This comprehensive and highly interactive course is designed to provide delegates with an excellent understanding of the financial markets and how they work. This is an ideal course for people working in the back office, Finance, Risk, Internal Audit and Compliance functions as well as individuals new to the industry who need to enhance their knowledge of the various and often complex financial markets. Individuals attending this course will learn about the market participants, the variety of financial instruments, why and how they are used, the risks involved and the various economic factors that have an impact on the markets. All of this is explained in an interactive and clearly understandable manner. Case studies are used throughout the course to help bring the markets to life and to foster interaction.
Attendance on this course will enable you to:
- Have a sound knowledge of the financial markets;
- Understand the economic factors that influence the various markets;
- Consider the financial instruments in use; why and how they are used; and
- Understand the risks involved in the various financial instruments that have evolved over time.
The course programme: Day One
Overview of the Financial Markets
- Who are the major participants and how do they interact with?
- Investment Banks, Asset Managers, Hedge Funds, Private Equity firms, corporates etc
Overview of Economics
- How markets are influenced by major economic indicators
- GDP, Unemployment, Inflation etc are explained and discussed
Case study: Delegates will consider what influence certain countries have on financial markets.
The Money Markets
- Short term borrowing and lending
- Calculation of simple interest
Case study: Calculating the interest and an Overnight repo trade
The Bond Markets
- Yield Curves
- Government bonds and the “risk free rate”
- Corporate bonds and the “credit spread”
- Coupons, Redemptions and Yields
- Bond pricing…..discounting cash flows
- Fixed rate v Floating rate v Zero coupon
- Domestic, Eurobonds, Foreign and Sovereign
- Primary and Secondary Markets
Case study : Delegates are asked to look at 6 different types of bond and asked to decide which bond they would invest in, given several criteria eg; Highest return, safest investment, highest coupon etc.
Case study: Delegates are asked to buy a bond and calculate how much it would cost them … clean price plus accrued interest.
The Equity Markets
- Ownership of a company …Ordinary v Preference shares
- Reasons for owning shares ….capital growth v income
- International Stock Exchanges…..Order Book v Market Maker
- ECNs ( Electronic Communication Networks ) Nasdaq, Instinet etc
- Dark Pools
- OTC trades
- How participants interact…Role of Fund Managers / Broker Dealers
- Principal or Agent
Case study: Delegates are required to fill an order at the best prices across different liquidity venues.
Case study: Delegates must calculate some basic Equity ratios, such as, EPS, P/E ratio and the dividend yield, to decide which share looks most attractive to buy.
- CSDs and DvP. Why is it so important ?
- RTGS v Multilateral Netting
- Euroclear, Clearstream and the DTCC
- Local CSDs
- Sub Custodians
Case study: We look at a settlement flow diagram for a trade between a Fund Manager and Broker, which includes a Global Custodian to achieve settlement on a DvP basis at a CSD.
Foreign Exchange Markets
- World turnover
- Spot trading…bid / offer and the dealing spread
- FX forward swaps
Case study: Spot trading …..long/short positions and calculating profit and loss
Case study: Calculating FX swaps points from currency interest rates and therefore understanding the relevance of this product
FX Settlement and Accounting
- Cash payments
- Nostro accounts
- Double entry book keeping
- CLS Bank …multilateral netting
Case study: Delegates are asked to pass the correct entries for various FX trades
- An overview of the derivatives markets
- How futures contracts work
Case study :Following the life cycle of a futures trade – this will include use of a broker, margining, leverage and arbitrage.
- Basics of option terminology and examples
Case study : Basic use of exchange traded options to take advantage of market movements
Trading Simulation: 2 hours
- How Market Making works.
- Position keeping
- Basic accounting and reporting of position and profit and loss
Simulation Game : Delegates are asked in teams, to fill the roles of Trader, Accountant and Risk Manager. They will be asked to trade a futures contract. The Price of the futures contract is determined by the role of electronic dice.
The winners are those with the greatest profit. However, fines will be severe for bookkeeping errors.
Final Question and Answer Session
Course aimed at: Individual working in the financial sector or in an environment where they need to have knowledge of the financial markets.