Derivatives School (Modular Course)

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This comprehensive 5-day Derivatives School is designed to provide you with a thorough understanding of the derivatives market place for both OTC and exchange-traded instruments, in particular how derivatives are used on a day-to-day basis to manage both exposures and to provide customer based solutions. Save US$1,690 for registering both modules. Just contact us at training@euromoneyasia.com

  • Course Instructor

    Former Strategic Development Manager at the London International Financial Futures Exchange (LIFFE)

"Good coverage on derivative products applicable for banks and clients."
Director of corporate sales, Standard Chartered Bank

"Very comprehensive content & delivery."
Vice President, Citibank Indonesia

"Very well explained and plenty of examples during the course."
Derivatives/Treasury Sales, Permata Bank

Course overview

This five-day Derivatives School provides you with a thorough understanding of the derivatives market for both OTC and exchange-traded instruments. It focuses on how banks use derivatives to manage their own exposures and to provide practical solutions to their customers.


You can attend both modules of this Derivatives School to enjoy most benefit or pick from the following modules.

Module 1: Fundamentals of Derivatives

Module 2: Bank Applications of Derivatives

Save US$1,690 for registering both modules!

Module 1: Fundamentals of Derivatives (Day 1-Day 3), is a comprehensive overview of the major classes of derivatives, distinguishing between linear and non-linear derivatives.

Module 2: Bank Applications of Derivatives (Day 4-Day 5) explains, by way of specific examples, how banks use derivatives for their own and their customer benefit. The first part looks at specific solutions for customers and focuses on the role of swaps in the primary issuance business, and managing customer FX exposures; whilst the second looks at financial engineering, and more specifically, at how derivatives can be used to reduce funding costs and/or as a means of the bank earning fees without taking a proprietary position, whilst at the same time providing investors with instruments that meet their risk/reward requirements.

Summary of course content

  • How and why are derivatives used in practice?
  • The difference between exchange-traded and OTC derivatives?
  • Clearing procedures for exchange-traded derivatives
  • Understanding the principal money market derivatives and how they are used to manage interest rate risk
  • Swaps and how banks and other institutions use them
  • Prima on options and their application in the management of FX risk
  • How derivatives are embedded in common structures to provide investors with attractive risk/reward profiles


The School uses interactive lectures, worked examples and real-world case studies showing in detail how the products are used and why. It shows the products in a highly practical way, without over-complication, with clear illustrations of each so that you may readily understand them and the role the bank plays.

Who should attend

The Derivative School is beneficial to professionals at all levels who require a thorough understanding of derivatives and their practical applications.


This programme is approved for listing on the Financial Training Scheme (FTS) Programme Directory and is eligible for FTS claims subject to all eligibility criteria being met.

Please note that in no way does this represent an endorsement of the quality of the training provider and programme. Participants are advised to assess the suitability of the programme and its relevance to participants’ business activities or job roles.

The Financial Training Scheme (“FTS”) is a training incentive scheme supported by the Financial Sector Development Fund (FSDF) in Singapore. The FTS is available to eligible entities, at a 50% funding level of programme fees subject to all eligibility criteria being met and to a cap of S$2,000/participant/programme. Please contact us or visit www.ibf.org.sg  for more information.

Please note that this course is only eligible for FTS Funding when registering for all modules.

Module 1


Day 1: Introduction to derivatives and derivative types

Introduction to derivatives

  • What is a derivative?
  • The equity CFD market explained
  • Why is there a market for derivatives?
    • Attributes of derivatives
    • Practical uses of derivatives
      • Leveraged trading
      • Risk management applications
      • Creating synthetic positions
    • Advantages of derivative instruments over cash instruments

The trading, dealing and clearing environment

  • OTC vs. Exchange traded products
    • Recent developments
  • Broking vs. Market making
  • Trade execution
    • Order vs. Quote driven markets
    • Market order types
    • Placing orders in an electronic trading platform
  • Calculating the P & L on a futures contract
  • Understanding the Clearing House guarantee and margining system for exchange traded instruments

Case study: Delegates will complete a margining return over a period of time for a small portfolio

Linear derivatives: Money market derivatives

  • Concept of a forward contract
  • Forward interest rates
  • Forward rate agreements (FRA’s)
    • Locking-in a forward interest rate
  • Exchange traded version: Short-term interest rate (STIR) futures contracts

Case study: Delegates will complete a number of exercises based on FRA’s and STIR’s

Day 2: Swaps

Multi-period linear interest rate derivatives: Swaps

  • The interest rate swap (IRS) market
  • Types of swap
    • Interest rate swaps
    • Currency swaps
  • Understanding the credit risk in swaps
  • Relationship between swaps and forwards
  • Market structure
    • Inter-bank vs. Customer market
    • Broker quotes in the inter-bank market
  • Why the market exists: Reducing funding costs by using swaps
  • Applications of swaps

Case Study: Delegates will derive the market swap bid and offer rates consistent with the actual and target borrow rates of two institutions

A framework for marking-to-market OTC derivative positions

  • Building the discount function
  • What instruments to use
  • "Bootstrapping" the swaps curve

Case study: Using the bootstrapping approach, delegates will derive the inter-bank discount function

Marking-to-market interest rate and currency swaps

  • Identifying the cash flows
  • Representing the floating cash flows as notional cash flows
  • Extending the principle: Pricing a deferred start swap
    • Marking-to-market a currency rate swap

Case study: Using the discount function derived earlier, delegates will mark-to-market a number of swap positions

Day 3: Introduction to options

An options primer

  • What is an option?
  • Option terminology
    • Exercise types
    • Option "moneyness"
    • Intrinsic vs. Time value
  • Understanding the payoff profiles

Trading and hedging strategies with equity options

  • Understanding how to construct payoff profiles for combinations of options and the underlying
  • Understanding the relationship between puts and call
  • Identifying common directional and volatility trading strategies
  • Hedging with options

Case study: Delegates will draw the payoff profiles of a number of trading strategies

Introduction to option pricing and risk measures

  • The importance of correct valuation
  • What drives the price of the option: Understanding the model inputs
  • Approaches to option valuation: Hedge approach vs. Probabilistic approach
  • Breaking-down the Black Scholes option pricing model
  • Option risk measures: The "Greeks"

Case study: Delegates will use the option Greeks to estimate the new price following a change in market variables

Module 2


Day 4: Bank applications of derivatives

Delivering customer solutions: Using swaps in primary bond issuance

  • Understanding the motivation for swapping from fixed financing to a floating liability
  • Calculating the "all-in" funding cost as a spread over LIBOR

Case study: Delegates will compare funding alternatives for a company

Delivering customer solutions: Providing tailored hedge programmes for customers’ FX exposures

  • The problem with "forward only" cover
  • Using currency options to retain the up-side
  • Creating zero premium products
  • Introducing more innovative solutions: Using exotic options to reduce hedging costs

Case study: Delegates will propose a suitable hedging strategy for a corporate with FX exposures

Day 5

Financial engineering with derivatives

  • Primary motivations for structuring
    • Securing cheaper funding
    • Providing attractive risk/reward profiles for investors
    • Earning fee income
  • The structuring process

Delivering cheaper funding: Inverse floating rate notes

  • Investor perspective
  • Understanding the structure
  • Variations on a theme
    • Deferral period
    • Adding a minimum rate
    • Step-ups
    • Adding leverage
  • Pricing and valuation
    • Hedging the issuer exposure
  • "Super-floater" FRN's

Case study: Delegates will construct a deferred reverse floating rate note, identifying appropriate parameters, and identifying the "hedge" required by the issuer to ensure LIBOR based financing

Targeting the retail market: Capital guaranteed notes and high income products

  • Understanding the process and distribution channel
    • Who takes the risk
  • Constructing a capital guaranteed note
  • Introducing a cap and other common variations
  • High income products
    • Selling puts to increase income
  • The listed certificate market

Case study: Delegates will critically analyse a recent World Bank equity-linked note from the perspective of issuer and investor

  • The Course Director was the Strategic Development Manager at the London International Financial Futures Exchange (LIFFE), where he was responsible for the research and definition of new specialist swap and risk transfer contracts. Prior to this, he was Head of Interest Rate Product Development with responsibility for the maintenance of the existing product range and the development of new products.

    He began his career with Ernst & Young and Grant Thornton as a tax specialist, before moving into corporate treasury management at Royal Mail where he was project leader for a treasury and risk management group. In this role he developed risk management protocols and procedures for the use of derivative products. He was responsible for recommending the optimal combination of product types and features for a wide range of situations.

    Following the completion of a quantitative finance masters degree, he became senior lecturer in Corporate Finance and Taxation at the University of Greenwich. He is a visiting lecturer to Cass Business School on their Executive MBA programme.

    He is a panel member for the Securities Institute, a member of the Association of Corporate Treasurers and an associate of the Institute of Taxation.

    Courses run by this instructor

4-5 Star Hotel in Hong Kong, Hong Kong, China

All of our courses are held in 4 – 5 star hotels, chosen for their location, facilities and level of service. You can be assured of a comfortable, convenient learning environment throughout the duration of the course.

Due to the variation in delegate numbers, we will send confirmation of the venue to you approximately 2 weeks before the start of the course. Course fees include training facilities, documentation, lunches and refreshments for the duration of the programme. Delegates are responsible for arranging their own accommodation, however, a list of convenient hotels (many at specially negotiated rates) is available upon registration.

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