UCIs – Financial Instruments Valuation

By the end of this training, participants will be able to:

• Understand the features of the main financial instruments and their valuation methods.
• Know the concept of fair value with reference to the key accounting standards (IFRS, Lux GAAP).
• Understand the main legal and regulatory requirements applying to valuation (product requirements and AIFM requirements).
• Apply the core techniques used to price fixed income instruments and compute interest rate sensitivity measures.
• Understand the conceptual framework of arbitrage-free pricing and risk-neutral valuation.
• Price common derivatives such as forwards, futures, swaps, options and instruments with embedded features.

• Understand key credit risk metrics and the pricing of credit default swaps.
  

>>> Day 1 <<<

1.a TRANSFERABLE SECURITIES

- Transferable Securities:

  * Equity Securities
  * Debt Securities
  * Hybrid Securities
  * Derivatives Securities
  * Asset-Backed Securities

- Securitisation:

  * SECR and STS Securitisations
  * Taxonomy of Securitisations
  * Cash Flow Waterfall of Securitisations
  * The Global Financial Crisis
  * Securitisation Risks
 

1.b LEGAL & REGULATORY REQUIREMENTS

- General Requirements:
  * Accounting Standards
  * LUX GAAP, IFRS
  * IFRS Fair Value, Fair Value Hierarchy and Valuation Techniques
- Product Requirements:
  * UCITS and UCIs Part II
  * Money Market Funds
  * SIFs and RAIFs

- AIFM Requirements:

  * Valuation Policies and Procedures
  * Valuation Models
  * Review of Individual Values of Assets

1.c FIXED INCOME PRICING

- Bond Pricing:
  * Spot & Forward Rates 

  * Fixed Rate Bond Pricing

  * Floating Rate Note Pricing

  * Interest Rate Swap Pricing
  * Inflation-Linked Bond Pricing

- Yield & Spread Measures:
  * Yield to Maturity, Par Yield and Discount Margin

  * Z-spread and OAS

1.d: FIXED INCOME SENSITIVITIES

- One-Factor Sensitivity Measures:
  * Modified and Effective Duration
  * DV01, Spread Duration and CS01

  * Modified and Effective Convexity
  * Portfolio Duration and Convexity
- Multi-Factor Sensitivity Measures:
  * Key Rate Duration and KR01
  * Principal Component Durations

 >>> Day 2 <<<

2.a RISK NEUTRAL PRICING 

- Arbitrage-free Pricing

- State Prices & Risk Neutral Probabilities

- Risk Neutral Pricing

- The Binomial Model

  * Cox-Ross-Rubinstein Approach

  * Jarrow-Rudd Approach

- Short Rate Models

  * The Black-Derman-Toy Model

2.b PRICING FORWARDS & SWAPS 

- Forwards and Futures Pricing:

   * Currency Forwards

   * Stock Index Futures

   * Bond Futures

- Swaps Pricing:

   * Interest Rate Swaps

   * Total Return Swaps

   * Contracts for Difference

2.c PRICING OPTIONS

- Options Pricing:

   * Equity Options

   * Stock Index Options

   * Options on Bond Futures

- Instruments with Embedded Derivatives:

   * Callable and Putable Bonds

   * Convertible Bonds

2.d PRICING CREDIT DERIVATIVES

- Credit Risk Analysis

- Credit Risk Metrics

- Credit Default Swaps Pricing