BOND TRADING SIMULATION

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1 BOND TRADING SIMULATION May 2019 Risk comes from not knowing what you are doing Warren Buffett 1

2 Overview This workshop provides a highly practical opportunity to analyse the key instruments of the cash fixed income markets, with a particular emphasis on fixed coupon bonds. The programme makes extensive use of a world-class trading simulator in order for the delegates to examine the real-world issues and imperatives confronting participants in these markets. Working in teams, the delegates are required to manage portfolios of local benchmark instruments, as well as to participate in primary and secondary market activities, all against the backdrop of a volatile yield curve and fast-changing sentiment and liquidity conditions. A key theme of the workshop is the sound risk management of fixed income portfolios, according to internal and external prescriptions. Learning Outcomes Understand the available instruments and methodologies for constructing short- and long-term yield curves Price a range of short- and long-term cash fixed income instruments Construct a portfolio containing fixed income instruments subject to a specific investment mandate Benchmark fixed income portfolio returns and risk to an index Conduct instrument and portfolio valuation in illiquid markets Manage the liquidity requirements of a fixed income portfolio using short-term cash instruments and repurchase agreements Profitably trade fixed income portfolios against a range of yield curve shifts, twists and changing liquidity conditions Discuss and implement different yield curve strategies to maximise portfolio returns Calculate and use key risk measures, including duration, PV01, convexity and value-atrisk Match the duration of liability portfolios with available assets Suitability The workshop is suitable for the following individuals: Bond traders Fixed income salespersons Relationship managers Pension fund trustees Asset managers 2

3 Risk managers Regulators Systems developers Information vendors Facilitators George Van der Westhuizen George has extensive practical experience of the local and international fixed income markets, having worked for several years as a cash and derivatives trader for one of the largest banks on the continent. He is now a full-time training consultant, specialising in fixed income and asset/liability management. Peter Skerritt Peter has spent three decades in the financial markets as a derivatives trader, financial engineer, author, and trainer, with experience in Europe, The United States, The Middle East, and Africa. He has worked extensively with large and medium-sized corporations in the development of a range of vanilla and exotic hedging solutions, and he has coached several generations of bank corporate dealers and derivative traders. Programme The programme can be found in the Appendix to this document. Workshop Methods The workshop comprises a number of expert-led theory sessions, followed by extensive simulation of real-life bond portfolio management and trading. Each of the several simulation sessions represents a hypothetical week in the market. During this time, delegates are required to analyse a constant stream of news and data releases and execute appropriate buying, selling and short-selling transactions. Pre-Course Preparation Delegates should possess a sound understanding of basic interest rate theory and mechanics, and they should already be familiar with the basic features of cash fixed income instruments. 3

4 Pre-course reading and online assessments are provided to ensure that these prior learning requirements are met. Post-Assessment The workshop culminates in a multiple-choice test on the final afternoon to verify that the learning outcomes have been achieved. Fee The fee for a 3-day workshop ZAR 11,950 per delegate. VAT at 15% is additionally levied on South African residents. The fee includes: Expert facilitation Simulator licence fee Training venue and refreshments Copies of slides Copies of spreadsheets Booking Details To further information, please contact the Programme Director, Lerato Metseeme: lerato@peterskerritt.com Tel:

5 Appendix - Programme Day Welcome and introduction Bond pricing Yield curve construction Dealing simulation Yield curve construction (continued) Dealing simulation Day Liquidity management Portfolio valuation Dealing simulation Risk measures of fixed income portfolios Portfolio benchmarking Dealing simulation Day Trading the curve Dealing simulation Dealing simulation Post-assessment Review and prize-giving 5