Structured Equity Products 1: Mechanics and Basics of Pricing

Professions Involved in the Structuring Process
  • Structuring desk (sell-side)
  • Other teams involved (buy-side)
  • Structuring a product
Review: Underlying Theory of Equity Markets
  • Market assumptions and models
  • Return distribution
  • Historical volatility/Implied volatility
  • Volatility smiles
Vanilla derivatives used in structured equity products
  • The Black & Scholes formula
  • Calculating sensitivities: “Greeks”
  • Strategies based on vanilla options
  • Impact of dividends, yield curve and volatility skew on the pricing of structured products
  • Practical workshop
  • Managing Delta-neutral and Gamma positive positions in EXCEL™
Exotic pay-offs
  • Alternatives to the Black & Scholes formula: Monte Carlo method and binomial trees
  • Overview of exotic options: lookback, barriers, Asian, ladder,ratchet, baskets
  • Typology: forward start, stop loss, path dependant, multiple underlyings
  • Practical workshop
  • Comparing pay-offs as a result of fluctuations in the underlying
Structuring
  • Definition, structure, pricing
  • Documentation, term sheets: analysing recent term sheets
  • Issue, post-sale
  • Practical workshop
  • Price a structured swap, reverse engineering
Overview of Structured Equity Products
  • Option packages: spreads, collars
  • Guarantee products (interest rate, volatility), CPPI
  • Coupon products: reverse convertibles, corridors
  • Dividend swaps, CFD
  • Volatility/correlation/dispersion products: variance swaps
  • Practical workshop
  • $ .Pricing: spread, zero-cost collar, guaranteed capital product (zero-coupon calculation, cash flow discounting, investable premium, pay-off choice)

  • Master the mechanics and pricing of standard options
  • Master the notions of implied and historical volatilities
  • Master the implications of volatility smile
  • Master the pay-off of major exotic options
  • Master the risk factors of exotic options
  • Master the structuring of the most important equity products
  • Analyse the term sheets of various products.
  • Progressive overview of structured equity products, including legal and financial aspects
  • Introduction to pay off exotics in order to analyse complex structured products
  • Introduction to the fundamentals of pricing through simulation methods
  • Impact of the global financial crisis on structured equity products
  • Fund managers
  • Junior traders
  • Salespeople
  • Brokers
  • Middle office / Senior back office
  • Internal controllers / Auditors
  • Financial divisions
  • Risk managers
  • Institutional investors
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