Course description
Option Hedging Simulation
Applying theory to practice takes its best form in this cutting-edge program.
Options risk management can be very challenging in real life. This innovative program uses practical examples and computer based simulations to give you an intuitive perspective on hedging, and how to use the “Greeks” to measure the sensitivities of an option value with respect to all market parameters.
During two days, you will simulate the management of a portfolio of options and make hedging decisions just like a derivatives trader. You will test theories, learn from your own mistakes, and perfect your decision-making in a risk-free platform. Once the behavior and interplay of the Greeks are well understood, derivatives will have no more secrets.
The content covered in this program applies to options traded in equity, currency, commodity, and rates markets. Exercises are implemented using Excel VBA, which participants can take away.
All participants will receive a copy of Dr Leoni’s book “Hedging and the Greeks Explained”.
Upcoming start dates
Who should attend?
This Option Hedging Simulation program is designed for:
- Traders
- Risk Managers
- Stress Testers
- Investment Managers and Analysts
- Portfolio Managers and Hedge Fund Managers
- Structured Products and Derivatives Desks
- Trading Desks
- Quantitative Researchers
- Middle Office and IT professionals
Training content
Day One
Hedging Cost
- Forwards
- Put Call Parity
- Binomial Tree model
- Black-Scholes-Merton model
Delta Hedging
- Volatility
- Several angles at delta hedging
Simulation: Delta hedging, P&L distribution, and hedging balance
Greeks
- Option Price dynamics
- Greek shapes
- Hedging volatility
- Trading the Black-Scholes assumptions
Simulation: Risk management of options - Short-dated options, Long-dated options, and P&L explained
Day Two
Portfolio Management
- Greek sensitivity of a derivative
- Portfolio Greeks
- Vega matrix
- Portfolio effects
Simulation: Portfolio hedging - Delta-Vega hedging, Delta-vega-gamma-theta hedging, and Portfolio stability of exotics
Volatility Term Structure
- Time-dependent volatility
- Greeks revisited
- Market term structure and non-arbitrage
Workshop: Hedging under term structure
Skew and Smile
- Volatility surface
- Market skew and dynamics
Workshop: Become an option market maker and set your own skew
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