Derivative instruments - Step by step - Module 1 - The essentials

Whoever watched "The wolf of Wall Street" has struggled to understand the jobs, products, jargon that surround the financial markets. Some of us are still trying to get their 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 7 complementary building blocks:

Derivative instruments – Step by step - Module 1 - The essentials
Derivative instruments – Step by step - Module 2 - Forward, future in details
Derivative instruments – Step by step - Module 3 - The world of swaps: IRS, CRS, CCIRS, performance swaps, inflation swaps, volatility swaps…
Derivative instruments – Step by step - Module 4 - Options
Derivative instruments – Step by step - Module 5 - Credit derivatives
Derivative instruments – Step by step - Module 6 - Securitisation vehicles – traditional, synthetic (under development)
Derivative instruments – Step by step - Module 7 - Structured products – credit linked notes, reverse convertible bonds, auto-call, inflation linked, volatility linked, shariah compliant, embedded derivatives (under development)

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 each instrument;
• gain in-depth understanding of how the instruments operates;
• list how it can best be used on the market - be it in single or in combination with other instruments;
• understand the valuation method and what can impact the value of it;
• 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, 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.

Frédéric has developed a strong fund audit experience and is also involved in the expert team in the area of circular CSSF 2002/77 requirements and is instructor in several courses linked to this topic and to derivatives.
Frédéric is also leading several SRI reporting for major IM players.