DAY 1
(Day 1 is extremely intensive. Candidates should be familiar with much of this material, as they will already have passed the Dealing Certificate or have equivalent experience)
The Foreign Exchange Market
 Spot exchange rates, reciprocal rates and crossrates
 Roles of marketmakers, brokers and electronic broking
 Forward outrights and their uses
the relationship with the money markets
premiums and discounts
crossrate swaps
what is a swap deal?
settlement rates
historic rate rollovers
hedging forwards via deposits
 Covered interest arbitrage and hedging a swap in the deposit market
 Short dates
daily rollover of positions
 Positionkeeping: average rate, net position, and profit/loss
 Forwardforward rates
 NDFs
 Time options
 Value dates and broken dates
interpolation
 Longdated foreign exchange forwards
The Money Markets
 Time value of money, present value / future value, NPV
 Calculation of simple yield on an investment
 Simple and compound interest
 Annual and semiannual equivalent yields
 Cash loans and deposits
reference fixing rates, LIBOR, EURIBOR
calculation of EONIA
yield curve shapes and theories
converting between ‘bond’ and ‘money market’ yields
calculation of settlement amounts
price / yield relationship
accrued coupon, capital gain/loss
domestic, foreign, and Euro securities
Tbills, commercial paper, bills of exchange
Tbills, commercial paper, bills of exchange
calculation of settlement amounts
discount / yield calculations
 Comparison of yields quoted according to different conventions
Forwardforwards and FRAs
 Forwardforward interest rates
 The yield curve
 FRAs
the mechanics
uses by borrowers, depositors and positiontakers
documentation and ratefixing
 Arbitraging with FRAs and FX
Homework
Diploma workshop
DAY 2
Review of previous day's homework
The Futures Markets
 Pricing interest rate futures
 The futures markets
the mechanics of trading
tick values
currency futures markets
futures compared to OTC markets
calendar spreads
futures strips
butterfly, condor
calculation of P/L
 Arbitrage between FRAs and futures
 Hedging a FRA with futures
strip hedge, stack hedge, basis risk
calculation of FRA rate and hedge
 Hedging forwardforward FX using FRAs and futures
 Basis
definition and calculation of basis, theoretical basis and value basis
convergence
 Convexity problem
 Volume and open interest
calculation of open interest
Bond Markets
domestic, foreign and Euromarket issues
floating rate, assetbacked, warrants, convertibles
settlement
 Price / yield relationship for bonds
NPV and IRR concepts
clean and dirty prices, accrued interest
yield to maturity
day / year conventions
current and simple yield
calculation of theoretical bond price for annual and semiannual bonds
calculation of theoretical bond price on a noncoupon date
bond STRIPs
 Zerocoupon yield calculations
bootstrapping ytm to zeros
valuation of a bond
calculation of par yield from zeros
cashandcarry arbitrage
 Price sensitivity of bonds
calculation of duration and modified duration, annual and semiannual bonds
calculation of portfolio duration and modified duration
hedging a bond position
Homework
Diploma workshop
DAY 3
Review of previous day's homework
Repos, Sell/BuyBacks and Securities Lending
market conventions and terminology
pricing
general v. special collateral
margin
marking to market
substitution
crosscurrency repos
triparty v. bilateral v. holdin custody repos
documentation
 Users, applications and examples of repos
 Buy/sellbacks
pricing the buy / sellback structure
coupons
closeout and repricing
comparison with repo and buy/sellback
 Synthetic repo structures
Homework
Diploma workshop
DAY 4
Review of previous day's homework
Interest Rate Swaps
 Concepts and swap pricing
comparative advantage
 Mechanics of swaps
 Applications, asset and liability swaps
 Price quotation
day / year payment basis and calculations
annual and semiannual
spread over Treasuries
 Calculating allin cost of borrowing / allin return on an asset swap
 Settlement calculations
 Swap structures
basis swaps
constant maturity
OIS
total return
 Hedging swap positions
 Valuation
the use of zerocoupon yields
 Creating a 12month swap from a strip of futures / FRAs
Currency Swaps
 NPV and swap pricing
 Applications
 Comparison with foreign exchange forwards
 Settlement calculations
Homework
Diploma workshop
DAY 5
Review of previous day's homework
Currency and Interest Rate Options
 Basic concepts, definitions and terminology
 Pricing
underlying concepts
historic and implied volatility
limitations of Black & Scholes
'European' and 'American' options
binomial models
different ways of quoting a currency option price
 Historic and market volatility
 Put / call parity
synthetic forwards
price quotation
margin
 Profit / loss of a position
 Trading strategies
spread
straddle
strangle
risk reversal
butterfly
IRGs, caps, floors, collars and zerocost structures
 Hedging a cap / floor from calls and puts
 Survey of exotic options
barrier, Asian, swaption, compound, binary
 Delta hedging a position
 Gamma hedging
 Vega, Theta and Rho
Homework
Diploma workshop
DAY 6
Review of previous day's homework
Bank Risk Control
 Review of different risk types
 Controls and limits
 Interest rate risk measurement, gap analysis and duration
 Netting, novation and documentation
GMRA, GMSLA, IFEMA, ISDA, FRABBA
holding period, confidence level, observation period
parametric/meanvariance, historic, Monte Carlo
stress testing, backtesting, BIS guidelines
calculation of standard deviation of returns or prices
conversion of volatility between annualised and higher frequencies
calculation of VaR of a single future cashflow given price volatility or yield volatility (including deposit, CD, Tbill)
calculation of VaR of an option position given delta
calculation of VaR of two cashflows given individual VaR and correlation
 Capital adequacy controls
Basel II, pillars 1, 2, 3
riskasset ratio
regulatory capital
trading book and banking book
counterparty risk calculations
Currency Economics and Forecasting
PPP
balance of payments
inflation
interest rates and money supply
economic growth
main economic indicators in the market
fixed, crawling peg, limited floating, floating, real effective exchange rates
government intervention, sterilisation
Introduction to Technical Analysis
 Basic theory
 Chart types: line, bar, candlestick, point & figure
 Continuation and reversal patterns, congestion analysis
 Moving averages, MACD, momentum, oscillators, RSI
 Elliot waves, Fibonacci, Gann
Homework
DAY 7
A practice exam
A help line is available until each participant has passed the exam.
