Derivatives Markets
Forwards, futures, swaps, options, exotic payoffs – pricing principles, hedging mechanics and systemic role of derivatives.
advanced · 5h 00 · 29 lessons
Course content
Introduction to Derivatives
Understanding what derivatives are, their basic types, and their primary functions in financial markets.
Forward Contracts
Exploring the mechanics of forward contracts, their features, and their primary uses.
Futures Contracts
Understanding futures contracts, their standardization, exchange trading, and role in hedging and speculation.
Forwards vs. Futures: Key Differences
Comparing and contrasting forward and futures contracts across various dimensions.
Option Contracts: Basics
Introducing call and put options, their key terminology, and the fundamental differences from forwards/futures.
Call Options
A deep dive into call options: their mechanics, payoff profiles, and strategic uses for speculation and hedging.
Put Options
An in-depth look at put options: their mechanics, payoff profiles, and strategic uses for hedging and speculation.
Factors Influencing Option Prices
Delving into the key determinants of an option's premium: underlying price, strike, time, volatility, interest rates, and dividends.
Option Valuation: Black-Scholes-Merton Model
Explaining the foundational Black-Scholes-Merton model for European option pricing and its underlying assumptions.
Option Valuation: Binomial Model
Exploring the binomial option pricing model, its simpler, intuitive approach, and its ability to price American options.
Put-Call Parity
Understanding the fundamental no-arbitrage relationship between calls, puts, the underlying asset, and a risk-free bond.
Interest Rate Swaps: Basics
Introducing interest rate swaps, their mechanics, and their primary use in managing interest rate risk.
Currency Swaps
Examining currency swaps, their exchange of principal and interest in different currencies, and their use in managing FX and interest rate risk.
Credit Default Swaps (CDS)
Understanding Credit Default Swaps (CDS), their role as credit insurance, and their pricing and risks.
Exotic Options: Introduction
An overview of exotic options, their characteristics, and how they differ from plain vanilla options.
Barrier Options Details
A deeper dive into barrier options, including their different types, payoff structures, and uses in hedging and speculation.
Asian Options Details
Exploring Asian options, their use of average prices, and their value in reducing volatility and providing cheaper hedging.
Swaptions, Caps, and Floors
Exploring options on swaps (swaptions) and interest rate caps and floors, their structures, and applications in managing interest rate risk.
Financial Engineering & Structured Products
An introduction to financial engineering and the creation of structured products using combinations of derivatives and traditional instruments.
Financial Risk Management with Derivatives
How derivatives are used to identify, measure, and manage various financial risks, particularly market and credit risk.
Leveraged Investing with Derivatives
How derivatives enable leveraged exposure to financial markets and the associated risks and rewards.
Regulation of Derivatives Markets
Examining the regulatory landscape for derivatives, key regulations, and their impact on market structure and risk mitigation.
Systemic Risk and Derivatives
Understanding how derivatives can contribute to systemic risk and the measures taken to mitigate it.
Mathematical Foundations of Derivatives
An overview of the essential mathematical concepts underpinning derivatives pricing and risk management, from stochastic calculus to partial differential equations.
Quantitative Risk Measures in Derivatives
Exploring key quantitative measures used to assess and manage the risks of derivative portfolios, including VaR, Expected Shortfall, and the 'Greeks'.
Algorithmic and High-Frequency Trading in Derivatives
Exploring the impact of algorithmic and high-frequency trading (HFT) on derivatives markets, including strategies and market implications.
Ethics and Governance in Derivatives
Addressing the ethical considerations, governance challenges, and best practices in the derivatives markets to ensure fair, transparent, and responsible conduct.
Case Studies & Historical Events
Examining prominent historical events and case studies where derivatives played a central role, highlighting lessons learned.
Future of Derivatives Markets
Exploring emerging trends, technological advancements, and regulatory challenges shaping the future of derivatives markets.