Hello and welcome to this course.
Chartered interest rate derivative swaps
and risk management professional.
I'm JC Fernandez-Seoane and I will be
your instruction during this course.
And first of all, congratulations. Congratulations,
because derivatives are the largest financial market in the
world, probably the largest market in the world.
The of the
derivatives market is about $630,000,000,000,000.
That's the size of all the derivatives contracts
that are outstanding at any given time.
To give you a sense of this number, the
magnitude of this number, $630,000,000,000,000 is about two and
a half times all the bond and stock markets
in the world combined and about 25 times the
size of the US treasury market.
It's a huge market.
It's a massive market and the main reason
for derivatives to exist historically has been to
hedge risk, to hedge financial risk or
before financial derivatives, commodities risk.
In fact the very first derivatives contracts
appeared about 1700 BC in the Middle East
and there were just basic promises to deliver
a product, a commodity versus a payment.
Then in 1848, an important date
because it was the first
market for organized market for derivatives in the US, the
creation of the Chicago Mercantile Exchange and closer
to us, the 1970s: that decade
saw the very first financial derivatives markets,
first on currencies, then bonds, stocks, et cetera.
So there are really four types of
derivatives: futures, forward swaps and options.
And with those four types of derivatives you will
be able to build any type of risk profile,
any type of strategy to hedge risk.
There are again futures, forward, swaps and
options and we're going to see these
products extensively during the course.
So this course will have twelve modules.
There will be three modules on specifically interest
rate products, interest rate options, interest rate swaps. Short term
as well, products like FRAs and forward.
We will also take some time to go over
FX derivatives products because they are closely linked to
interest rates and some interest rate
products like for guaranteed
notes or cross currency swaps, hybrid between interest rates
and other type of underlying, in particular FX.
We are going to spend also some time
going over the credit and legal aspects of
this product which are very relevant.
If you want to trade derivatives for
instance, you need to sign an ISDA, an ISDA,
and it's important to understand how it works.
Same for the credit aspect of them.
Derivatives, in many cases have a credit component
and when you trade derivatives you might be taking
credit risk and so that's important to understand.
Finally the last module.
I will share with you some experiences of what
happened with some of the largest losses in derivatives
in the last 30 years or so.
This is it for the introduction.
I hope you will enjoy the course.
I'm sure you will enjoy the course, and if
you have any questions you can email me you'll
see in every module, in every PowerPoint presentation,
you will see my contact details and my email account.
Thank you and good luck.