Introduction to Capital Markets

Organisation of Financial Markets

• Market participants
• Main markets: interest rate, FX, equity, commodities, credit
• Cash and derivative products
• Dealing room staff

• Practical workshop

• Reconstruct the professional layout of a dealing room

Pricing principles of vanilla derivatives

• Non-conditional products: forwards and futures
• Conditional derivatives: options

• Practical workshop

• Calculate a forward price
• Describe the parameters necessary to price an option

FX Products: Characteristics, Market Conventions and Uses of Cash and Derivative Instruments

• Spot FX
• Forward FX and FX swaps
• FX options

• Practical workshop:

• Calculate a forward FX rate from the spot rate and swap points

Interest Rate Products: Characteristics, Market Conventions and Uses of Cash and Derivative Instruments

• Money Markets and Bond Markets
• Yield curves and credit spread
• Sensitivity and duration
• FRA, STIR, bond futures
• Interest Rate Swaps (IRS), caps / floors

• Practical workshop

• Hedge a bond portfolio with cash and derivative instruments

Equity Products: Characteristics, Market Conventions and Uses of Cash and Derivative Instruments

• Types of equities
• How Stock Exchanges work
• MTF : BATS, Turquoise, Chi-X, NYSE Arca Europe
• Types of buy/sell orders
• Block trading and dark pools
• Equity futures and equity index futures
• Options and warrants
• Roles of the depositary and the clearer

• Practical workshop

• Explain Beta and hedge an equity portfolio

Commodities: mechanics, market conventions and uses of cash and derivative instruments

• Main commodity derivatives
• Organised commodity markets

Inherent Risks

• Market risks (VaR and Stress test)
• Counterparty risks (Cooke and Mc Donough / Basel II and Basel III)
• Operational risks
• Liquidity risk

• Practical workshop

• Simple VaR calculation 1 day/99%