These days all risk managers must be well versed in the use and valuation of derivatives. The two basic types of derivatives are forwards (having a linear payoff) and options (having a non-linear payoff). All other derivatives can be decomposed to these underlying payoffs or alternatively they are variations on these basic ideas. The seminar describes valuation methods used for forward contracts. Cost-of carry model is used to value forward contracts with and without intermediate cash flow.

 

At the end of Intrinsic Value's training seminar in valuing forward contracts the participant should be able to:

􀂅  Define spot price and forward price.

􀂅  Calculate   the   value  of   a   forward  contract  at  expiration  and  prior  to

     expiration.

􀂅  Describe the impact of intermediate  cash  flows  on  the value of a forward

     contract.

􀂅  Describe the impact of storage costs on the value of a forward contract.

􀂅  Describe   the   impact  of  convenience  yield  on  the  value  of  a  forward

     contract.

􀂅  Calculate the forward price of a bond, stock, currency and commodity.

􀂅  Define and Discuss a Forward Rate Agreement (FRA).

􀂅  Calculate the value and price of FRA.

􀂅  Compare and contrast forwards and futures.