Fr En



AYMERIC KALIFE - CEO, iDigital Partners, Adjunct Professor, Université Paris - Dauphine

Les objectifs du cours

The objective of this course is to give an all-round comprehensive knowledge and understanding of the theory and the day-to-day use of derivatives contracts.
This course aims at “demystifying” key derivatives products, widely used to hedge existing market risks, to speculate on the future movements of market variables or more generally to taylor the return distribution of a portfolio. Participants will learn how banks and corporate treasuries use Financial Options alike in the management of risks, for trading, hedging and arbitrage and their role in the day-to-day running of the finances of businesses.
Starting from some basic knowledge of cash equity and equity derivatives market, and based on real option trade ideas capitalizing on a “nuanced” market view, it equips the audience with the skills to price and risk manage the most common and complex options, by explaining and dissecting the risks associated with trading a derivative from a risk/return/cost perspective by means of real life examples. For each option, from vanilla to light exotics, this course makes clear why there is an investor demand, explains where the risks lie and how this affects the actual pricing, and shows how to hedge them.

The class uses Excel Spreadsheet applications and Visual Basic, involving the use of market data and Equity Research publications.

Plan du cours

I Derivatives products features overview

  • Derivatives Markets Overview
  • Options Pricing framework

II Capitalizing on a “nuanced” view using derivatives

  • Specific market situations where derivatives go beyond cash
  • Tailoring a derivatives strategy to a specific market situation and fundamentals
  • Capitalizing on a risk/return/cost profile using derivatives: from protection to yield enhancement derivatives strategies

III Arbitraging using derivatives

  • Asymmetry between market rise and fall: “the skew”
  • Short-term crash fears: jumps and “fat tails”
  • Long-term uncertainty: volatility term structure trades

IV Hedging using derivatives

  • Dynamic hedging: “Delta hedging” using Futures (discrete hedging & transaction costs, Delta Greek features -vs. stock level, time, “shadow delta”)
  • Static hedging: trading “Gamma and Vega hedging” using options (Gamma & Vega Greeks features, illustrations of Gamma-Vega hedging)
  • P&L and hedging issues (Gamma-Theta P&L computation & pattern, impact of option maturity and Time decay, P&L and Options portfolio rebalancing frequency)
  • Stylized facts of volatility empirics

John C. Hull: Options, Futures, & Other Derivatives, Prentice Hall
Paul Wilmott: Derivatives: The Theory and Practice of Financial Engineering
Sheldon Natenberg: Option Volatility and Pricing: Advanced Trading Strategies and Techniques
Nassim Nicolas Taleb: Dynamic Hedging: Managing Vanilla and Exotic Options


Grading: Homeworks (trade idea on corporates, VBA project on options portfolio) + Final Exam