The course will combine a wide range of interactive activities including group exercises, cases, short problem sets and a simulation. The practical focus of the session is designed to ensure that participants have the basic skills to provide immediate value after commencing a career in Wealth Management.
DAY 1:
Portfolio Management / Bonds, Equities & FX Cash Markets INTRODUCTION
Portfolio Management Overview
Presentation
An overview of portfolio theory, its implications, the importance of diversification, and how diversification is best achieved.
• Risk & reward
• Markowitz & the portfolio frontier
• Capital Asset Pricing Model
A Holistic Approach to Portfolio Management for Wealth Clients
Presentation & exercises
A look at the various asset classes, the role of the portfolio manager and how to evaluate their performance.
• Bonds, equities, FX & commodities
• Investment strategies & analysis BONDS & CASH EQUITIES
Case (A): Mr. Benjamin Hollis
Group exercise & cass discussion
A meeting is scheduled with a Wealth client prospect with an existing bond and equity portfolio comprising both domestic and overseas assets. Participants are required to do a first-cut analysis of the risk
• Wealth client profiling
• Bond risk identification & measurement
• Equity risk identification & measurement
• FX risk identification & measurement
Case (B): Mr. Benjamin Hollis
Group exercise & class discussion
After the meeting with the client prospect (in the (A) case), more information is available to perform a more quantitative analysis.
• Bonds: market v. credit risk
• Duration & convexity
• Equities: beta
Bond Trading Strategies
Presentation & exercises
A discussion of the yield curve, the role of bonds in a portfolio, some basic bond trading strategies and the workings of the repo market.
• Capital appreciation v. income
• Directional & spread trades
• Repo market mechanics FX MARKETS
FX Markets Overview
Presentation & exercises
An insight into the workings of the FX markets including statistics, mechanics and forward pricing, followed by a look at the implications and tools for wealth clients.
• FX market overview: players & roles
• Spot markets: conventions & terminology
• Forward FX markets: pricing
Case (C): Mr. Benjamin Hollis
Group exercise & class discussion
Mr. Hollis has holdings in overseas stocks and bonds within his portfolio giving rise to FX exposure which needs to be quantified and managed.
• Risk analysis
• FX forwards
• FX swaps
Currency Swaps
Presentation & exercises
A discussion about the mechanics and pricing of a currency swap, and how they may be used by bond investors.
• Currency swaps v. FX forwards
DAY 2:
Interest Rate Forwards / Equity Forwards / Equity Options / Interest Rate Options FORWARD PRODUCTS
Derivative Solutions: Managing Interest Rate Exposure with Forwards
Presentation & exercises
A discussion about the forward family of interest rate derivative products in the context of Mr. Benjamin Hollis’ fixed income investments (money market instruments and bonds)
• Pricing, applications and risk issues of:
o FRAs & futures
o Interest rate swaps
o Non-generic swaps
Case: Ms. Rosemary Tan
Group exercise & class discussion
A wealth investor wishes to strip out the market risk and take a credit view only by asset swapping a bond
• Asset swaps
• Analyzing asset swap performance
Derivative Solutions: Managing Equity Exposure with Forwards
Presentation & exercises
A discussion about the forward family of equity derivative products in the context of Mr. Benjamin Hollis’ share portfolio
• Pricing, applications and risk issues of:
o Equity futures
o Equity swaps
Caselets: Mr. Miguel Pereira
Group exercise and class discussion
A wealth client seeks firstly to hedge the risks associated with a broad range of US stocks, and secondly to monetize a positive view on a stock in swap format.
• Beta hedging
• OTC products v. futures
• Leverage & margining
OPTION PRODUCTS
Derivative Solutions: Managing Equity Exposure with Options
Presentation & exercises
A discussion about the equity option family of equity derivative products in the context of Mr. Benjamin Hollis’ share portfolio
• Option terminology & pay-off diagrams
• Applications
• Intuitive pricing & volatility concepts
Caselets: Ms. Melissa Barker
Group exercise and class discussion
A sophisticated wealth client considers the pros and cons of using equity options for hedging purposes and as tools for yield enhancement and trading.
• Collars
• Covered call writing
• Bull spreads & straddles
Derivative Solutions: Managing Interest Rate Exposure with Options
Presentation & exercises
A discussion about the option family of interest rate derivative products in the context of Mr. Benjamin Hollis’ fixed income investments (money market instruments and bonds)
• Caps & floors
• Swap options
• Participation & leverage
DAY 3:
Commodities / Portfolio Performance Analysis / Simulation / Exam COMMODITIES
Commodity Markets
Presentation & exercises
A study of the characteristics that differentiate commodities from traditional financial products, the formation of prices and the rationale for investing in commodities.
• Forward pricing & behavior
• Energy, metals & softs
• Why & how of commodity investing
Case: Mr. Hanson’s Oil-linked Note
Group exercise & class discussion
Participants reverse-engineer a commodity-linked note and are then asked to tweak to parameters to meet the required objectives of the investor.
• Principle protection
• Participation
• Deal structuring PORTFOLIO ANALYSIS & SIMULATION
Portfolio Performance Analysis
Presentation & exercises
An outline of the various the economic variables impacting on bond and economic portfolios and the metrics by which the performance is measured.
• Factors effecting performance
• Volatility & correlation
• VAR, Sharpe & Treynor ratios
Portfolio Management Simulation I
Simulation explanation & rules
A quick review of asset allocation and portfolio construction in the context of the simulation, and an explanation of the workings of the sim and what makes for a successful portfolio manager.
• Portfolio construction
• Portfolio performance analysis
• Rules of the game
• Limits and controls
Portfolio Management Simulation II
Simulation & results
Participants will be acting as Portfolio Fund Managers, making asset allocation decisions within parameters/ limits over a time period, and are required to explain their performance results afterwards.
• Round 1
• Round 2
• Results: performance metrics & attribution analysis
EXAM
Exam
A 90-minute exam will review all the concepts discussed during the session.
• Portfolio management
• Cash markets
• Derivative markets