Implementing Quantitative Techniques For The Financial Markets

Implementing Quantitative Techniques for the Financial Markets

Course Outline:
In a complicated financial world a detailed understanding of the application of quantitative techniques is essential. This course provides an in-depth coverage of practical quantitative methods important in today's financial markets. This course is charged and can be booked by the day. Select the days that meet your needs, or participate in the whole course for a thorough understanding of these important techniques.  

Who The Course is For:
Anyone who needs to understand a comprehensive set of tools for managing risk in the financial markets. The seminar will be of special interest to: Risk managers System developers Traders and derivatives teams Consultants and brokers

Objectives:
To provide practitioners with a practical understanding of how a range of tools can be used to manage analyse and price financial instruments.

Participants will study:
Principal components
Duration and the impact of convexity
Methods of interpolation, their uses and limitations
Regression techniques
Implementing Monte Carlo simulations
Binomial and trinomial tree building
How to model assets and price derivatives in continuous time
Implementing dynamic term structure models


Course Programme
Day One
Convexity and the Money Markets


Review of the basics
Sensitivity analysis: Futures v FRAs
The impact of volatility and correlation
A rule of thumb for adjusting futures prices to reflect volatility


Workshop:
The Impact of Convexity
Interpolation Techniques and Yield Curve Fitting


Bootstrapping a yield curve
The form of the discount function
Methods of interpolation
Maximum smoothness
Cubic splines in detail
Interpolation and the forward curvens

Workshop: Interpolation and Swap Pricing
Day Two
Regression Techniques and B-splines


Applying multiple regression to bond data
Finding a functional form for the yield curve
B-splines v cubic splines
Econometric issues
Credit curves


Workshop: Estimating the Term Structure of Interest Rates from Bond Data
Principal Components and Bond Portfolio Hedging


Review of single and two-factor duration
Principal components
Using principal components with B-splines to derive hedging factors
Bond arbitrage and portfolio immunisation


Workshop: Portfolio Immunisation
Day Three
Modelling Movements in Asset Prices - Monte Carlo Simulation


The generalised Markov process
Asset prices represented by Brownian motion
The basics of Monte Carlo simulation
Random number generators
Control variate and antithetic variable techniques


Workshop: Building and Running a Monte Carlo Simulation
Modelling Movements in Asset Prices - Trees


Alternative futures
Probabilities and pseudo probabilities
The binomial tree
Fitting the tree to the asset price process
Trinomial trees
Trees and Monte Carlo


Workshop: Building a Binomial Tree
Day Four
Using Trees for Pricing Derivatives


Risk neutral valuation
Valuing standard options
Early exercise and Bermudan structures
Valuing look-back options with trees


Workshop: Building a Binomial Option Calculator
Modelling Asset Prices in Continuous Time


Some basic stochastic calculus and Ito's Lemma
Normal and lognormal distributions
Applying the Black-Scholes analysis


Workshop: Comparing Techniques
Day Five
Practical Approaches to Modelling the Dynamics of the Yield Curve


The stochastic behaviour of interest rates
Arbitrage and no arbitrage
Risk neutral valuation
Spot rate models
Forward rate models
Derivative pricing
Sources of uncertainty and continuous time
Forwards and futures revisited
Model calibration.


Workshop: Implementing a Single Factor Model


This program is eligible for 40 Continuing Education credit hours from the CFA Institute. If you are a CFA Institute member, CE credit for your participation in this program will be automatically recorded in your CE Diary.