Introduction to Derivative Valuation
This workshop is designed to take delegates who have little or no knowledge of derivative valuation to the point where they have a good grasp of the fundamental drivers and methodologies behind the process, including the basic rational and need for accurate valuations for accounting, risk management and regulatory purposes.
The workshop focuses on the practical aspects of the process and, although it covers numerical examples and the use of models, the agenda is designed to allow the non-mathematician a considerable understanding of the core methodologies.
Delegates attending this course will leave with a good understanding of why and how derivatives are valued and how errors and anomalies in those values may be spotted.
A sample module from this highly practical Derivative Valuation introductory workshop:
Valuing Non-Linear Derivatives like Options
This section of the programme extends the previous module to include arbitrage pricing of options.
A model of the basic underlying price behaviour: e.g. stock prices
Mapping real world derivatives on to the model: cost of carry and volatility
Historic and Implied Volatility: Smile and Skew
Constructing the cost of carry or arbitrage basket for an option: or why the world is now uncertain!
Building an option model: the Binomial Model example
Valuation examples using the Binomial and Black-Scholes models
Hedging options using the Greeks and the arbitrage relationship
Potential pitfalls of models – how to test for success
Using models in a risk management process
Liquidity, concentration and other adjustments
Works Group Session: Non Linear Derivatives Valuation
Using spreadsheet exercises to derive model prices for simple options
Comparing with market prices and examining the arbitrage relationships
Practical hands on simulation of dynamic hedging using Monte-Carlo simulation
Comparing actual hedging costs with model prices and valuation
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