Course Outline 

Module 1: Introduction to Derivatives and Financial Markets

• Definition and purpose of derivatives

• Why derivatives exist: risk management, speculation, and arbitrage

• Key players: hedgers, speculators, arbitrageurs

• Underlying assets: commodities, currencies, interest rates, equities, indices

• Exchange-traded vs. over-the-counter (OTC) derivatives

• Understanding leverage and margin

• Practical examples: Simple hedging and speculation scenarios

Module 2: Forwards and Futures Contracts

• What forwards and futures are and how they work

• Key terms: contract size, maturity, settlement, margin, marking to market

• Futures exchanges and clearinghouses

• Pricing basics: cost-of-carry model (beginner-friendly explanation)

• Hedging with futures (long hedge, short hedge)

• Speculation using futures

• Practical exercise: Reading and interpreting futures contract specifications

Module 3: Options Fundamentals

• What options are: calls and puts

• Key option concepts: strike price, expiration, premium, intrinsic vs extrinsic value

• The Greeks explained simply (Delta, Gamma, Theta, Vega, Rho)

• Factors affecting option prices

• Options strategies (beginner-level): covered call, protective put

• Practical exercise: Calculating option payoff diagrams

• Case study: Using options to manage portfolio risk

Module 4: Swaps and Hybrid Derivatives

• What swaps are: interest rate swaps, currency swaps, commodity swaps

• Why institutions use swaps (risk management, financing advantages)

• Basic pricing concepts for swaps (simplified)

• Introduction to hybrid derivatives: swaptions, credit derivatives, and structured products

• Real-world examples: How banks and corporates use swaps

• Practical activity: Building a simple interest rate swap structure

Module 5: Derivatives Markets, Risks, and Regulation

• Types of risks: market, credit, liquidity, operational, settlement

• Risk management techniques: hedging, netting, collateral, diversification

• Introduction to clearing, settlement, and central counterparties

• Regulatory environment (beginner level):

  • Basel III & IV

  • Dodd-Frank

  • EMIR

• Understanding documentation: ISDA Master Agreement (overview)

• Case study: Derivatives misuse and financial crises (e.g., 2008 simplified)

• Final practical exercise: Identify risks in sample derivative transactions