Equity Derivatives 1: , Swaps and Options

A practical 3-day course presented by Dr Simon Acomb Equity indices, dividends, forwards, swaps and options are an essential part of the financial marketplace. This programme will equip you to use, price and manage risk across the wide variety of different equity products.

The programme starts with the building blocks of equity market indices, dividends, futures and forwards. From there, it progresses to equity and swaps. It covers issues in valuation including collateral and credit risk as well as the practical applications of swaps in corporate finance, M&A activity and investment management.

Day two focuses on advanced issues in trading equity swaps and options. This includes the definition, types and uses of different equity options. It then progresses to teach practical applications and strategies across risk management, trading, corporate treasury and investment management.

Day three covers the essentials of pricing, including the Black-Scholes model, hedging and option sensitivities (the “”). It then teaches various strategies to trade views on using equity options.

The approach is hands-on and learning is enhanced through many practical exercises covering hedging, valuation and risk management. The exercises use Excel spreadsheets which participants can take away for immediate implementation.

Who the course is for Prior knowledge • Equity and Derivative sales, traders, structurers, Basic knowledge of Microsoft Excel and a general quants and relevant IT personnel understanding of equity markets. • Asset allocation managers • Equity portfolio managers • Company finance executives, corporate treasurers and investment bankers • Risk managers, finance and IPV professional • Auditors and accountants

About LFS London Financial Studies is a specialist teaching resource concentrating exclusively on capital markets. Our course leaders have extensive practical experience in derivatives, quantitative analysis and econometrics.

Asia Pacific: +65 3159 3707 [email protected] www.londonfs.com Equity Derivatives 1: Dividends, Swaps and Options

A practical 3-day course presented by Dr Simon Acomb

Course Leader Dr Simon Acomb

Dr Simon Acomb has over 20 years of experience in quantitative finance. He started his career in finance at Barclays deZoete Wedd in 1992 in the Equities Derivatives Group and progressed to run the quantitative research team.

This was followed by five years at Commerzbank, where he established a derivatives proprietary trading team and then became head of the equity quantitative research group. Most recently, Simon has been a managing director at Morgan Stanley as global head of the Equities Analytic Modelling Group. He now works as a consultant and trainer in mathematical finance.

Practical application Tight focus What we teach is soundly based in current best practice. Our expertise is in capital markets. That is what we Our teachers have extensive practical experience in concentrate on. We offer courses and packages on a relevant capital markets. wide range of topics in this important and complex area. This tight focus enables us to deliver teaching that is uniquely effective and useful. Intellectual clarity Our teachers are first class communicators and acknowledged experts in their fields. They combine Theory and practice extensive practical experience with profound theoretical The professional and personal qualities of our course understanding. As skilled communicators, they get the leaders are crucial: effective learning can only be message across quickly and effectively. Course delivered by exceptional teachers. At London Financial exercises deliver effective practical learning that Studies we are able to attract prominent practitioners and participants remember long after leaving the classroom. academics all of whom have a clear and thorough grasp of their subjects and wide, practical experience. They are all expert communicators with the ability to Personal approach impart their knowledge in a clear and engaging way. We try to understand the needs of each person and structure courses and packages of real benefit to them. All our teaching groups are small enough to enable Accreditation individual needs to be assessed and met continually. LFS is recognized by the CFA and GARP as providing executive education of the highest quality. Members are eligible for CE/CPD credits from this event. Economic value We understand the commercial environment in which our clients operate. What we teach them delivers tangible benefits to their personal performance and to the bottom line of their companies.

Asia Pacific: +65 3159 3707 [email protected] www.londonfs.com Equity Derivatives 1: Dividends, Swaps and Options

Day 1

Equity Markets: Indices, Dividends, Equity and Dividend Swaps Forwards, Repo and Stock Loan ● Timing of resets and cashflows for an ● Corporate structure and types of equity ● Valuing an equity swap using discounting ● Equity indices: price and capitalisation weightings ● Exotic swap types – variable notional, quanto, index vs. index ● Lifecycle and type of dividend payment ● Motivations and players in the market ● Dividends and tax ● Using equity swaps for dividend taxation arbitrage ● Mechanics of stock lending ● Trading the equity repo ● Uses of stock loan – fee income and arbitrage strategies ● Using an equity swap in mergers and acquisitions ● Equity Repos ● Diversifying cross holdings ● Introduction to an equity forward ● Overlay strategies for asset managers ● Non-arbitrage pricing of an equity forward ● Discounting and choosing a yield curve – Eonia or : Corporate use of an equity swap Euribor ● Differences between futures and forwards and the impact of uncertain rates

● Forecasting dividends – fixed amount or proportional dividends ● Using futures to short the market ● Futures and tactical asset allocation

Exercise: Building a forward curve, studying the impact of corporate actions on index dividends

LFS is an excellent institution with a very high standard of tutors. I have completed two courses through LFS and would highly recommend them.

Analyst, AMP Capital

Asia Pacific: +65 3159 3707 [email protected] www.londonfs.com Equity Derivatives 1: Dividends, Swaps and Options

Day 2 Day 3

Advanced Issues in Equity Swaps Essentials of Option Pricing ● Collateral and credit risk ● Pricing options by replication ● Central clearing and trading with a CSA ● Black-Scholes assumptions on asset price ● Role of CVA in swap pricing movements ● Introduction to the dividend swap contract ● Geometric Brownian motion and standard option valuation ● Comparing dividend swaps and dividend futures ● Hedging and risk neutrality ● Trading dividends as an asset class ● Including dividends in price dynamics ● Impact of the structured product market on dividend swaps ● Sensitivities and the Greeks ● Hedge fund strategies with dividend swaps ● Impact of dividend choices on risk measures (fixed cash, proportional and hybrid dividend assumptions) ● Hedging costs vs. time decay (the relationship Exercise: Trading opportunities with a dividend swap between theta and gamma) ● Using trees to price American options Equity Options ● Problems of combining dividends into American ● Option definitions option pricing ● European and American options ● Causes and impact of volatility smiles ● Trading on an exchange versus OTC ● Put / call parity for European options Exercise: Investigation of risk sensitivities for American and European options ● Index and basket options ● When to exercise American style options ● Portfolio protection – put, put spread, Trading Volatility with Options ● Directional views – call, call spread ● Implied vs. historic volatility ● Buying the underlying vs. buying a ● Options on illiquid assets or large size ● Range bound strategies – and strangles ● Extreme event risk, volatility skew and smile ● Yield enhancement – call overwriting ● Pricing the chance of a payoff ● Corporate Treasury – structured acquisition and ● “Zero cost” and “Pay later” strategies disposal using options ● Simple volatility trades ● Taking positions and skew and smile Exercise: Protecting a portfolio against downside risk ● Introduction to a contract with options ● Trading with volatility indices

Exercise: Trading and hedging volatility

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Location: Singapore

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Asia Pacific: +65 3159 3707 [email protected] www.londonfs.com