Overview

This eCourse consists of two modules. Module 1 looks at how forward and futures contracts are used to hedge FX exposures as well as stock and bond portfolios. The key risks associated with putting on a hedge, such as rollover risk and basis risk, are also discussed in detail.

Module 2 discusses the trading of forward and futures contracts with a particular emphasis on order types, algorithmic trading and HFT, technical analysis, and the margining of futures contracts.

Objective

On completion of this course, you will be able to:
- Recognize how forwards and futures can be used to hedge the predominant risk or one or more of several risks associated with the hedged instrument
- Recall how to hedge stock portfolio and bond portfolio using beta and DV01 respectively
- Recognize the importance of basis risk, rollover risk, and cross-hedging when putting on a futures or forward hedge
- Identify the key forward-related products such as FX swaps, forward rate agreements (FRAs), and interest rate swaps (IRS) and the potential for trading of forwards
- Recognize how futures contracts are traded via electronic exchanges and open outcry, the potential for algorithmic trading, and the risks involved
- Identify the key types order and the use of technical analysis in futures trading
- Recognize the importance of margining, especially the use of SPAN margining

Content

Module 1: Forwards & Futures – Hedging
Topic 1: Hedging Risk with Forwards & Futures
Topic 2: Hedging Basis Risk
Topic 3: Cross-Hedges, Rollovers, & Replication

Module 2: Forwards & Futures - Trading
Topic 1: Trading in Forwards
Topic 2: Trading in Futures
Topic 3: Order Types & Technical Analysis
Topic 4: Margining