Portfolio
& Risk Management

Derivatives & Risk Management

Sign Up

• Faculty educated at IIM and Duke University.
• Faculty has international teaching exposure - US, Singapore and Australia
• Faculty has 10 years of corporate training experience - major Indian IT companies as well as Multi-national IT companies
• Faculty has published a number of books on derivatives in both India and Singapore.
• This program has been offered in some of India's leading business schools.
• The program fee includes a comprehensive text book on derivatives.
• The program includes state of the art movies and EXCEL based exercises to reinforce the concepts.
• All topics will commence from first principles and no prior knowledge in the area is required except for a basic feel for Financial Management.
• Ideal platform for people working in the BFSI space in the IT sector or in the Financial Services industry (and those aspiring to do so).
• The course is a delectable blend of theoretical rigor and practical applications.

Program Duration: 8 days x 4 hours per day

Introduction to Futures (2 Hours)

• All Cash/Spot versus Forward Contracts
• Introduction to Options
• Introduction to Swaps
• Forward Contracts versus Futures Contracts
• Standardization and the Role of the Exchange
• The Clearinghouse
• Margins and Marking-to-Market
• Arbitrage
• Spot-Futures Convergence at Expiration
• Delivery
• Trading Volume versus Open Interest
• Multiple Deliverable Grades and Conversion Factors
• Profit Profiles
• Types of Underlying Assets
• Futures Exchanges
• Hedgers and Speculators
• Leverage
• The Economic Role of Futures and Options
• Reasons for the Rapid Growth of Derivative Markets

Orders & Exchanges (2 Hours)

• Market Orders and Limit Orders
• Marketable Limit Orders
• Trade Pricing Rules
• Stop-Loss Orders
• Stop-Limit Orders
• Market-if-Touched Orders
• Equivalence of Limit Orders and Options
• Validity Conditions
• Open-Outcry Trading Systems
• Electronic Trading versus Open-Outcry Trading: Merits and Demerits

Valuation of Futures Contracts (2 Hours)

• Assumptions
• Forward Contracts on a Security that pays No Income
• Repos and Reverse Repos
• Short-Selling
• The Value of a Forward Contract
• Forward Contracts on a Security that pays a Known Income
• Forward Contracts on a Security that pays a Known Dividend Yield
• Forward Contracts on Commodities
• Investment Assets
• Consumption Assets
• Calendar Spreads and Arbitrage
• Net Carry
• Backwardation and Contango
• Delivery Options
• Imperfect Markets
• Synthetic Securities
• Forward Prices versus Futures Prices
• Stochastic Interest Rates
• Quasi-Arbitrage
• Risk and Futures Prices
• Risks Inherent in Arbitrage

Hedging and Speculation (2 Hours)

• Selling and Buying Hedges
• Options and Hedging
• Futures versus Options
• Ex-post Regret
• Cash Versus Delivery Settlement
• A Perfect Hedge
• Basis Risk
• Selecting a Futures Contract
• A Rolling Hedge
• The Minimum Variance Hedge Ratio
• Estimating the Hedge Ratio
• Tailing a Hedge
• Hedging Processing Margins
• Speculation with Futures
• Speculation with Options
• Developing Derivative Exchanges

Foreign Exchange Forwards and Futures (3 Hours) 

• Purchase and Sale Transactions
• The Spot Market
• The Forward Market
• The No-Arbitrage Forward Price
• One-way Arbitrage
• The Relationship Between Interest Rate Parity and One-way Arbitrage
• Option Forwards
• FOREX Futures
• Hedging an Import Transaction
• Hedging an Export Transaction
• Creating Synthetic Investments
• Borrowing Funds Abroad
• Currency Futures and Forward in India
• Modification of Forward Contracts in the Indian Market

Stock and Stock Index Futures (2 Hours)

• Cash Dividends
• Stock Dividends
• Splits and Reverse Splits
• Pre-emptive Rights
• Adjustment of Futures Contracts for Corporate Actions
• Types of Stock Indices
• Tracking Portfolios
• Major Market Indices
• Stock Index Futures
• Pricing of Stock Index Futures
• Index Arbitrage and Program Trading
• Hedging With Index Futures
• Market Timing with Index Futures
• Using Index Futures to Change the Beta
• Stock Picking
• Portfolio Insurance
• Index Futures and Volatility

Fundamentals of Options (2 Hours)

• Options and Stocks: Similarities and Differences
• Common Terms Associated with Options
• Exercising Call and Put Options
• Cash Settlement versus Delivery Settlement
• Exchange Traded versus OTC Options
• Moneyness of the Option
• Contract Specification
• Choosing Expiration Month
• Specification of Exercise Prices
• FLEX Options
• Assignment of Contracts
• Contract Value Margining
• Adjustments for Corporate Actions
• The Put-Call Ratio

Arbitrage Restrictions (2 Hours)

• Non-negative Option Premia
• Properties of American Options
• Put-Call Parity for European Options
• Intrinsic Value and Time Value
• Option Premia at Expiration
• Upper Bounds for Call Options
• Lower Bounds for Call Options
• Upper Bounds for Put Options
• Lower Bounds for Put Options
• Early Exercise of American Options
• Put-Call Parity For American Options
  

Option Strategies and Profit Diagrams (3 Hours)

• Long Calls
• Long Puts
• Writing Naked Calls
• Writing Puts
• Writing Covered Calls
• Bull Spreads
• Bear Spreads
• The Convexity Property
• Butterfly Spreads
• The Condor
• Straddles
• Strangles
• Strips
• Straps
• Box Spreads

Valuation of Options (3 Hours)

• Relevant Variables for Option Pricing
• The Binomial Model
• Pseudo Probabilities and Risk Neutrality
• Replicating Portfolios
• Extension to the Multi-period Case
• Binomial Pricing for European Puts
• Valuing European Calls on Dividend Paying Stocks
• Valuing American Calls on Dividend Paying Stocks
• Rationale for Early Exercise
• The Breakdown of the Self-Financing Property
• European versus American Puts
• The Black-Scholes Model
• Estimating Volatility from Historical Data
• The Black-Scholes pde
• Risk Neutral Valuation
• Put-Call Parity
• Implied Volatility
• European Options on Dividend Paying Stocks
• Using the Binomial Model in Practice
• An Introduction to the Greeks

The Indian Derivatives Market (2 Hours)

• Revival of Derivatives Trading in India
• Equity and Index Derivatives
• Clearing and Settlement
• Margining
• Risk Management
  

Swaps (2 Hours)

• Interest Rate Swaps
• Market Terminology
• Futures and Options versus Swaps
• Valuing an Interest Rate Swap
• Terminating a Swap
• Equivalence with FRAs
• Currency Swaps
• Inherent Risks
• Valuation of Currency Swaps
• Swaptions

Movies (3 Hours)

• How Wall Street Works
• How the Bond Market Works
• 100 Years of the US Economy as Seen Through the Dow Jones Index
• Dow Jones Futures and Futures Options

EXCEL Based Exercise (2 Hours)