School of Derivatives

What is business coaching?

We offer in-house training only – we do not run public courses

This course has been available as a public training programme in many countries around the world in particular in London, Frankfurt and Singapore. It has also been available as a tailored in-house programme.

It is an interactive training programme on Treasury Products, Financial Markets and Investment Banking. In three modules it covers the main areas of Money Markets, Foreign Exchange, Capital Markets and their Derivatives.

The first module focuses on Money Markets and Foreign Exchange.
The second module emphasises the Bond Market and Swaps.
The third module explains Futures and Options.
The overall duration of the programme is 5 days.

Money Markets and Foreign Exchange are central to the Treasury operations as a whole and play a fundamental role. With a large array of ever increasing short-term instruments the dynamic nature of the money markets is extremely interesting and diverse, not to mention profitable, with billions of pounds turnover every day. Therefore, it is clear to see that anyone working in finance needs a thorough grounding in the subject.

Bond Markets and Swaps are playing an ever greater role in capital markets. Questions about how to weather the current turmoil, correctly price a new bond issue and then properly value the positions over time has become an essential requirement.

Financial Derivatives have played an increasingly important role since their introduction. In some markets, they actually have become the driving force behind the movements in cash markets. Obviously a foundation in this area is mandatory.

We offer short, focused, strategic, high-value interventionst

Overall course aim

To provide market participants with the necessary building blocks to understand the different products in financial markets leaving them with an excellent foundation and a comprehensive overview in order to understand and develop new structures. Participants will understand beyond the Treasury products the spirit of Trading and Investment Banking. At the end of the programme, participants will have an advanced view on financial markets that can only be achieved by attending this programme.

The speaker shares with great clarity and charisma the concepts that have lead market participants from tears to success.

School of Derivatives

Hands on training

Using a scientific calculator with the functions 1/x and x^y will dramatically enhance the participants learning experience. We therefore highly recommend bringing such a calculator to the training. The best would be the financial calculator HP17BII+.

School of Derivatives

Financial Markets Training

Training Objectives for Money Markets and Foreign Exchange

On completion delegates will:

  1. Apply the mathematical formulas used in Money Markets and FX.
  2. Know the importance of Capital Adequacy Requirement (Basel II) for banks.
  3. Know the main market conventions.
  4. Convert different types of interest rates.
  5. Know the main payment day conventions are their uses.
  6. Price and value different types of interest bearing products.
  7. Work out Forward Rates.
  8. Understand the information contained in Forward Rates.
  9. Price Forward Rate Agreements (FRA’s).
  10. Price FX Forwards and Swap points.
  11. Recognise the importance of covered interest arbitrage.
  12. Differentiate between Sell/Buy backs, Classic repos and Securities Lending.

Objectives for Fixed Income Bonds and Swaps

On completion delegates will:

  1. Apply the mathematical formulas used in the Bond and Fixed Income Markets.
  2. Review the importance of Basel II for banks.
  3. Understand the segments of the bond market.
  4. Price a fixed income bond.
  5. Distinguish between Street and Fed Method for accrued Interest calculations.
  6. Explain and use Macauley Duration, Modified Duration and Convexity.
  7. Duration based trading and hedging.
  8. Price a new bond issue (debt origination).
  9. Annualise fees in the debt origination process.
  10. Understand Asset Securitisation.
  11. Create the term-structure of interest rates.
  12. Distinguish between Yield, Par Yield, Zero’s and Forward Rates.
  13. Price and value Interest Rate Swaps and Structure Products.
  14. Explain the 7 different applications of Swaps.
  15. Asset Swap pricing techniques with par, premium and discount bonds.
  16. Benchmark bonds in 4 different ways.

Objectives for Futures, Options and Structured Products

On completion delegates will:

  1. Understand the advantages of Futures and Options.
  2. Explain the benefits and risks of Margining and Gearing.
  3. Price Futures and understand Cash and Carry.
  4. Identify the Carry and Value Basis.
  5. See the importance of cash settlement and physical delivery.
  6. Identify the issues around Bond Futures.
  7. Understand the principles of Puts and Calls.
  8. Understand the use of options and option strategies.
  9. Understand the arbitrage boundary using Put-Call Parity.
  10. Understand how Swaps are an application of Put-Call Parity.
  11. Gain flexibility in managing risk.
  12. Understand the principle of Option pricing.
  13. Understand the arbitrage triangle Cash-Future-Option.
  14. Get a sense of the risk measures.
  15. Understand the rationale of Exotic Options.
  16. Understand the principals of structured products.

Day 1: Regulation, Financial Arithmetic, Market Conventions



  • Overview over Financial Markets
  • Cash Flows: the Underlying of any Financial Instrument
  • Risk and Return Characteristics
  • Current developments

Financial Markets:

  • Money Markets
  • Capital Markets

Funding through Capital Markets:

  • Equity Finance
  • Loan Financing
  • Securitisation
  • Syndication
  • Bond Financing
  • Hybrid Instruments

Banking Regulations:

  • Accounting
  • Capital Adequacy Requirement
  • Basel I
  • Basel II
  • Basel III
  • Berne I

Basel II:

  • The three overall pillars
  • Risk capital for
  • Market risk
  • Marking to Market
  • Value at Risk
  • Credit risk
  • Operational risk
  • Pillar II

Basel III:

  • Redefininition of Capital
  • Adjustment of the basic ratios
  • Core capital and Conditional Convertibles
  • Liquidity Ratios
  • Centralised Counterparties (CCP)

Time Value of Money and Interest Rates (I):

  • Factors determining the Value of Money
  • Future Value and Present Value
  • Discount Factors and Compound Factors
  • Yield versus Return
  • Differences between Capital Markets and Money Markets
  • Exercises

Explanation of the commonly used Market Conventions (time permitting):

  • US Bond Basis
  • US Money Market Basis
  • UK Money Market Basis
  • ISMA Convention
  • Actual/Actual

Payment Day Convention (time permitting):

  • Preceding and Following Payment Day Convention
  • Modified Following Payment Day Convention
  • FRN Convention

Day 2: Money Markets and Foreign Exchange

Money Market Instruments:
  • Development of Money Markets
  • The role of the central bank as lender of last resort
  • Implementation of economic policy
  • Discounted Securities versus Interest-bearing Securities
  • Decomposition of cash flows
  • Interest Rate Calculations
  • Worked examples

Forward Forward Markets:

  • Developing a Forward Market from Deposits
  • Cash and Carry Arbitrage and cross-currency basis
  • Decomposition of cash flows
  • Forward Forward Pricing
  • Worked example
  • Booking the trade
  • Discussion on broken dates

Forward Rate Agreements (FRA):

  • Developing FRA’s from Forwards
  • FRA Pricing
  • Decomposition of cash flows
  • FRA settlement amount and working out p&l
  • Worked example
  • Booking the trade

Interest Rate Futures:

  • Quotation
  • Interpolation
  • ‘Points per day’
  • Jumps on special days

The Repo Markets:

  • Sell/Buy Back
  • Classic Repo
  • Securities Lending

Spot FX:

  • Quoted and base currencies
  • Direct and indirect quotation
  • Treatment of holidays
  • Onshore and offshore rates

Forward FX:

  • Calculating forward outrights
  • Hedging the cash flows
  • Forward points (PIPS)
  • Linear interpolation
  • P&L calculation

FX Swaps:

  • Understanding the FX swap mechanism
  • Hedging the cash flows
  • Pricing FX swaps
  • Calculating swap points
  • Worked example
  • Discussion of forward starting FX swaps
  • Discussion of mismatch swaps
  • Comparison of FX swaps with FRA’s, Forwards and Futures

Covered Interest Arbitrage:

  • Selecting the ‘right’ investment
  • Carry trades
  • Worked example

What moves the markets? (time permitting):

  • Fundamental versus technical analysis
  • Market views
  • Algorithmic trading
  • Economic factors
  • Central bank policy
  • Liquidity management
  • Currency interventions
  • Purchasing Power Parity
  • The role of hedge funds

Day 3: Bonds
and Swaps

Introduction to Bond Markets:
  • Main Players
  • The Investor Perspective
  • The Borrower Perspective
  • The Intermediaries Perspective
  • Credit Structure, Credit Agencies and Ratings

Bond Market Segments:

  • Domestic Bond Market
  • Foreign Bond Market
  • International Bond Market
  • Global Bond Markets

Bond Pricing:

  • Pricing and Valuation of Fixed-Rate Bonds
  • Accrued Interest
  • Fed versus Street Method
  • The Relationship between Price, Yield and Coupon

Bond Risk Management:

  • Factors affecting the Bond Price
  • Bond Price Sensitivity
  • Macauley Duration
  • Modified Duration
  • DV01
  • Convexity

Applications of Duration (time permitting):

  • Risk Measure
  • Investment Decisions
  • Portfolio Management and Switching
  • Asset and Liability Management
  • Hedging
  • Trading

Interest Rate Swaps:

  • The Swaps Mechanism
  • Types of Swaps

Credit Default Swaps:

  • The Swaps Mechanism
  • The uses
  • Variations to the the theme

Currency Swaps:

  • Understanding the Currency swap mechanism
  • Pricing currency swaps
  • Comparison FX Swaps versus Currency Swaps How cross basis arises
  • How this affects forwards

Applications of Swaps:

  • Speculation
  • Hedging
  • Asset and Liability Management
  • Market Making
  • Risk Management
  • Debt Origination Arbitrage
  • Asset Swaps
  • Creating Synthetic Instruments
  • Cross-currency asset swaps
  • Benchmarking

Day 4: Term-structure of Interest Rates and Swaps Pricing

Coupon Stripping and Asset-backed Securities:
  • Special purpose vehicles (SPV), CLN’s, CMO’s etc

Term-structure of Interest Rates:

  • Par Curve
  • Zero-coupon Curve
  • Forward Curve
  • Bootstrapping

Benchmarking and Credit:

  • Money Market and Capital Market Benchmarks
  • Government Curve
  • Bank Curve
  • Corporate Curve

The Principle of Swap Pricing:

  • The Need for Forward Rates
  • The Need for Zero-coupon Rates

Swap Pricing:

  • Finding the Forward Amounts
  • Discounting the Floating Leg
  • Equalise the Floating Leg with the Fixed Leg
  • Discounting the Fixed Leg
  • Finding the Swap Rate
  • Creating a Swap Curve

Swap Valuation:

  • Swap Rates
  • Zero-coupon Rates
  • Forward Rates
  • Discount Factors
  • PV of fixed and floating Leg
  • Net Present Value
  • Present Value of a basis point (PVBP, BPV)

Asset Swap Pricing:

  • Par-Par Structures
  • Premium-Par Structures
  • Discount-Par Structures
  • Asset swap spread
  • Z-spread

Uses of Asset Swap Valuation:

  • Investment Decisions
  • Benchmarking over Swap Curve
  • Benchmarking over Libor
  • Comparison with CDS

Day 5: Futures, Options and Structured Products

The Spot, Forward and Option Triangle:
  • The individual elements
  • The links between
  • Arbitrage boundaries

Introduction to Futures and Options:

  • The History and Development of the Market
  • Definitions
  • Over-the Counter (OTC) versus Exchange Traded Products
  • The Role of The Clearing House


  • Trading
  • Novation of Contract
  • Initial Margin
  • Variation Margin
  • Intra-day Margin Call
  •  Gearing

Pricing and Valuing Futures:

  • Basic Futures Mechanism
  • Pricing Futures through Cash and Carry Arbitrage
  • The Value Basis
  • The Carry Basis
  • The Importance of Credit

Specialities with Futures Contracts:

  • Cash Settlement
  • Physical Delivery

Bond Futures:

  • Exchange Delivery Settlement Price
  • Price Conversion Factors
  • Cheapest-to-deliver

Introduction to Options:

  • Definitions
  • Calls and Puts

Using Options to:

  • Gear up
  • Speculate
  • Hedge
  • Arbitrage

Option Trading Strategies:

  • Straddles
  • Strangles
  • Bear Spreads
  • Bull Spreads
  • Butterflies
  • Risk Reversal
  • Cylinders
  • Put – Call Parity

A Simple Approach to Option Pricing:

  • Volatility
  • The Binomial Model
  • The Black & Scholes Model
  • The Greeks (Risk measures)

Case Study: Managing the Risks

  • Delta-hedging your Option Positions

Exotic Options:

  • Barrier Options
  • Knock-in and Knock out Options
  • Lookback Options
  • Best of two (Digital)

Structured Products:

  • Participation and Tracking
  • Guaranteed Return Products
  • Yield enhancement

Interest Rate Risk Management:

  • Arbitrage boundaries

Course Summary:

  • Putting Financial Instruments Into Context
  • Risk Management
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