UCIs – Financial Instruments Valuation

This training is designed to be practical and hands-on. The mathematics will be kept as simple as possible. In addition to the essential theoretical references, participants will receive Excel sample files that will also be covered during the sessions.  

By the end of this training, participants will be able to:

• Understand the features of the main financial instruments and their valuation methods
• Know the concept of fair value with reference to the key accounting standards (IFRS, Lux GAAP)
• Understand the main legal and regulatory requirements applying to valuation (product requirements and AIFM requirements)
• Apply the core techniques used to price fixed income instruments and compute interest rate sensitivity measures
• Understand the conceptual framework of arbitrage-free pricing and risk-neutral valuation
• Price common derivatives such as forwards, futures, swaps, options and instruments with embedded features
• Understand key credit risk metrics and the pricing of credit default swaps
  

Day 1

• Transferable Securities

• • Equity, Debt &  Hybrid Securities

  • Derivatives Securitie

• Securitisation

  • Asset-Backed Securities

  • Taxonomy of Securitisations

  • Cash Flow Waterfall of Securitisations

  • Global Financial Crisis and EU Regulatory Response

•  Accounting standards 

• • Overview of LUX GAAP and IFRS

  • IFRS Fair Value, Fair Value Hierarchy and Valuation Techniques

• Legal & Regulatory Requirements

• • Product Requirements

• • •   UCITS and UCIs Part II

    •   Money Market Funds

    •   SIFs and RAIFs

• • AIFM Requirements

• • • Valuation Policies and Procedures

    • Valuation Models

    • Review of Individual Values of Assets

• Fixed Income Pricing

• • Compounding and Discounting Regimes

  • Spot and Forward Rates

  • Rate Bond Pricing

  • Floating Rate Note Pricing

  •  Interest Rate Swap Pricing

  • Inflation-Linked Bond Pricing

  • Yield to Maturity, Par Yield and Discount Margin

  •  Z-spread and Option Adjusted Spread

• Fixed Income Sensitivities

• • One-Factor Sensitivity Measures

• • • Modified Duration, Effective Duration and DV01

    • Spread Duration and CS01

    • Modified Convexity, effective Convexity and Cross-Convexities

• • Multi-Factor Sensitivity Measures

• • • Key Rate Duration and KR01s

    • PCA and Principal Component Durations

Day 2

• Introduction to Financial Derivatives

• •  Forwards and Futures, Options, Swaps

• Risk Neutral Pricing 

• • Arbitrage-free Pricing

  • State Prices & Risk Neutral Probabilities

• • Binomial Pricing

  • Monte Carlo Pricing

• Pricing Forwards, Futures & Swaps 

• • Forwards vs Futures

  • Forwards and Futures Pricing

• • • Equity Forward and Futures

    • FX Forward and Futures

  • Swaps Pricing

• • • Equity Total Return Swaps

    • Interest Rate Swaps

    • FX Swap

• Pricing Options

• • Cox-Ross-Rubinstein Model

  • Black-Scholes-Merlon Model

  • Sensitivity Measures

  • Options Pricing

• • • Equity and FX Options

    • Warrants

    • Options on Futures

• • Instruments with Embedded Derivatives:

• • • Callable and Puttable Bonds

    • Convertible Bonds

• Black-Derman-Toy Model

  • Equity Derivatives vs Interest Rate Derivatives

  • Equilibrium vs Arbitrage-free Short Rate Models

  • Black-Derman-Toy Model

  • Black-Derman-Toy Model Calibration

• Pricing Fixed Income Derivatives

• • Forward Rate Agreement

  • Interest Rate Futures

  • Bond Futures

  • Implied Repo Rate & Cheapest-to-deliver

  • Interest Rate Futures Option

  • Bond Futures Option

  • Cap & Floor

  • Swaption

• Pricing Credit Derivatives

• • Credit spreads

  • Risk Neutral Default Probability

  • Recovery Rate

  • Default Correlations

  • Asset Swap

  • Bond Total Return Swap

  • Credit Default Swap

  • Credit Default Swaption

Professionals who are involved or would like to acquire an in-depth knowledge in the valuation of financial instruments.

Basic knowledge of Excel and financial markets.