Course Outline 

Module 1: Advanced Foundations of Derivative Markets

• Derivatives market structure: OTC vs. exchange-traded

• Market participants: hedgers, arbitrageurs, speculators

• Pricing fundamentals: the cost-of-carry model, arbitrage-free pricing

• Understanding volatility drivers and market dynamics

• Role of derivatives in risk transfer, liquidity, and financial innovation

• Case Study: Analysis of a major market derivatives failure (Barings, LTCM, Archegos)

Module 2: Futures, Forwards, and Swaps – Pricing & Applications

• Forward pricing models: interest rates, storage costs, convenience yield

• Futures pricing and the no-arbitrage principle

• Basis risk, contango, and backwardation

• Interest rate swaps, currency swaps, commodity swaps: structure and pricing

• Applications in hedging: interest rate, FX, commodity, and credit risk

• Practical Exercise: Constructing and valuing swap agreements

Module 3: Options & Option Pricing Models (Advanced)

• Option classifications: European, American, Bermudan, Asian, barrier options

• Payoff structures and profit diagrams

• Black-Scholes-Merton (BSM) model – assumptions, derivation, and limitations

• The Greeks: delta, gamma, theta, vega, rho – interpretation and application

• Binomial and trinomial tree models for American options

• Volatility modeling: implied volatility, volatility smile & skew

• Practical Exercise: Option pricing and Greeks calculation using real data

Module 4: Exotic Derivatives & Structured Financial Products

• Structured notes, credit-linked notes, and hybrid derivatives

• Exotic options: lookback, digital, barrier, chooser, rainbow, compound options

• Credit derivatives: CDS, CDOs, TRS – mechanics and valuation basics

• Weather and energy derivatives

• Tail-risk hedging and volatility derivatives (VIX futures/options)

• Case Study: Structured product failures and regulatory fallouts

Module 5: Derivatives Trading, Risk Management & Regulation

• Derivatives trading strategies: spreads, straddles, strangles, butterflies, collars

• Hedging strategies using options, futures, forwards, and swaps

• Value-at-Risk (VaR), stress testing, scenario analysis

• Counterparty risk and credit valuation adjustment (CVA)

• Regulatory environment: EMIR, MiFID II, Dodd-Frank, Basel III/IV, IFRS 9

• Operational risk in derivative trading

• Practical Simulation: Designing a hedging strategy for a real portfolio