Functioning and economic relevance of the money market for financing trades, facilitating monetary policy and investing.
Basic types of money market instruments, e.g. treasury or central bank bills, interbank deposits, commercial paper, certificates of deposit and repos.
Quotation, valuation, dealing conventions and terminology in cash money market instruments.
Collateral in Money Markets: types of collateral, principles of collateral management and operations.
Focus on Repos: general collateral (GC) versus special repo, initial margin, haircuts and margin maintenance. Treatment of income paid on collateral, consequences of default and failure to deliver collateral.
2. Foreign Exchange Markets
The structure of OTC FX Markets: Role of principals, dealers, brokers, prime brokers. Trading venues and systems: voice brokerage, multilateral and single bank trading platforms.
Spot FX dealing conventions and terminology.
Traditional OTC forex instruments versus non-deliverable transactions, forex futures, contracts for difference.
Tom-next, forward and FX swap transactions and relationships to interest rates; including the concepts of interest rate parity and covered interest arbitrage.
The application of tom/next and overnight FX swaps in rolling over spot positions and hedging
FX Trade Processing – Settlement, netting and clearing: principles of cash and physical settlement, advantages and disadvantages of netting, various contractual forms of netting (bilateral payment netting, multilateral netting, netting by novation, close-out netting), Continuous Linked Settlement (CLS)
3. Fundamental Tools in Financial Analysis
Time value of money, present value, future value, yields, annuity formulas etc.
Risk, uncertainty, probability, probability distributions and descriptive statistics.
Structure of fixed income (bond) markets. Role of bond & capital markets for financing, investing and trading. Bond market segments by issuer and credit risk: government, central bank, municipal, corporate, emerging markets, eurobonds, high yield (junk) bond markets;
Typology of fixed income instruments and features: fixed coupon bonds, floating rate notes, inflationlinked notes, corporate bonds, covered bonds, asset- or mortgage-backed securities, callable and puttable bonds, convertible bonds and amortizing bonds.
Applying financial math concepts in fixed income: Bond pricing, yield curves, duration, convexity, hedging. Impact of issuer credit risk on bond prices.
Bond quotations and market conventions.
Basics of fixed income operations, clearing and settlement
5. Equity Markets
Types of equity securities and their key characteristics.
Institutional structure and key players in global equity markets: regulated exchanges, market segments, listing requirements, alternative trading venues, internalization platforms, market makers, asset managers, retail investors, etc.
Equity trading, clearing and settlement processes and systems.
Market indexes and equity portfolio benchmarks.
Equity market valuation and return analysis.
Basic equity portfolio management strategies.
6. Commodities Markets
Overview of liquidly tradable commodities and markets: precious metals, energy, agricultural commodities
Trading process and market conventions for precious metals dealing: spot, forward and derivative markets, gold lending and borrowing.
7. Fundamentals of Derivatives (all markets)
Overview of derivative instruments and key characteristics.
Forward markets and valuation of interest rate and forex forward contracts.
Futures markets and valuation of futures contracts.
Option contracts, pay-off profiles, valuation, applications and markets.
Swap markets and valuation of interest rate and cross currency swap contracts.
Credit derivatives markets and instruments.
Uses of derivatives in portfolio management and hedging.
Special focus on forex and interest rate options, caps and floors: contract definitions, terminology and market conventions for OTC options, the Greeks, option combination strategies and synthetic positions.
8. Risk Management
Fundamentals of Risk: risk typologies, risk-return relationship, risk measures, risk management and mitigation strategies. The Risk Management Process: identification, measurement, limits, hedging, mitigation and control.
Basic Principles of Operational Risk and Internal Control. The three lines of defence approach. Roles and responsibilities of front office, middle office and back office. The role of Compliance. Disaster Recovery and Business Continuity Planning.
Special Focus on Market Risk: interest rate risk, equity price risk, currency risk and commodity price risk. The limit structure in the dealing room. Value at Risk and Expected Shortfall measures for market risk.
9. Asset Liability Management
Definition and Scope of Asset Liability Management. Practical challenges in managing banking book exposures.
Organization and Governance of ALM practice: the role of the Risk Management, Treasury, ALM Department and ALCO. The importance of ALM in terms of business development, strategic planning, long-term funding, capital management, the Internal Capital Adequacy Assessment Process (ICAAP) and the Internal Liquidity Adequacy Assessment Process (ILAAP).
Analyse the impact of main risk factors on the asset and the liability side of the balance sheet (interest rate risk, FX risk, liquidity risk, credit risk).
Key ALM analytics: cash flow schedules, gap analysis, stress testing.
Credit risk, market risk and minimum capital requirements under Basel rules.