Enter code SPRING24 when booking.
Convertible Bonds: Issuing, Pricing and Investing
This course explains in detail a range of convertible securities, their applications and trading strategies (with special attention to hybrids and Contingent Convertibles - CoCos).
Participants will undertake a series of workshops to explore key ideas including pricing convertible bonds, the incorporation of credit risk, handling corporate events such as ratchets, calculating Greeks and simulating trading strategies.
Workshops are built around real world convertible bond examples where participants will work their way through several prospectuses.
Recommend to a ColleagueThis course is also available in London Time Zone and New York Time Zone
This course is FTS-Eligible* and also eligible for 24 CPD hours. GARP & CFA Institute members are eligible for 24 CE/CPD credits. See details
- Traders
- Credit and equity risk managers
- IT
- Middle office
- Quantitative researchers
- Hedge funds
- Portfolio managers
- Structured products desk
- Debt capital markets staff
- Gain a solid understanding of convertible bonds and other hybrid financial instruments
- Learn how to carry out the valuation and risk management of convertible bonds
- Analyze the different components of a convertible structure
- Gain familiarity with different valuation models and hedging approaches
- Numerate background (basic)
- Basic knowledge of fixed income and equity products
- Basic knowledge of Microsoft Excel
*FTS Eligible
This programme is approved for listing on the Financial Training Scheme (FTS) Programme Directory and is
eligible for FTS claims subject to all eligibility criteria being met. Please note that in no way does
this represent an endorsement of the quality of the training provider and programme. Participants are
advised to assess the suitability of the programme and its relevance to participants' business activities
or job roles. The FTS is available to eligible entities, at a 50% funding level of programme fees subject
to all eligibility criteria being met. FTS claims may only be made for programmes listed on the FTS Programme
Directory with the specified validity period. Please refer to www.ibf.org.sg for more information.
Dr Jan De Spiegeleer is a co-Founder of RiskConcile a risk management advisory firm based in Lausanne. From 2007 till 2015 he was the head of risk management at Jabre Capital Partners, a Geneva-based hedge fund.
Jan gained extensive knowledge of derivatives pricing, hedging and trading while working for KBC Financial Products in London, where he was managing director of the equity derivatives desk. He also ran his own market neutral statistical arbitrage hedge fund (EQM Europe) after founding Erasmus Capital in 2004.
Jan holds a Masters Degree in Civil Engineering (Royal Military Academy- Brussels - Polytechnic Division – 1988), an MBA (KU Leuven – 1994) and a PhD in mathematics (KU Leuven – 2013).
Request a Brochure with full details for Convertible Bonds: Issuing, Pricing and Investing
Introduction
The Convertible Bond Market
- Trading Strategies
- Market Players
- Cheapness
- Yield Measures
- Liquidity
Convertibles Primer
Basic introduction to what a convertible bond is and what its key elements are. Attention is given to the nomenclature: Convertible bonds come with their own language and conventions which are different from the traditional derivatives language: conversion premium, parity, conversion price, etc.
Convertible Bonds: Instrument Features
- Issuer Calls
- Investor Puts
- Cross Currency Convertible Bonds
-
Resets
- A deeper understanding will be provided regarding the reset feature. The negative convexity of this feature can be a real trap for the convertible bond arbitrageur
- Dividend Protection
From Prospectus to Model
This part of the course is exercise driven. Based on several real-world prospectuses, the delegates will set-up a convertible bond from scratch dealing with the different instrument specific features: issuer calls, investor puts, etc. Starting from these sample prospectuses, the participant in the course will have to set up a valuation and initial hedge for each of these real-world examples.
This will be done by making use of interactive spread sheet-based models. All of the knowledge build up in the previous session is going to be embedded in this workshop.
Pricing Models
This part of the course introduces the delegates to the different mainstream models to value convertible bonds.
-
Equity Models
- Black-Scholes
- Jump-Diffusion
- Heston
-
Credit Models
- Blended Credit Spread
- Intensity based (CDS based models)
Risk Management and Hedging of a Convertible Bond Portfolio
-
Delta hedging
- Starting from a real world example, the delta hedging of a convertible bond portfolio will be explained. It will be shown how any delta hedge changes the risk profile of the bond
-
Gamma trading
- This section will deal with the impact of a frequent rebalancing of the hedge in low and high volatile markets
-
Credit and Volatility hedges
- This section will examine with the way to use listed options to deal with some of the volatility risk embedded within a convertible bond. Volatility contracts such as VIX and their possible pitfalls will be explained as well
-
Sensitivity Analysis
- This is an introduction to the different risk measures that can be applied to convertibles
Convertible Bond: Advanced Instrument Features
- Ratchets
Extended example on how ratchets should be evaluated whenever the convertible gets involved in a takeover situation
- Convertible Bond Options (ASCOTS)
Hedging the credit risk by making used of options on convertible bonds.
CoCos and Hybrids – Part I
Introduction to Hybrid Assets
- Issuers
- Rating Agencies
- Performance
- Particular Risks: Regulatory calls, rating calls an extension risk
Preferred: Equity or Bond Volatility?
Corporate Hybrids
- Yield pick-up
- Coupons: cancellation risk
- Replacement Capital Covenant
- Rating Agencies
- Extension Risk: introduction
Contingent Capital
- Definition
- Timeline
- Anatomy
- CoCos with upside
- CoCos vs convertible bonds
- Tier 1 and Tier 2 CoCos
- Pro and Contra
- Alternative structures
Bail-In Capital
- Definition and differences with CoCo bonds
- Examples of bail-in
- Resolution Framework in Europe
CoCos and Hybrids – Part II
Regulatory Framework
- Basel III
- ECB’s Stress Tests and CoCos
- CRD IV
Risk Profile of CoCo Bonds
- Sensitivity-analysis
- Death Spiral
- Extension Risk
Pricing Models
- Equity Derivatives Approach
- Credit Derivatives Approach
- Adding Extension risk
Case Study: Setting up a CoCo Bond from Scratch
This course is highly recommended to get a good understanding of all types of hybrid instruments. Jan and Wim are fantastic teachers with both in-depth professional and academic experience.
(Senior Analyst - Convertibles - Lombard Odier Asset Management)
Very useful for anyone who considers adding convertible bonds or Cocos into their investment portfolios.
(Portfolio Manager - Fisch Asset Management)
Very practical and useful teaching from a top ranked hedge fund manager throughout topics that are not covered in any textbook or paper. I don't want to let any competitor know about this course.
(Capital Markets Origination - Citi)
"Very good [...] training that enhanced my capital markets knowledge."
(Investment Banking - Unicredit)
"Excellent presentation!"
(Equity Trader - )
Course Details
This course is also available in London Time Zone and New York Time Zone
Call now for more information on this course or to book:
Asia Pacific +65 3159 3707
You may also be interested in...
London Financial Studies is registered with GARP as an Approved Provider of Continuing Professional Development (CPD) credits.