WEBVTT

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Hello and welcome to this course.

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Chartered interest rate derivative swaps

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and risk management professional.

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I'm JC Fernandez-Seoane and I will be

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your instruction during this course.

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And first of all, congratulations. Congratulations,

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because derivatives are the largest financial market in the

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world, probably the largest market in the world.

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The of the

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derivatives market is about $630,000,000,000,000.

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That's the size of all the derivatives contracts

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that are outstanding at any given time.

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To give you a sense of this number, the

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magnitude of this number, $630,000,000,000,000 is about two and

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a half times all the bond and stock markets

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in the world combined and about 25 times the

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size of the US treasury market.

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It's a huge market.

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It's a massive market and the main reason

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for derivatives to exist historically has been to

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hedge risk, to hedge financial risk or

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before financial derivatives, commodities risk.

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In fact the very first derivatives contracts

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appeared about 1700 BC in the Middle East

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and there were just basic promises to deliver

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a product, a commodity versus a payment.

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Then in 1848, an important date

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because it was the first

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market for organized market for derivatives in the US, the

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creation of the Chicago Mercantile Exchange and closer

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to us, the 1970s: that decade

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saw the very first financial derivatives markets,

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first on currencies, then bonds, stocks, et cetera.

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So there are really four types of

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derivatives: futures, forward swaps and options.

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And with those four types of derivatives you will

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be able to build any type of risk profile,

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any type of strategy to hedge risk.

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There are again futures, forward, swaps and

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options and we're going to see these

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products extensively during the course.

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So this course will have twelve modules.

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There will be three modules on specifically interest

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rate products, interest rate options, interest rate swaps. Short term

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as well, products like FRAs and forward.

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We will also take some time to go over

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FX derivatives products because they are closely linked to

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interest rates and some interest rate

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products like for guaranteed

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notes or cross currency swaps, hybrid between interest rates

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and other type of underlying, in particular FX.

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We are going to spend also some time

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going over the credit and legal aspects of

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this product which are very relevant.

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If you want to trade derivatives for

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instance, you need to sign an ISDA, an ISDA,

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and it's important to understand how it works.

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Same for the credit aspect of them.

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Derivatives, in many cases have a credit component

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and when you trade derivatives you might be taking

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credit risk and so that's important to understand.

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Finally the last module.

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I will share with you some experiences of what

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happened with some of the largest losses in derivatives

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in the last 30 years or so.

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This is it for the introduction.

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I hope you will enjoy the course.

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I'm sure you will enjoy the course, and if

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you have any questions you can email me you'll

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see in every module, in every PowerPoint presentation,

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you will see my contact details and my email account.

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Thank you and good luck.