Unit 5 - Exchange Traded Derivatives: Futures and Options

Unit 5: Learning Aims and Objectives

Examine the evolution of the futures markets in commodities into the coverage of futures for a wide array of financial instruments
Grasp Central Counter Party Clearing (CCP), settlement, collateral/margin management, risk, contrast with bilateral clearing
Improve your knowledge of principal futures exchanges and futures contracts
Recognise the manner in which exchange traded futures and options are priced, fair value, trading strategies and uses in hedging
Gain the ability to critically examine different kinds of options, pricing issues including Black Scholes and binomial models, sensitivities to market factors etc.

Unit 5 - Content

Futures and options traded on exchanges
- contractual assets
- Centralised Clearing (CCPs)
- regulatory initiatives designed to promote migration from OTC to CCP
- central clearing vs. counterparty risk
Legal framework
- clearing
- initial margin
- variation margin
- novation and the role of Central Counterparty (CCP)
Factors of options pricing
- Black Scholes Merton model
- binomial tree methods
- option premium
- understanding the “Greeks”
- delta and dynamic hedging
- time value
- intrinsic value
Types of options
- puts and calls
- perspectives of buyer and writer
- American
- European
- Asian style
- risks to buyer/writers of options
Characteristics of futures contracts
- standardised contract specifications
- tick size
- contract size
- delivery dates
- calculation of fair value
- cost of carry
- contango
- backwardation
Principal futures contracts
- Eurodollar
- bond futures
- short term interest rates
- stock index futures
- FX futures
- Energy
- Metals
- agricultural products
Exchanges and platforms
- open outcry
- order types accepted by the markets
- market orders
- limit orders
- cash settlement/physical delivery

Would you like more information?

Please submit your details and a member of our team will contact you soon.