Exotic Options and Structured Products

Professor: : Pierre Roussel – graduated from ENSAE – is currently Head of Single Stocks Exotic Trading EMEA at HSBC. He has worked for more than 10 years in HSBC in Paris and Hong Kong, and has held several positions in both Structuring and Trading.

Objective: This 15-hour seminar is split in five 3-hour classes. At the end of each class, students should be able to do the followings:

Outline:

1. Class 1 & 2: Introduction

• To understand who are SPs players and how is this business organized between Buy & Sell side;
• To understand how to exchange SPs and the difference between main wrappers (OTC, Swap, Fund, EMTN);
• To define greeks (delta, gamma, rho, vega and epsilon);
• To have an advance understanding of vega risk and volatility surface (Term Structure and Skew particularly).

2. Class 3: Barrier Options

• Understand all types of barriers options payoffs (KO, KI);
• Understand Delta and Gamma hedging of barrier options;
• Understand the need to smooth barriers and how to define this over replication;
• Being able to replicate any European KI or KO Options with Vanillas.

3. Class 4: Correlation

• Understand basis in correlation and dispersion ;
• Understand the main correlation products (Basket, Worst Of, Best Of and Rainbow);
• Being able to define correlation sensitivities of these options.
• Apply this knowledge to decompose a payout into a multi underlying barrier option.

4. Class 5: Autocallable and Compo/Quanto options

• Understand what an Autocallable product is;
• Understand what the specific risks are for an Autocallable;
• Struture all kinds of Autocallables based on exotic options seen previously;
• Understand what is a Quanto and a Compo option and what are specific risks of this payoffs (FX vega and Quanto Correl).

General Application abilities: Students are able to:

• Read a Termsheet or Retail prospectus and find what the payoff is and how to decompose it with exotic options;
• Find sensivities (delta, gamma, vega, skew, cega, epsilon, rho, FX vega, quanto Correlation) of any exotic options and for different level of spots;
• Structure an EMTN based on real market datas (rate, credit spread, Exotics Options prices …);
• Understand from any Structured Product, what the client view is, why client is willing to trade it and how to hedge it;
• Use Structured Products to package a solution for a given problematic.