School of Derivative Instruments

5 days 4-8 Dec 2017, New York United States $5,415.00 Download brochure Add to basket

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Derivatives markets have witnessed significant change in the years following the financial crisis, not only in how they are regulated, but in the market structure for the trading and clearing of derivative instruments, and in how they are priced.

This programme will provide delegates with a detailed understanding of how these changes have impacted the derivatives landscape, and will be of particular interest to those in client-facing positions and those who are operating in back and middle office functions, who require a comprehensive overview of the changes and how they affect operations.

This course will cover:

  • Introduction to derivatives instruments and markets
  • Pricing and valuation of interest rate and currency swaps
  • Derivatives applications:  the uses and benefits
  • Non-linear derivatives

Course Training Method
The programme will use traditional and well-tried techniques, lectures, worked examples and many realistic case studies showing in detail how the products are used and why. The course has been designed to show the products in a highly practical way, without over-complication, with clear illustrations of each so that participants may readily understand them and the role the bank plays. 


We work with a series of expert instructors, please select the course location of interest to review the credentials of who will be delivering the programme.

New York
Graham Dudlyke

Graham Dudlyke is a leading consultant and specialist trainer with over three decades of experience within the international financial markets, holding senior positions in a number of leading financial institutions in both London and New York.

His career boasts a wealth of experience within the derivative and capital markets, with senior roles at JP Morgan chase and Mitsubishi UFJ Securities International within derivatives trading, marketing, structuring and risk management. At JP Morgan he managed rate option trading books, and additionally held responsibility for developing the derivatives trading and marketing presence within European markets. At Mitsubishi UFJ he held responsibility for the management of interest rate derivatives trading, and played a major role in building and developing the interest rate derivatives trading business into new products and markets.

In 2011 Graham joined Hilltop Fund Management LLP, London, as a consultant, advising on hedge fund trading and complex investment strategies.

As an independent training consultant for over 10 years, Graham brings his unique practitioner’s perspective and insight to financial markets, providing training and consultancy services to many of the world’s leading financial institutions - banks, institutional investors and asset managers, official institutions and other related financial bodies. The world’s largest asset manager, global ‘bulge bracket’ investment banks, a number of supranational development banks, Fortune 500 companies, as well as central banks across four continents are all represented amongst the institutions that Graham has worked with in the delivery of specialised training and consultancy needs.

Graham is a consultant to Euromoney Institutional Investor plc, international business-to-business publisher, business conference, seminar and training course provider, as a regular and world renowned expert on derivatives and capital markets.

Graham holds an M.B.A. from Imperial College, London and an M.A. from Oxford University.


New York

New York Hotel

This program takes place on a non-residential basis at a New York hotel. Non-residential 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.

As with all programmes on-site administrators are with you throughout the programme to ensure smooth administration and group interaction.

Related Courses



Do you have five or more people interested in attending this course? Do you want to tailor it to meet your company's exact requirements? If you'd like to do either of these, we can bring this course to your company's office. You could even save up to 50% on the cost of sending delegates to a public course.

To find out more about running this course in-house:

Our Tailored Learning Offering

If you want to run this course at a location convenient to you or if you want a completely customised learning solution, we can help.

We produce learning solutions that are completely unique to your business. We'll guide you through the whole process, from the initial consultancy to evaluating the success of the full learning experience. Our learning specialists ensure you get the maximum return on your training investment.


We can offer any of our public courses delivered at your office or we can devise completely tailored solutions:

Read more about our offering or complete a call back request to speak to a learning specialist.



Day 1

Introduction to Derivative Instruments and Markets

  • Evolution and development of the derivatives markets
  • Derivatives defined: characteristics of derivative instruments
  • The range and diversity of the derivatives markets
  • Linear and non-linear derivatives
  • Outright (forwards, futures and swaps) and option derivatives
  • Over-the-counter vs exchange traded derivatives
  • OTC derivatives documentation and legal issues
  • Applications of derivatives: risk transfer
  • An overview of applications in trading, hedging and arbitrage
  • Benefits and shortcomings of derivatives
    -Accounting for derivatives – Impact of IAS39/FAS133
    -Hedge accounting

‘Delta 1.0’ Derivatives: Forward and Futures Markets

  • Forward contracts
    -Definitions and nomenclature - market practices
    -Generic characteristics of forward contracts
    -Pricing principles of forward/futures contracts
    -Arbitrage-free pricing
    -Backwardations and the breakdown of arbitrage free valuation
    -Credit risk exposure and forward contracts
  • Futures contracts
  • The mechanics of futures contracts and futures markets
  • The role of the clearing house
  • Margining: definition and operation
  • Credit risk and futures contracts
  • Interest rate forward contracts and futures
    -Forward Rate Agreements (FRAs)
    -The FRA market – conventions: price, quotation and settlement
    -Pricing and valuation of FRAs
    -Applications of FRAs in trading and interest rate risk management
    -Contract features - short term interest-rate futures (STIRs)
    -Applications of futures in trading and hedging; managing basis risk

Case study 1: Pricing and valuation of FRAs – Application to exposure management

Swaps Markets

  • Evolution and development of the swaps market
  • Swaps market dynamics
  • Swaps market participants and roles
  • Business drivers – applications of swaps to trading, portfolio risk management and funding (ALM)
  • Generic characteristics of swap contracts
    -Interest rate, currency & basis swaps
    -Equity swaps
  • Swaps documentation and legal issues
    -Termination, assignment by novation
    -Netting agreements
    -Legal enforceability of netting arrangements

Interest Rate and Currency Swaps

  • Generic swap structures
    -Par interest rate swaps
    -Basis swaps
  • Generic and non-generic swaps – a classification of types
  • Cross-currency swaps
    -Cross currency basis swaps
    -Principal exchanges – implications for removal of initial and/or final amounts
  • Swaps market conventions and practices
    -Nomenclature, terminology and market quotation conventions
    -Interest rate accrual and payment conventions
    -Stub interest calculation periods (long/short)
    -Off-market contract terms and margins

Day 2

Pricing and Valuation of Interest Rate and Currency Swaps

  • Basic foundations of swap valuation - nil value of par swaps
  • Discounted cash flow (DCF) methodology
  • Estimation of zero coupon discount factors from market based data
    -Yield curve construction using FRA rates and the futures strip
    -Yield curve construction using par swap rates and bond yields
  • Pricing and Valuation techniques
    -Practical pricing and valuation applications
    -Mark to market - swap portfolio valuation
    -Swap terminations and assignments - fee estimation
    -Off-market swap structures - margin and fixed coupon calculation

Interest Rate and Currency Swaps - Funding, Risk Management and Trading Applications

  • Applications of interest rate derivatives to client risk management strategies
    -Hedging currency and interest rate exposures
    -Hedging fixed and floating interest rate assets and liabilities
    -Creating ‘synthetic’ assets and liabilities
  • Applications of swaps and options in liability management
    -Credit risk arbitrage – identifying and realizing comparative advantages
    -Funding diversification Applications of swaps and options in asset management
    -Asset swaps
  • Exposure management - identifying client risk profiles
    -Selection of appropriate risk management strategies using OTC solutions
    -Outright hedges (swaps, FRAs) vs option-based hedges
  • Comparative analysis of risk management strategies
    -Advantages/shortcomings of risk management solutions; opportunity gains and losses
    -Tailoring interest rate options to client interest rate risk management strategies
    -The use of options in hedging contingent liabilities
  • Trading Strategies using interest rate derivatives
    -Interest rate swaps as a substitute for fixed income bond trading
    -Credit trading: yield curve arbitrage strategies
    -Option trading strategies
    -Directional trading strategies
    -Premium generation (yield enhancement) strategies
    -Costs and benefits of using derivatives in trading and portfolio management strategies

Case study 2: Pricing a new bond issue structured with a currency swap. Structuring an asset swap Swap Risks – Market Risk and Counterparty

Credit Risk

  • Measurement of swap risks
  • PV01, Delta
  • Hedging a swap transaction with bonds, futures
  • Counterparty Credit Risk Exposure
  • Credit risk mitigation
    -Collateral agreement
  • Credit and regulatory capital requirements

Case study 3: Risk analysis of swap portfolio – Risk measurement and construction of hedge relationship

Day 3

Non-Linear Derivatives: Options

  • Option characteristics, terminology and market conventions
    -Put and call options
    -European, American, Asian and Bermudan option styles
    -Intrinsic and time value
    -Put-call parity
  • Global option markets
    -Exchange traded and OTC option markets
    -FX options; interest rate options; equity options; equity index options; warrants
  • Pay-off profiles and their interpretation
    -Understanding Option Valuation - Option Pricing Models
  • Intuitive approach to understanding option valuation and value drivers
    -Option valuation: intrinsic value, time value and ‘moneyness’
  • Option pricing models
    -Advantages and shortcomings of Black-Scholes
    -a critical analysis
    -Simulation methods of option valuation –

Monte Carlo Methods

  • Volatility in option valuation
  • Time value: impact on option values

Volatility Estimation

  • Historic, implied and realized volatility measures
  • Volatility smiles and skews

Option Risks

  • Dynamic risk characteristics of options
  • The Greeks (Delta, Gamma, Theta, Vega, Rho and Phi risks)
  • Interpretation of Delta - cash equivalent risk representation
  • Delta hedging Market impact of Delta hedging
  • Why Delta hedge – a brief overview of volatility risks (Gamma, Vega)
  • Time decay
  • Carry related risks (Rho, Phi)

Interest Rate Options

  • Caps, floors and swaptions
  • Pricing techniques: Black Vs. term structure models
  • Cap/floor market conventions, terminology, price quotation basis
  • European and American style swap options
  • Swap option market conventions, terminology, price quotation basis
  • Applications in trading, investment and portfolio management

Case study 4: Corporate exposure management applications of caps and floors

Hedging and Trading Strategies Using Options

  • Risk-reward profiles of naked option strategies
  • Put-call parity:
    -Risk reversals, range forwards, participating forwards, synthetic forwards and options
  • Hedging and arbitrage strategies using options
  • Creating trading and hedging strategies using options
    -Spreads: vertical (call and put) and horizontal (calendar) spreads
  • Volatility trading strategies
    -Straddles, strangles and butterflies
  • Analysis of trading strategies
    -Payoff profiles
    -Instantaneous risks (delta, gamma etc.)

Case study 5: Analysis of option trading and hedging strategies

Day 4

Derivatives Applications

Interest Rate and FX linked Structured Products

Interest Rate Linked Structured Products

  • Callable/Puttable bonds
  • European/Bermudan (step-up) callable bonds
  • Range Accrual notes
  • CMS-linked notes
  • Capped, floored FRNs
  • Inverse FRNs
  • Callable, non-callable
  • TARNs
  • Ladders’ (LIFTS) and ‘Snowblade’ structures

Case study 6: Analyzing and reverse engineering an inverse floater with embedded options
Case study 7: Pricing a cancellable swap; Bermudan stepup

Callable Bond

FX Derivatives

Forward Foreign Exchange

  • Outrights and FX swaps
  • Pricing using interest rate differentials
  • Quotation conventions
  • Calculating outright forward FX rates
  • Cross rate forwards
  • Determination of synthetic interest rates using forwards
  • Applications of forward FX in hedging transaction and translation exposure
  • Non-deliverable forwards (NDFs)
  • Uses and benefits of NDFs

Currency Options

  • Market conventions, terminology, price quotation basis
  • Puts, Calls; European, American styles
  • Hybrid structures: Collars, Range forwards,

Participating Forwards, Knock-In Forwards

  • Hedging transaction and economic exposure using FX forwards and options
  • Applications to currency exposure management
  • Exotics
    -Barrier options (Knock-in, knock-out, reverse, double knock-out structures)
  • Digital options
    -Average rate options
  • Currency Linked Structured Products
    -Currency linked deposits
    -Knock out structured notes
    -Dual currency notes
    -Reverse dual currency notes
    -Power reverse dual currency notes
    -Range accrual notes

Case study 8: Evaluation of currency exposure hedging strategies; Pricing of FX linked range accrual note structure.

Day 5

Derivatives Applications - The Uses and Benefits of Equity Derivatives

  • Applications in portfolio management
  • Corporate applications of equity derivatives
  • Index vs. single stock derivatives
  • Delta 1.0 derivatives: synthetic equity proxies; market access vehicles
  • Asset allocation using equity derivatives
  • Arbitrage opportunities: profiting from stock borrow, interest rate, net dividend differentials, market access
  • Hedging strategies using options
    -Put spreads
    -Collars, put-spread collars
  • Portfolio strategies using options
  • Yield enhancement strategies
    -Over-writing and under-writing strategies
  • Directional trading strategies
    -Risk reversals and Synthetics
    -Option Spreads
  • Volatility and Correlation trading strategies
    -Volatility and Variance swaps
    -Dispersion trading strategies

Equity Linked Structured Products

  • Simple synthetics

Principal Protected Equity Linked Certificates

  • Investment Rationale
  • Capital Guaranteed equity linked structured notes
  • Equity linked TARN certificates
  • Basket ELN’s & ‘Best of ’ and ‘Worst of ’ structures
  • Partial-Principal Protection: Notes offering limited downside protection
  • Reverse and Mandatory Convertibles

Exercise 9: Structuring and pricing capital guaranteed equity linked note structures

The Credit Derivatives Market

Market Overview

  • Evolution and market development
  • Recent developments and key issues
  • Terminology and nomenclature
  • Market participants
  • Credit indices (iTRAXX) and related products

Credit Derivatives: Default Swaps (CDS)

  • Definitions and nomenclature
  • Credit Events – Definitions and associated problems
  • Documentation (ISDA credit default swap masteragreement)
  • Single asset and basket structures
  • Settlement mechanisms
  • Credit indices (iTRAXX)
  • Pricing and valuation of CDS
  • Arbitrage based methods
  • Deriving default curves
  • Estimation of default probabilities, hazard rates

Exercise 10: Pricing and valuation of CDS

2nd Generation Credit Derivatives

  • First to default FTD CDS
  • Standardized FTD baskets: analytics and settlement mechanisms
  • nth to default basket structures
  • CDS options

Derivatives Application - Uses and Benefits of Credit Derivatives

  • Credit (portfolio) risk management
  • Using credit derivatives to manage and securitize credit risk
  • Regulatory capital management
  • Credit risk diversification, risk reduction
  • Investment applications (Synthetic asset generation)
  • Leverage (unfunded exposures)
  • Yield enhancement (exploiting of credit arbitrages)
  • Market access (synthetic loan generation)
  • Credit trading

Structured Credit Products

  • Collateralized debt obligations (CDOs)
  • CDO structures
    -Cash flow CDOs
    -Synthetic CDOs
    -Funded and unfunded structures
  • Single Tranche CDOs
    -DJ Traxx Index tranche CDOs
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  • Quality – our clients consistently rate our performance ‘excellent’ or ‘outstanding’. Our average overall score awarded to us by our clients is nine out of ten.
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