Global Markets Apprenticeship programme

Global Markets Apprenticeship programme A Blended-Learning Program by ACF Consultants Ltd Produced: 25 Sep 2017

Structure Working closely with employers, we train apprentices across the principal areas of the wholesale banking industry. The objectives of this programme are: To provide an integrated, coordinated and effective training programme To embed the employer s culture into the approach and examples used To encourage interaction between students, teamwork, and how to facilitate the building of a network across cultural and business divisions To ensure a sound knowledge of fundamental concepts To give delegates the ability to apply theory to practice to fix knowledge in delegates minds and to build solid foundations to support later learning To introduce the range of fixed-income, equity, and commodity products, their uses and applications To present a clear explanation of derivative products, their benefits and risks To demonstrate how banks apply the concepts and products to their business To ensure that all concepts are put into immediate practice, using simulation and intensive interactive case studies, to consolidate the learning process After completing the apprenticeship programme, participants will: Have a solid understanding of the role and functioning of the debt capital markets Be familiar with a wide range of fixed-income and equity instruments of pricing, structuring and hedging Understand how all these products are implemented and managed within banking operations and will be able to effectively apply their knowledge immediately. Blended Learning Blended learning is a fundamental principle of the ACF approach to training. Our seminars offer a fully integrated, multi-faceted learning experience which ensures that knowledge is applied in practice and retained effectively. We limit the numbers attending each program to maximise the benefit for each student. Passive learning is kept to a minimum, and the emphasis is on apprentices achieving a true understanding of the key concepts, and how they are applied in the real world. The diagram provides a summary of the 12-month program for this graduate level apprenticeship. Detailed content is described in the following sections. Induction Introduction to Excel Excel Tips and Techniques Excel Functions Month 1 Creating Executive Presence Month 2 Economics 2

Time Value of Money Money Market Products and Markets The Yield Curve Bond Math Month 3 Fixed Income Products and Markets Emerging Markets Equity Products and Markets Q&A Session Quarterly Exam Quarterly Group Projects Month 4 Foreign Exchange Spot FX Forwards Further Excel (Optional) Soft Skills FX Client Applications Futures Markets Stock Index Futures Bond Futures STIR Futures Month 5 Month 6 Interest Rate and Currency Swaps Yield Curve Mathematics Swap Pricing and Valuation Month 7 Banking Risk Regulations: Basel III, DFA, EMIR Q&A Session Quarterly Exam Quarterly Group Projects Overview of Credit Derivatives Single Name Credit Default Swaps Using Credit Default Swaps Credit Index Products CVA Equity Derivatives Introduction to Options Further Excel (Optional) Month 8 Month 9 Option Pricing An Intuitive Approach Option Greeks Building Option Portfolios Month 10 3

Option Trading Strategies Hedging Client Risk Using Options Month 11 Mortgage Backed Securities Structured Products Q&A Session Final Exam Final Group Projects Month 12 Program Timetable All practical sessions are highlighted like this: denotes a Case study denotes a Workshop or Simulation Introduction Senior welcome overview Expectations Bank policies ACF introduction schedule Group activity overview Introduction to Excel The Excel interface The main tabs: Home, Insert, Page Layout, Formulas, Data, Review, View The ribbon Worksheets and workbooks Rows and columns Excel Tips and Techniques Organising the ribbon and quick-access toolbar for efficiency Absolute and relative references Copy and pasting Pasting values, formulas, and formats Using drag and drop for moving and copying cells Filling cells Merging and unmerging cells Excel Functions Financial: FV, PV, NPV & XNPV, IRR MIRR & XIRR, PMT, RATE, NPER Date and Time: DATE, DATEVALUE, TODAY, WEEKDAY, EOMONTH, YEARFRAC Cells Ranges Numbers and text Simple Excel formulas Simple formatting options Some Excel shortcuts Organising the workbook: Data, Assumptions, Results Freezing rows and columns Formatting numbers and dates Using borders, fonts, colours, and shading to enhance visual appearance Using Names for cells and areas Auto-formatting for tables Creating and formatting charts Maths and Statistical: MAX, MIN, SUM, AVERAGE, MEDIAN, RANK, COUNTIF Arithmetic: SUM, SUMIF, MAX, MIN, ROUND, MROUND 4

Communicating With Confidence Introduction The importance of planning and preparation Developing effective presentations Becoming more audience focused Business communication styles Delivery Skills The seven observable behaviours First impressions and the first 30 seconds Physical delivery skills Presenting flow diagram Macroeconomics and the Markets What is macroeconomics The role of news in financial markets Key economic policy tools Monetary and fiscal policy Central bank statutory objectives Key macro-economic data GDP Tailoring presentation styles for different audiences Understanding your own style Identifying your clients style Increasing flexibility Different forms of office communications Meetings, presentations and conference calls Organisation flow chart Employment / unemployment Retail sales Inflation (RPI, CPI, PPI, etc.) Balance of payments Actual data versus expectations Current state of play workshop Time Value of Money Present and future values Interest and discount factors Simple vs. compound interest Discounting and compounding Money Market Products and Markets Discount vs. coupon securities Depos, bills, CP, BAs, and CDs Repos LIBOR and recent changes Pricing discount instruments Discount quotations The Yield Curve and Forward Rates Definition of the yield curve The normal yield curve Liquidity and expectations hypotheses Up- and downward sloping yield curves Yield curve strategies and plays Bond Math Pricing interest-bearing instruments Price and yield Day-count conventions Accrued income Clean and dirty prices Re-investment of coupons Calculating duration and convexity Annuities Discrete vs. continuous compounding Nominal vs. effective interest yield TVM workshop Add-on yield quotations 360 and 365-day bases Money-market and bond-equivalent yields Holding-period returns Japanese money market features Money-market exercises Riding the yield curve Trading the yield curve Forward rates as breakevens Forward rates are not predictors! Forward rates after the credit crisis Duration as weighted cash-flow times Duration and modified duration Duration and maturity, coupon, and yields Calculating hedge ratios Convexity myths and reality Constructing duration-weighted trades Fixed income workshop 5

Fixed Income Products and Markets The US Treasury Market T-Bills, T-Notes, and T-Bonds Non-government notes and bonds Auction process The secondary market The treasury yield curve Investment strategies and techniques Treasury strips Agency securities JGBs, Bunds, BTPs, Gilts The European sovereign debt crisis Emerging Markets The emerging markets History and evolution of EM The LatAm crisis Crisis in Asia, Russia, Argentina US Treasuries / JGBs simulation Corporate bonds Bond rating and rating agencies Covenants and seniority Covered bonds High-yield bonds Sinking funds and other provisions Bonds with embedded options Eurobonds and MTNs Hedging a corporate bond How EM differs from other markets Compliance and regulatory issues Range of EM products Venezuela today Equity Products and Markets Brief review of international equity markets Common stock vs. preference shares Depositary receipts Issuing procedures Dividends Role of the Stock Exchange Electronic stock markets Types of order ETFs Active versus Passive investing Dark pools, dark liquidity, and alternate trading venues Block trades and auto trades Program trading Algorithmic trading High-frequency trading Equity market-making and price-taking Trading strategies long only vs. long/short Corporate event driven trading Trading less liquid stocks Share buy-backs Stock indices Equities trading simulation Q&A Session The Q&A session will allow delegates to ask questions across the entire spectrum of the topics covered during the past module. The quiz that follows will then enable each delegate to see how well they have understood and assimilated the material covered. Group Project Groups will deliver their first projects Foreign Exchange Spot Market Functions and purposes of the FX market Market mechanics Spot quotations Direct and indirect prices Cross-rates Foreign Exchange Forwards Outright forwards and swaps Impact of interest rates Relation between spot and forward markets The driving force behind client deals why does a client do a trade Trading strategies Influences on the market FX spot simulation Quoting forward rates and swap points Non-Deliverable Forwards (NDFs) FX forward and swap workshop 6

Further Excel Techniques Data validation Protecting worksheets and workbooks Hiding and un-hiding sheets and formulae V and H Lookup Grouping of rows and columns Arrays and array formulas Goal seeking and the solver optimisation techniques The if function Soft Skills Lessons from the projects The importance of structure Stance and posture Managing time Foreign Exchange Client Applications Sources of Corporate FX Risk Comparing financial and economic risks Dealing with questions Gaining control of the agenda Adhering to objectives Identifying Corporate FX Hedging Needs Handling Transaction Risk from Overseas Revenues Futures Markets History, growth and development Definitions and terminology Trading features of futures exchanges Pit vs. screen trading systems How clearing and margin systems work Stock Index Futures Types of stock index Contract definitions Cash-and-carry pricing The concept of the forward equity price The effect of dividends Bond Futures Definition of bond futures contracts Conversion factors Cash-and-carry pricing of bond futures The cheapest-to-deliver bond Short-Term Interest Rate (STIR) Futures Definition of interest rate contracts Arbitrage pricing principles Basis and convergence Outright and spread positions Standardization of exchange-traded contracts Physical delivery vs. cash settlement Advantages and uses for futures The futurization of the OTC market Fair and actual futures prices Hedging equities portfolios using futures Switching between cash and equity exposure The Implied repo rate Hedging bond portfolios with bond futures Bond portfolio hedging Basic hedging application Trading strategies Hedging using STIR futures Interest Rate and Currency Swaps Definitions and terminology Trading practices Cash flows and timing Quotation conventions Documentation ISDA and CSA Interest rate swaps: plain-vanilla and nonstandard swaps Overnight Indexed Swaps (OIS) Spread between LIBOR and OIS rates 7 Currency swaps: fixed-fixed, fixed-floating, floating-floating Swap Execution Facilities (SEFs) Central Counterparties SwapClear Using interest rate swaps Hedging interest rate risk Asset and par-asset swaps Swap applications Swap trading simulation

Yield Curve Mathematics Zero-coupon rates Swap and par rates Zero-coupon pricing Discount factors and the discount function Swap Pricing and Valuation Swap valuation principles Valuing the fixed leg Valuing the floating leg Valuing a swap Banking Risk What is Risk? Types of banking risk Credit and counterpart risk Operational risks Types of market risk Regulation: Basel III, DFA, EMIR Regulatory overview The role of capital Basel I and II Tier One, Tier Two, and RWA Foundation vs. Advanced IRB approaches Basel III Links between swap, zero & forward rates Deriving the discount function from market rates Interpolating the discount function Pricing and valuing vanilla swaps Sensitivity to movements in swap rates Pricing and valuing non-standard swaps Understanding VaR Stress testing with simulated data FRTB Managing interest rate risk Pricing and valuing non-standard swaps The new capital and leverage ratios The leverage ratios: LCR and NSFR The Dodd Frank Act (DFA) European legislation: MiFID II EMIR Q&A Session / Quarterly Exam and Review The Q&A session will allow delegates to ask questions across the entire spectrum of the topics covered during the past module. The quiz that follows will then enable each delegate to see how well they have understood and assimilated the material covered. Group Projects Groups will deliver their second projects Overview of Credit Derivatives Principles of credit derivatives Terms and definitions Who uses credit derivatives? Single-Name Credit Default Swaps Introduction to CDS Terms and definitions Credit events Settlement methods Reference and other obligations ISDA and CSA agreements The Big Bang protocol Determination Committees Motivations for using credit derivatives Growth of the market and recent trends Types of credit derivatives Market and trading conventions Standardized premiums and up-front payments Sovereign vs. other reference entities Distressed credits Auction settlement how it works Central Clearing counterparties Other recent changes and events 8

Using Credit Default Swaps Separating credit risk from the lending relationship Managing credit risk Implementing directional credit views Monetizing relative credit views Credit Index Products The CDX and itraxx indices Geographic and sector coverage Index construction Arbitrage opportunities The link between bond spreads and CDS prices Credit curve trades Using credit default swaps Who uses indices? Tranched CDS index products Index trading workshop CVA Credit Valuation Adjustment xva and counterparty credit risk The role of collateral Calculating credit exposure Example of calculating collateral Why the need for valuation adjustments The range of valuation adjustments Equity Derivatives Trading volatility Comparing the VIX and the S&P500 The VIX term structure VIX futures and options Introduction to equity swaps Comparison to stock index futures Examples and variation Dividend swaps Equity index swaps workshop Principles and Characteristics of Options Options definitions and terminology Calls and puts; buying and selling American vs. European style In-, at-, and out-of-the-money Intrinsic and time value Components of time value What the buyer pays for the true cost of an option Value and profit profiles Profit profiles at maturity Profit profiles prior to maturity Options Using a Call Option Further Excel Techniques Data tables Macros Recording and running macros More on charting Statistical functions Forecasting and projections Pivot tables Option Pricing An Intuitive Approach Types of option pricing model Closed-form option pricing Binomial option pricing Time value revisited Early exercise of American options Option Greeks Measuring dimensions of option risk Delta the hedge ratio Gamma the change in delta Theta the decay of time value Vega the sensitivity to volatility Put-call parity Significance of volatility Historic, implied, and experienced volatility Volatility smiles and skews The Greeks of short-dated options compared to long-dated options The Greeks of ATM options, compared to ITM or OTM options Greeks workshop 9

Building Option Portfolios Horizontal, vertical, and diagonal spreads Straddles and strangles Ratio spreads and backspreads Option Trading Strategies Directional vs. volatility trading Spread trading Near vs. far dates Out-of-the-money vs. in-the-money Designing your own structure a fluent transition between payoff diagrams and component parts Options vs. cash Options strategy Directional and volatility trading with options Hedging Client Risk Using Options Basic option hedging strategies using protective puts Reduced-cost and zero-premium structures Collars Mortgage Backed Securities Product classes and characteristics Fixed rate vs ARM s Characteristics of each class The prepayment feature Securitisation of mortgages Put-spreads Put-spread collars Participations Hedging an equities portfolio Pass-through securities CMOs and REMICs Tranche types PACs, IO and PO strips Overview of Structured Products Defining structured products The key building blocks: Note Derivatives overlay Principal-protected vs. other products Price and yield enhancement strategies Range accrual notes Equity-linked Range-Accrual Note Q&A Session Delegates will have an opportunity to ask questions on any aspect of the course, to consolidate their understanding, to resolves any uncertainties, and to help with their preparation for the final exam. Final Exam and Review The final exam will focus on the material covered in the last module. It will measure how well delegates have absorbed the material covered, and will also provide a measure of how much they have improved since the first two examinations. Project Presentation 3 Groups will deliver their final project presentations. Each module features frequent quizzes, plus a detailed end-of-module examination. We will track delegates progress through the modules, plus their scores in end-of-module examinations, to ensure that everyone has successfully completed the preparatory work. Any delegates falling behind on their pre-course preparation will receive automated emails reminding and encouraging them to keep up progress. 10

ACF Consultants Ltd ACF Consultants Ltd have an established reputation for providing first rate training and consultancy to banks and other financial institutions. ACF have extensive knowledge, experience and expertise in the areas of banking and finance, and are acknowledged leaders in the development and application of advanced computer based training techniques. Blended learning was the philosophy on which the company was founded. Our training methodology, integrating theory with practice using our own very powerful training tools, creates a uniquely exciting and effective learning environment. The result pays immediate dividends in the retention of newly-learned concepts and their immediate and practical application. As part of our quality control, we always obtain a detailed written evaluation from every delegate attending any of our seminars. As an indication of the kind of feedback we regularly receive, we reproduce here just a few of the comments made: the tutor was in every respect outstanding... superb professional knowledge... clear and quick grasp of participants problems This was a phenomenal course. It was extremely intellectually challenging. The course met its objectives extremely well the content was well planned and good precourse documentation was received in advance. The ACF trainer had the rare quality of making difficult things easy to understand. overall one of the best courses I have ever been on The teaching style was excellent. The ACF faculty presented complicated subjects in a wellbalanced manner. For further information, please contact: London Office ACF Consultants Ltd 28 King Street London EC2V 8EH United Kingdom New York Office ACF Consultants Ltd 45 Broadway New York, NY 10006 United States Tel: +44 (20) 7710 0070 Fax: +44 (20) 7726 0629 www.acfconsultants.com info@acfconsultants.com Tel: +1 (212) 422 4320 Fax: +1 (212) 422 4640 11