Structured Equity Products 2: Structure and Pricing

Statistics recap, introduction to options
  • Main phases of pricing
  • Standard models (Black & Scholes, local volatility,stochastic volatility)
  • Risk-Neutral probability
  • Replication portfolio
  • Call / put parity
  • Black & Scholes formula
  • Alternative approaches (EDP, binomial trees, Monte Carlo)
  • Practical workshop
  • Analysing and pricing a call/put vanilla using EXCEL™
  • Pricing via Monte Carlo and binomial tree in EXCEL™
  • Example of modeling of a quanto
  • Sensitivity of options to various parameters (Strike, maturity, volatility, interest rate, …)
Structuring Process: Players and Objectives
  • The players
  • Structuring / Trading / Sales
  • Compliance / Legal / Fiscal
  • Issuers / Clients
  • Objectives / Types of product
  • Capital guaranteed/protected / not guaranteed
  • Dividend swaps, currency selection, off-shore and on-shore curves
  • Practical workshop
  • Create an index for a guaranteed capital product
Secondary Market/Primary Market
  • Issuer’s selection
  • Organisation of the secondary market
  • Practical workshop
  • Issuer’s optimal choice / currencies
Determining Suitable Products
  • Responding to clients’ needs: bull / bear
  • Sophistication: plain vanilla / exotic
  • Market driven
  • Practical workshop
  • Constraints on product choice: availability, client expectations, etc.
Exotic Options
  • Mathematical recap
  • Monte Carlo method / Digital methods
  • Estimate volatility and correlation
  • Product catalogue: Rainbow / Barrier / Athena / Variance-Swap
  • Cancellable / autocall
  • Practical workshop
  • Calculate the price of an Athena and a Rainbow
  • Model and calculate a variance swap
Risk Management
  • Risk parameters
  • Greeks (vega, gamma, delta, etc.) and their use in hedging
  • Limitations of delta-hedging and of the Black & Scholes model
  • Practical workshop
  • Analyse mispricings
  • Find the optimal hedge

  • Master the different elements composing structured equity products
  • Master all the steps in the structuring process
  • Analyse models and underlying risk factors
  • Master the parameters of volatility and sensibility (Greeks: vega, gamma, delta, rho, thetha, vanna and volga)
  • Master the numeric methods for pricing
  • Master the delta-neutral replication of a portfolio
  • Master the risks of a trading book
  • Optimise hedging
  • Apprehend regulatory limits (compliance, law, tax, counterparty, …)
  • Master the issuer’s problems: spread / rating
  • Various pricing exercises of structured products using in EXCEL™
  • Sensitivities calculation and application of book management techniques
  • Presentation of standard models, underlying principles and their associated risks
  • Detailed explanation regarding structuring of major equity structured products
  • Presentation of binomial trees, EDP resolutions and Monte Carlo method
  • Book managers
  • Junior structurers
  • Risk managers / Internal controllers / Inspectors
  • Financial intermediaries
  • Middle office staff
  • Finance departments
  • Junior traders
  • Institutional investors
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