Derivatives on financial market

Indicative content

1. Introduction to financial derivatives. Definition of basic terms, inclusion of financial derivatives in the structure of the financial market. Future contracts - basic concepts, meaning, functions, valuation principles. Definition of futures contracts, basic characteristics of futures contracts, their use in practice, valuation principles, risk-free arbitrage and its exclusion. Functions of futures contracts - security, speculation, arbitration.
2. Currency forwards - valuation and use. Security, speculation, arbitration. Definition of currency forwards, use them in practice, valuation principles, risk-free arbitrage and its exclusion. Fair value of currency forwards and its calculation. Significance of the fair value of currency forwards, calculation of the fair value of currency forwards, the difference between the price and the fair value of the currency forward, its definition and use in IFRS and taxation.
3. Interest rate forwards - valuation and use. Definition of interest rate forwards, use them in practice, valuation principles, risk-free arbitrage and its exclusion. Security, speculation, arbitration. Fair value of interest rate forwards and its calculation. Significance of the fair value of interest rate forwards, calculation of the fair value of interest rate forwards, the difference between the price and the fair value of the interest rate forward, its definition and use in IFRS and taxation.
4. Futures - specifics and method of trading on the stock exchange. Basic characteristics of futures and specifics of futures trading on the stock exchange. Daily settlement of profit and loss. Futures on foreign currency. Definition of foreign currency futures, method of trading, use in practice. Security, speculation, arbitration.
5. Interest rate futures. Use the definition of short-term interest rate futures, the method of trading, in practice. Security, speculation, arbitration. Other futures - for indices, for long-term interest rates - CTD bonds. Definition of other futures, their meaning and use in practice. Calculation of CTDs of bonds when trading futures at the long-term interest rate. Security, speculation, arbitration.
6. Swaps - meaning and use. Basic characteristics of swaps, their importance and use in practice. Currency swaps. Definition of currency swaps, their calculation, use in practice. Interest rate swaps. Definition of currency swaps, their calculation, use in practice.
7. Option trades - meaning, use and basic graphs of profit and loss. Basic definition of option trades, their meaning, standardization. Security, speculation, arbitration. History of option trades. Basic principles of option pricing - Black - Scholes model I. Basic principles of option pricing, transition from pricing of futures contracts to option pricing. Distribution function of the standard normal distribution. Internal and time value.
8. Basic principles of option pricing - Black - Scholes model II. The basic principles of option pricing, Call and Put parity, use it in practice. Volatility and its importance. Volatility calculation, its importance in valuation and trading in practice.
9. Greek alphabet. Significance of derivatives of individual input variables influencing the option price. Delta hedging. The effect of the change in the spot price on the option price and the importance of delta hedging in trading in practice. Gamma hedging. The effect of the change in the spot price on the option price and the importance of gamma hedging in trading in practice. Normal distribution density.
10. Option strategies I. Vertical strategies: call spread, vertical put spread, condor, butterfly, straddle, strangle - meaning and use.
11. Option strategies II. Horizontal and diagonal option strategies - meaning and use.
12. Exotic options I. Asian options, barrier options, Bermuda options - basic principles and use in practice.
13. Exotic options II. Binary options, chooser options, compound options - basic principles and use in practice.