Training Courses

Introduction to Futures

Category: Derivatives

Course level: Introductory

In house

This 3-hour workshop is designed to provide a fast-track review of the most commonly used exchange-traded futures contracts, pricing, margining and settlement, and how they are used in institutional client portfolios and retail funds under UCITS III.

No prior knowledge is assumed and all terms will be fully explained.

Case studies form an integral part of the course, to allow the delegates to consolidate the information and provide the basis for group discussions.

Objectives

By the end of the workshop, delegates will have a more complete understanding of:

  • different types of derivatives
  • the role of the exchange and clearing house in exchange-traded derivatives
  • cash flow structure (e.g., initial margin, variation margin, maintenance margin and the impact on fund valuations)
  • common derivatives strategies: hedging, asset switching, securitising cash, duration, option strategies
  • impact of UCITS III on authorised funds
  • valuation approaches with derivatives

Length

3 hours

Course Content

Exchange-traded contracts

The main derivative markets
    LIFFE, Eurex, CBOT, CME, Simex
Opening and closing out positions
Contract specifications
    Expiry, contract value, tick value

Clearing

Role of the clearing house
Role of clearing brokers
Novation

Margining positions

Initial margin, variation margin and maintenance margin
    Securitising derivatives positions
    Cash buffers, using other collateral 
    Showing the trade as it progresses through the
    M&G admin process
Case study: Margining a futures contract

Index futures

Valuing index futures
How do portfolio managers use index futures?
    Efficient Portfolio Management (EPM)
    Hedging, asset allocation, pre-allocation before
    the cash is received
Worked example: Switching asset classes using index futures

Fixed income contracts

Contract specifications
What is delivered?
    CTD explained
Using fixed income contacts
    Asset switching, changing duration
 

Short-term interest rate futures (STIR)

Contract specifications
Quote conventions
Futures vs. FRAs
Worked example: Using futures to hedge interest rate exposure

Currency futures

Using currency futures
Case study: Using currency futures to hedge

Regulations governing the use of derivatives by portfolio managers

UCITS III and FSA COLL sourcebook

Accounting for derivatives

Valuing futures held in portfolios
Associated economic exposure
Cash/stock adjustment
Impact on the balance sheet and P&L
Implications for performance measurement

This course would be suitable for:

  • Client services and call centres
  • Finance and accounting
  • HR and training
  • Investment administration and operations
  • Investment professionals
  • Legal & Compliance
  • New entrants
  • Risk management
  • Sales and marketing

This course would be suitable for these exams:

  • CFA - Level 1
  • CFA - Level 2
  • IMC
  • SII Certificate - Derivatives
  • SII Certificate - Financial Derivatives Module
  • SII Certificate - Securities & Financial Derivatives
  • SII Diploma - Financial Derivatives
  • SII IAQ - Exchange-Traded Derivatives Administration
  • UKSIP - Introduction to Investment
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