Paul North – Advanced Futures & Forwards – CFI Education

Description

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Paul North – Advanced Futures & Forwards – CFI Education
Advanced Futures & Forwards

Explore the importance of basis, hedging, and how to trade futures and forwards in this advanced course to build your mastery of Capital Markets derivatives.

Discover what factors influence futures and forwards
Learn how to hedge exposures by precisely deploying derivatives
Study how to identify mispricings in cash versus futures markets

Overview
Advanced Futures & Forwards Course Overview

This Advanced Futures & Forwards course teaches the importance of basis, hedging, and trading with futures and forwards. You will learn about the factors influencing basis, as well as various components of bond futures including cheapest-to-deliver (CTD) bonds, repos vs. reverse repos, and how to calculate implied repo rates. You will also learn how to hedge CTD and non-CTD bonds, and how to adjust duration using futures. After completing this course, you will have a better understanding of LIBOR alternatives (ESTR, SOFR, SONIA, etc.), exchange delivery settlement price (EDSP), and spread (basis) trading with futures.
Modules explored:

Futures & Forwards Pricing – Review
Understanding Basis
Bond Futures – Basis Risk
Futures Hedge – Basis Risk
Refining the Hedge
Spread (Basis) Trading With Futures

Advanced Futures & Forwards Learning Objectives
Upon completing this course, you will be able to:

Explain basis and factors which influence it
Identify basis risk within futures and bonds
Calculate implied repo rates
Determine how to hedge CTD and non-CTD bonds
Interpret LIBOR alternatives (ESTR, SOFR, SONIA, etc.)

Who Should Take This Course?
This Advanced Futures & Forwards course is ideal for any student or professional interested in gaining a better understanding of the futures and forwards markets. Whether you are interested in derivatives or not, this course provides the key learning objectives required to become familiar with these complex tools.
What you’ll learn
Course Introduction
Futures & Forwards Pricing – Review
Generic Futures Contract

Cost of Carry

Contango and Backwardation Markets

Interactive Exercise 1
Understanding Basis
Understanding Basis

Basis Overview

Basis and Hedge Outcome – Scenario 1

Basis and Hedge Outcome – Scenario 2 and 3

Basis and Hedge Outcome – Change in Basis

Factors Influencing Basis

Natural Long Example

Storage and Basis

Storage and Basis – Example

Quoting Basis

Quoting Basis Example

Interactive Exercise 2
Bond Futures – Basis Risk
Bond Futures Introduction

Bond Futures Example

Bond Price Factor

Cheapest-To-Deliver Bond

Repo vs. Reverse Repo

Repo vs. Reverse Repo Trade

Return on Cash and Carry

Calculate Implied Reverse Repo

Calculate Implied Reverse Repo – Solution

Implied Reverse Repo Exercise

Cash and Carry Arbitrage

Net Basis

Net Carry

Net Basis – Example

Net Basis Exercise

Net Basis – Example Continued

Cash and Carry Summary

Reverse Cash and Carry Summary
Futures Hedge – Basis Risk
Futures Hedge Introduction

Simple Hedge Ratio

Basis Point Value (BPV)

Basis Point Value Historical Observation

Basis Point Value Exercise

Hedging the CTD

Hedging the CTD Continued
Refining the Hedge
Refining the Hedge Introduction

Hedging the CTD – Example

Hedging the CTD – Solution 1

Hedging the CTD – Solution 2

Hedging the CTD Exercise

Hedging Non-CTD Bonds

Hedging Non-CTD Bonds Continued

Hedging Non-CTD Bonds – Example

Hedging Non-CTD Bonds Exercise

Risks in Hedging Non-CTD Bonds

Hedge Efficiency

Calculation of Portfolio Duration

Calculation of Portfolio Duration Continued

Duration Adjustment With Futures

Duration Adjustment With Futures – Example

Duration Adjustment Exercise

Simple Hedge Ratio – Beta Example

Tactical Asset Allocation – Question

Tactical Asset Allocation – Answer

Hedge Ratio – Question

Hedge Ratio – Answer
Libor Alternatives and Other Hedging Strategies
Libor Alternatives

Spot Rates vs. Forward Rates

ESTR Spot Rate

ESTR Overview

One-Month ESTR Contract – Example

Exchange Delivery Settlement Price (EDSP)

ESTR One-Month Period

ESTR EDSP

EDSP Formula

EDSP Calculation

ESTR EDSP Expanded

EDSP Calculation Continued

EDSP Exercise

Market Risk

Concept of Hedging

Long Hedge

Tails and Stubs

Tail Hedge Example

Stub Hedge Example

Stub Hedge Example Continued

Odd Month Hedge Overview

Odd Month Hedge Example

Odd Month Hedge Example Continued

Hedging Within a Month
Spread (Basis) Trading With Futures
Spread (Basis) Trading Introduction

Trading With Futures – Spread or Basis

Trading the Switch – Spread Narrowing

Trading the Spread Outcome

Course Summary
Qualified Assessment
Qualified Assessment