Derivative instruments - Module 1 - The essentials

Whoever has watched "The Wolf of Wall Street" has likely struggled to understand the jobs, products, jargon that surround financial markets. Some of us are still trying to get our way out of this financial jungle and clarify the associated strategies. Demystifying financial instruments is the key objective of the step-by-step programme we propose below.

This training curriculum is designed around 5 complementary building blocks:

• Derivative instruments – Module 1 - The essentials
• Derivative instruments – Module 2 - Forwards and futures
• Derivative instruments – Module 3 - Swaps
• Derivative instruments – Module 4 - Options
• Derivative instruments – Module 5 - Credit derivatives

Our modular approach allows each participant to select his/her entry point in the programme to best fit cumulated knowledge and experience on this wide topic.

By the end of this course, participants will be able to:

• define the general characteristics of swaps;
• gain an in-depth understanding of how swaps operate;
• list how swaps can best be used on the market: be it in isolation or in combination with other instruments;
• understand the valuation method and what can impact swaps' quotation;
• identify major risks associated and determine controls that may mitigate them.

This module can be viewed either, for people who are not directly confronted with derivative (such as legal, IT, compliance, etc), as a global presentation of the derivative world, or, for any other person, as a first, introductive step, to be developed in the following modules. This module covers:

• Some useful insights about underlying instruments such as interest rates, bonds, currencies and stock indexes
• Main features of a derivative contract, listed or OTC
• Forward contracts and the role of the yield curve
• Futures contracts, specific features of the trading on an exchange
• Swap contracts (IRS, CRS) and swap rates market; importance of the ISDA contract
• Options: main features, ITM, OTM or ATM, the volatility, 4 basic option strategies, use of options vs use of forwards/futures
• The use of forwards and of futures contracts for hedging and for speculative trading purpose
• Credit derivative: how to define and measure credit risk?
• The CDS market

The content of the session is illustrated by many real market examples. It is given in an attractive, understandable way, avoiding mathematical developments.

An attendance certificate will be sent to participants.

This training will be coordinated by Frédéric Botteman, Partner at PwC Luxembourg.

The different modules will be animated by experts in derivatives.

Frédéric, Audit Partner, is specialised in the valuation of derivatives and illiquid securities. Thanks to this, he has gained a high expertise in the audit of guaranteed funds. He is also leading several SRI reporting for major IM players.

Frédéric is instructor in several courses linked to derivative instruments.