Practical Risk Management Workshop
SUMMARY
The financial sector around the globe is experiencing dramatic changes, especially in the aftermath of the global credit crunch. The credit crunch has put more importance on a good understanding of the measurement and management of financial risk that corporations, fund managers and financial institutions face in today’s high volatile market conditions.
This two-day workshop will provide participants with a comprehensive overview of derivatives instruments as well as an introduction to pricing, risk measurement and management of financial risk. The programme will encourage participation through exercises, computer activities, and case studies (e.g.Metallgesellschaft and Barings Bank).
The workshop is designed to address the problems from a practical perspective, rather than taking a detailed academic approach. An understanding of financial mathematics (discounting, compounding, risk free rate of return, yield to maturity) is required. However, as the workshop puts the emphasis on the practical use of derivatives to hedge the financial risk, an in-depth knowledge of the theories of term structure of interest rates and option pricing models is not required.
The primary objective of this workshop is to enable participants to gain a good understanding of the pricing and the use of derivatives to hedge the different types of risks that both corporations and fund managers face. For example, hedging foreign exchange risk; hedging the volatility of the oil price; stock market volatility etc.
DAY 1
Types of Derivatives:
Forwards & Futures, Swaps, Options (Call and Puts), Warrants, Futures and Options Exchanges.
Introduction to Derivatives Pricing:
Binomial Pricing Model (Dynamic Tracking Strategy, One-period Binomial trees),
Tracking-portfolio Method, Risk neutral valuation method (Multi periods binomial trees) & Tracking Portfolio Method
Uses of Derivatives:
Hedging, Speculation & Arbitrage.
Valuation models:
Value of an Option at Expiry, Put-Call Parity, Introduction to the Black-Scholes Pricing Model, Estimating Volatility (Historical Volatility, Implied Volatility)
Option Sensitivities (The Greeks):
Delta, Gamma, Vega, Theta, Rho
DAY 2
Option Strategies:
Market conditions (Neutral, Bearish, or Bullish), Volatility (Bullish, Neutral, or Bearish). Example of strategies: Straddle, Butterfly, Condor, Call (put) Spread, Strangle, Straddle Calendar Spread, Conversion/reversal, and Volatility Trade etc.
Examples and Case Study
Software Demonstrations and Practice
The workshop will include computer demonstrations using real-life market data, market simulators and pricing models