While using and trading derivatives can add enormous value to a firm, a lack of understanding of risk management techniques can easily lead to disaster. It is, therefore, vital for financial and non-financial firms to be knowledgeable about the latest tools, tactics and strategies for risk management.

The purpose of this presentation is to help financial managers, traders, general managers, senior functional managers, and other non-financial managers gain a thorough understanding of what financial and commodity derivatives are, how they work, how they are used, and how to measure the risks and rewards associated with them.

Largely non-existent 25 years ago, financial and commodity futures, swaps, options, mortgage-backed derivatives and forward foreign exchange markets now exceed several trillion dollars in notional or face amount. Traders employ a variety of technical and fundamental techniques in their search for trades that will earn a substantial profit. This talk blends the teaching of the theory of technical analysis with a practical viewpoint to applying the concepts to real time trading. Topics include an explanation of the financial and commodity derivatives, arbitrage pricing methods, sophisticated trading strategies, risk management techniques and hedging concepts, with examples drawn from actual trading situations.

GOALS

You will leave this presentation with a solid and immediately useful understanding of:

• What forward, futures, swaps, and options are and how they work
  1. How they affect the performance of your firm
  2. How to use them
  3. How not to use them
  4. How to determine the value of an option or a futures position
  5. A proprietary formula for determining the value of an option
• The option pricing formula(s)
• How the prices of different options are linked together
• How option prices change when market conditions change
• Spot-futures parity, basis, option carry and volatility value
• How to hedge an existing position in derivatives
• How to set up a derivatives strategy to achieve a given objective: eliminating the downside risk without limiting the appreciation potential, getting rid of an asset without selling it, etc.
• How to design strategies to take advantage of expected moves in prices
• The latest tools in risk management
  

The proposed outline of the presentation is as follows:

• General Terminology
• What are 'Managed Futures'?
  A. Theory of Managed Futures
  B. Benefits of Managed Futures
• Performance of Managed Futures
• Efficient Frontier
• Industry Agencies
• Why Markets Trend
• Trading Philosophy
• Trading Methodology
• Sample Portfolio
• Markets and Exchanges
• Examples of Futures Contracts
• Trading in a Bull, Bear and Sideways Markets
• How Portfolio Allocation Decisions are Made
• Risk Management
• Component Based Risk Management System
• How Risk is Managed
• Currency Risk in Derivatives Trading
• Trading Systems, Programs and Performance (Standard and Customized)
• Margins (Initial and Maintenance)
• Quantitative Strategies
• A Different Approach to Trend Following
• System Design (Market Level and Portfolio Level)
• Futures on Commodities
• Exercises and Assignments
• Determinants of Futures Prices
• Futures on Stocks and Indices
• Futures on Cash Bonds
• Futures on Currencies
• Options
• Option Valuation
• Parity Graphs
• Long and Short Side of the Market
• Synthetics - Mechanics
• Parity, Basis, Option Carry and Volatility Value (Insurance)
• Equity Options
• Early Exercise
• Black-Scholes Pricing Formula
• The Binomial Model
• Implied Volatility
• Determinants of Option Prices
• Delta Hedging, Delta-Neutral Positions, Delta Re-Balancing or Dynamic Delta Hedging
• Gamma Strategies and Effect of Gamma
• Spreads
• Breakevens and Computing Basic Breakevens
• Conversions and Reversals (General)
• Pricing Conversions and Reversals
• Using Conversions and Reversals to Price
• Boxes and Jellyrolls