Intermediate financial derivatives

Exotic Options, Asset Swaps, CDS and structured products

Course objectives

  • Understand the motivations behind option trading strategies

  • Understand how market parameters affect the prices of options

  • Understand the risk management and pricing challenges behind complex derivatives

  • Get an overview of CDS and how they differ from other derivatives

  • See how options are embedded in structured products

  • Identify the optimal market conditions for structured products

Mathematical preview

  • Normal distribution
  • Poisson distribution and process
  • Variance properties
  • Assumptions behind Black Scholes

Vanilla options

  • Option premium parameters
  • Sensitivity of an option - greeks
  • Volatility surface
  • Building an option pricer with Black Scholes
  • Option trading strategies

Introduction to exotic options

  • Barrier options, digitals and asian options
  • Replicating exotics with vanilla options
  • When to use Monte Carlo simulations

Case Study: Digital options with Black Scholes

Asset Swaps

  • Purpose
  • How to build them
  • Asset swap spread and Z spread
  • Hedging an asset swap

Credit Default Swaps

  • Definition and terms
  • Upfront valuation
  • Sensitivities
  • Hedging against credit events
  • Aribitraging the basis between CDS and cash bond

Structured products

  • Introduction
  • Construction principles
  • Pricing

Case Study: Termsheet examples

Oscar Relier

Oscar Relier

Oscar has worked in corporate finance and trading room for SBC Warburg, UBS and Deutsche Bank. He masters the mechanism, use and pricing of derivatives. Also trained in behavioral techniques, he designs and conducts training on public presentation and on the issues of communication and management.

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