Derivatives School: M2 - Bank Applications of Derivatives

Derivatives School: M2 - Bank Applications of Derivatives

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Course overview Module 2: Bank Applications of Derivatives (Day 4 - Day 5) explains, by way of specific examples, how banks use derivatives for their own and their customer benefit. The first part looks at specific solutions for customers and focuses on the role of swaps in the primary issuance business, and managing customer FX exposures; whilst the second looks at financial engineering, and more specifically, at how derivatives can be used to reduce funding costs and/or as a means of the bank earning fees without taking a proprietary position, whilst at the same time providing investors with instruments that meet their risk/reward requirements. Summary of course content How and why are der…

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Course overview Module 2: Bank Applications of Derivatives (Day 4 - Day 5) explains, by way of specific examples, how banks use derivatives for their own and their customer benefit. The first part looks at specific solutions for customers and focuses on the role of swaps in the primary issuance business, and managing customer FX exposures; whilst the second looks at financial engineering, and more specifically, at how derivatives can be used to reduce funding costs and/or as a means of the bank earning fees without taking a proprietary position, whilst at the same time providing investors with instruments that meet their risk/reward requirements. Summary of course content How and why are derivatives used in practice? The difference between exchange-traded and OTC derivatives? Clearing procedures for exchange-traded derivatives Understanding the principal money market derivatives and how they are used to manage interest rate risk Swaps and how banks and other institutions use them Prima on options and their application in the management of FX risk How derivatives are embedded in common structures to provide investors with attractive risk/reward profiles Methodology This modular course uses interactive lectures, worked examples and real-world case studies showing in detail how the products are used and why. It shows the products in a highly practical way, without over-complication, with clear illustrations of each so that you may readily understand them and the role the bank plays. Who should attend? The Derivative School is beneficial to professionals at all levels who require a thorough understanding of derivatives and their practical applications. You can attend the comprehensive Derivatives School which runs from 1-5 December 2014 or pick from the following modules. Module 1: Fundamentals of Derivatives 1-3 December 2014, Hong Kong Module 2: Bank Applications of Derivatives 4-5 December 2014, Hong Kong Save US$1,690 for registering both modules on 1-5 December 2014!
Module 2 - Bank Applications of Derivatives Day 4 Bank applications of derivatives Delivering customer solutions: Using swaps in primary bond issuance Understanding the motivation for swapping from fixed financing to a floating liability Calculating the "all-in" funding cost as a spread over LIBOR Case study: Delegates will compare funding alternatives for a company Delivering customer solutions: Providing tailored hedge programmes for customers’ FX exposures The problem with “forward only” cover Using currency options to retain the up-side Creating zero premium products Introducing more innovative solutions: Using exotic options to reduce hedging costs Case study: Delegates will propose a suitable hedging strategy for a corporate with FX exposures Day 5 Financial engineering with derivatives Primary motivations for structuring Securing cheaper funding Providing attractive risk/reward profiles for investors Earning fee income The structuring process Delivering cheaper funding: Inverse floating rate notes Investor perspective Understanding the structure Variations on a theme Deferral period Adding a minimum rate Step-ups Adding leverage Pricing and valuation Hedging the issuer exposure "Super-floater" FRN's Case study: Delegates will construct a deferred reverse floating rate note, identifying appropriate parameters, and identifying the "hedge" required by the issuer to ensure LIBOR based financing Targeting the retail market: Capital guaranteed notes and high income products Understanding the process and distribution channel Who takes the risk Constructing a capital guaranteed note Introducing a cap and other common variations High income products Selling puts to increase income The listed certificate market Case study: Delegates will critically analyse a recent World Bank equity-linked note from the perspective of issuer and investor
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