Derivative instruments - Step by step - Module 8 - Valuation of derivatives - the principles

Inter-company training

Who is the training for?

Anyone who wants to reach a sound understanding of the financial instruments (including derivatives) used by investment managers.

Level reached



4,00 hours(s)

Language(s) of service



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 8 complementary building blocks:

Derivative instruments – Step by Step - Module 1 - The essentials
Derivative instruments – Step by Step - Module 2 - Forwards and futures
Derivative instruments – Step by Step - Module 3 - 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 (under development)
Derivative instruments – Step by Step - Module 7 - Structured products (under development)
Derivative instruments – Step by Step - Module 8 - Valuation of derivatives - Principles

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 instrument 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.

The aim of this module is to focus on the fundamental principles of derivative valuation, their rationale, their advantages and drawbacks. Attendance implies some basic knowledge of algebra and statistics, but the course will emphasise on understanding and handling the mathematical models rather than developing their calculus, which anyway are performed by usual softwares, such as the ones of Bloomberg.

  • Valuation in a deterministic environment:
    • the 3 paradigms of the quantitative finance in a deterministic world
    • theoretical, "fair" price vs market price
    • forwards pricing, on interest rates, currencies, bonds, stocks and stock indexes
    • futures pricing: general, application to stock indexes, bonds and commodities
    • swap pricing: IRS, CRS and variants
  • Valuation of conditional derivatives (options): the impact of random walk:
    • the fundamentals of stock price modelling:
    • market behaviour: the random walk hypotheses
    • the Wiener process
  • 3 methodologies of option pricing:
    • Black-Scholes formula
    • Binomial tree
    • Monte Carlo simulation
    • and the rationale of selecting the right method, depending on the product to price
    • why do we use a forward value in the option valuation?
    • the dramatic case of credit derivatives pricing

Certificate, diploma

An attendance certificate will be sent to participants.

Additional information

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.

These courses might interest you

Banking and insurance - Banking - Financial markets - Financial products