Financial Derivatives

Financial Derivatives: Content of 2 Day Workshop and (lower on page) Seminar

Finance Fundamentals

Financial Risk

Financial Derivatives

Financial Futures

General features: the clearing house, deposits and margins
Physical delivery versus cash settlement
Short term interest rate futures
Foreign exchange futures

Forward Rate Agreements (FRAs)

Definition and terminology
Pricing
Use as a hedging device
Pricing
Settlement

Swaps

Definition and characteristics
Pricing and valuation
Applications: interest rate swaps, zero coupon swaps and currency swaps
Non-generic swap structures
Pricing relativities: swaps and forward rates

Credit Derivatives

Fundamentals
Types and uses

Commodity Derivatives

Definition of commodity risk
Types and uses

Options

Definition and terminology
Over the counter (OTC) and exchange traded (ET) options
Pricing
Option profit profiles
Caps, floors and collars
Delta hedging

Value at Risk (VaR)

Capital allocation against risk positions

General rationale
Bank for International Settlements (BIS) recommendations

Financial markets risk management policy

Financial Derivatives Seminar: "Derivatives, Directors and Disasters: What’s the Link?"

(Approximate presentation time: one hour)

Background

Poor understanding by corporate directors and executives of the appropriate use of financial derivatives and the requisite ongoing oversight and controls that must accompany trading in derivatives have led to numerous public “ugly incidents” occasioning huge financial losses around the world in recent years.

This seminar discusses the conditions under which financial derivatives can eliminate financial risk or, if used inappropriately, they can become “weapons of financial destruction”.

Seminar Assessment

This seminar has been presented to CPA Australia's Directors' Discussion Group (DDG). The DDG Convenor remarked that the seminar presentation represented “an easy to understand expert presentation of a very difficult and confusing subject”.

Seminar Content

“Doing nothing” is doing something

Speculation, by default, on financial markets prices
Is this an option for directors?

Financial derivatives: definition and intention

The main classes of financial derivatives

Forward foreign exchange
Forward rate agreements (FRAs)
Futures
Swaps
Options
Credit derivatives

Financial derivatives by type of contract

Over the counter (OTC)
Exchange traded (ET)

Financial derivatives: use and abuse

Financial risk management policy

Proactive recognition of financial derivatives use and the circumstances under which financial derivatives are to be used – or not used

Bringing it all together: the link is revealed!