Chisholm Roth

Technical Analysis Building Blocks

Foundations

Primary and Secondary Trends

Art or science?

Chart Construction

Line Charts and Bar Charts

Candlestick Charts

Point and Figure Charts

Support and Resistance

Trendlines and Channels

Fanlines and Speedlines

Price Gaps

Reversal Days

Oscillators

Overview

Simple Oscillators

Relative Strength Index

Stochastics

Moving Average Oscillators

Volume-based Oscillators

Other Volume-based Oscillators

Conclusion

Chart Patterns

Overview

Head & Shoulders

Doubles and Triples

Saucers

V- Formations

Continuation Patterns

Triangles

Rectangles

Flags and Pennants

Candlestick Charts

Overview

Basic Shapes

Main Reversal Patterns

Engulfing Patterns

Harami

Dark Cloud Cover and Piercing Patterns

Counterattack

Tweezers

Other Reversal Patterns

Black Crows

Larger Reversal Patterns

Stars and Dojis

More on Dojis

Continuation Patterns

Gapping Plays

Three methods

Three White Soldiers

Other Continuation Patterns

Moving Averages

Overview

MA Construction

Which MA?

How many MA’s?

Filters

Application

Conclusions

Other Approach in Technical Analysis

Overview

Contrary Opinion

Tools of the Trade

Elliott Waves 

Structured Finance Principals

Overview

Business Organisation

Secured Lending

Debentures

Assessing the Collateral

Securitisation

Pricing the Loans

Structured Finance Applications

Overview

Whole-business Finance

Structured Project Finance

Structured Property Finance

The UK Commercial Property Market

PFI Property Transactions

Financing Future Cash Flows

Credit Arbitrage

Synthetic Securitisation

Tax Structured Finance

Tax-efficient Borrowing

Tax-efficient Investment

Tax-efficient Remuneration

Cross-border Financing Arbitrage

Accounting and Regulatory Structured Finance

Introduction to Risk Management

Overview

Market Risk

Sources of Market Risk

Controlling Market Risk

Credit Risk

Settlement Risk

Replacement Risk

Risk Mitigation Techniques

Other Risk

Market Value at Risk

Overview

Measuring Volatility

Histograms

Tails and Skews

Predicting Risk

Fitting a Normal Distribution

Predicting Price Changes

Portfolio Return and Risk

Portfolio Return

Portfolio Risk

Portfolio Frontier

Impact of Correlation

Simple VAR

Limitations

Conclusion

Stress Testing

Credit Risk

Overview

KMV Model

Introduction

Credit Losses on a Single Bond

Credit Losses on a Bond Portfolio

Estimating Default Correlations

Credit Metrics Model

Introduction

Credit Migration

Estimating the Cost of Credit Downgrades

Modelling the Credit Distribution

Summary

Limitations

Credit Risk Distributions

Estimating the Issuer’s Default Point

Portfolio Construction

Overview

Portfolio Effect

Portfolio Risk and Return

Portfolio Return

Portfolio Risk

The Portfolio Frontier

Impact of Correlation

Systematic Risk

Efficient Frontier

Efficient Portfolios

Capital Market Line

Allowing for Risk-free Lending

Structure of the CML

Finding the Optimal Portfolio

Single-factor Model

Applying the Model

Capital Asset Pricing Model

Applying the CAPM

Finding the Optimal Portfolio

Multi-factor Models

Portfolio Performance

Overview

Calculating Returns

Money Weight Return (MWR)

Time Weighted Return (TWR)

Unit Rate of Return (URR)

Internal Rate of Return (IRR)

Annualising Returns

League Tables

Return/Risk Analysis

Performance Attribution

Active Fund Management

Attribution Analysis

Fixed Income Portfolios

Index Tracking

Tracking Techniques

Synthetic Index Funds

Hedge Funds

What are they?

Types

Hedge Fund Performance 

Credit Derivatives Building Blocks

Overview

Definitions

What is a Credit Derivative?

Credit Events

Materiality

Market Users and Products

Credit Default Swap

Termination Payment

Term Sheet

Applications

Structural Variations

CDS Pricing as a Swap

CDS: Pricing as an Option

Reduced-form Model

Market Calibration

Capital Structure Arbitrage

Key Risks on such Trades

CDS Pricing in Practice

Total Return Swaps

Typical Term Sheet

Applications

Pricing

Credit Spreads Forwards

Pricing

Applications

Limitations

Credit Options

Main Types

Variations

Applications

Pricing

Structured Credit Derivative Products

Overview

Credit Default Notes

Applications

Synthetic CDOs

Basket Default Swaps

Total Return notes

Credit Spread Notes

Spread Linked Notes 

Callable Bonds

Overview

Structure

Putable Bonds

Issuing Rationale

Swapped Callable Bond Issue

Step-up Callable Bonds

Pricing

Pricing the Embedded Option

The OAS Model

The Option-adjusted Spread

Convexity

Convertible Bonds

Overview

Structure

Call Features

Variations

Debt Seniority

The Embedded Options

Issuing Rationale

Parity

Premium

Why pay the Premium?

Pricing

Income Advantage

Dividend Crossover Model

Pricing the Embedded Options

Trading

Equity Switching

Asset Swaps

Asset-backed Securities

Overview

Structure

Trusts

Securitisation vs. Secured Lending

Why Securitise?

What to Securitise?

The Issued Securities

Securitisation Process

Market Risk

Convexity

Yield

Weighted Average Life

Par and Zero Rates

Forward Rates

Yield Measures

Monte Carlo Simulation

Collateralised Debt Obligations

Definitions

Collateralisation

Cash flow analysis

Pricing and Credit Rating

Duration Management

Other CDO Structures

Warrants

Overview

Characteristics

Corporate Warrants

Bonds with Warrants

Equities with Warrants

Covered Warrants

Parity Ratio and Warrant Ratio

Parity in Put Warrants

Premium

Premium and Time Value

Breakeven

Gearing

Pricing Models

Scattergraph Valuation

The 30% Curve

Gearing Ratio Curve

Structured Option-based Notes

Overview

Principal Protected Notes

Gearing

High Yielders

Variations

Index Linked Notes 

Introduction to Exotic Options

Definitions

Packages

Combination Strategies

Deferred-premium Contracts

Chooser Options

Definition & Application

Pricing

Asian Options

Definition

Applications

Pricing

Compound Options

Definition

Applications

Pricing

Digital Options

Definition

Applications

Pricing

Variations

Forward Options

Definition

Applications

Pricing

Forward Volatility

Barrier Options

Definition

Types of Barrier Options

Applications

Pricing

Example1: Kick-out Call

Example2: Knock-in Call

Contractual Issues

Lookbacks

Multi-asset Options

Definition

Applications

Example1: Convergence Play

Example 2: The 20/20 Option

Example 3: Convertible Bond

Pricing

Rainbow Options

Exchange Options

Correlation Risk

Currency-linked

Definition

Applications

Pricing

Option concepts

Overview

Definition

Option Exchanges

Contract Structure

Trading Application

Simple Bull Trade

Expiry Payoff

Breakeven

Trading Procedures

Exchange-traded Contracts

OTC Contracts

Payoff Geometry

Intrinsic Value

Time Value

Definition

Why Do Options Have Time Value?

Interest Rate Options

Overview

Bond Options

Market Prices

Eurocurrency Options

Applications

Interest Rate Guarantees

Caps, Floors and Collars

Market Quotation

Swaptions

Example- Hedging

Other Applications

Swaptions and Caps Compared

Market Pricing

Pricing

Caps & Floors

Swaptions

Model Inconsistencies

Correlation Risk

Second-generation Models 

Option Pricing

Overview

Binomial Model

Key to Pricing is the Hedge

Alternative solution

Adding Some Realism

Analytic Models

Closed-form Solution

Put-Call Parity

Arbitrage Relationships

Put-Call Parity Relationships

Monte Carlo Model

Historic Volatility

Implied Volatility

The Volatility Curve

FX Options

Overview

Exchange-traded

Contract Specification

Applications

OTC Markets

Typical Deal

Option Strategies

Overview

Spread Trading

Ratio Spreads

Calendar Spreads

Volatility Trading

The Strangle

Portfolio Insurance

Example: Protective Puts

Fine-tuning the Strategy

Collars and Participations

Definition

Participations

Covered Sales

Underwriting 

Option Risks

Overview

Theta

Vega

Rho & Psi

Delta

Delta as the Hedge Ratio

Delta, Gearing and Leverage

Gamma

Ranges of Gamma Values

Gamma and Time Value Decay

Summary of Greeks

Volatility Smile

Pricing Anomalies

Equity Options

Overview

Index Options

Applications

Protective Puts

Calculating the Hedge

Stock Options

Market Prices

Interest Rate Swaps

Overview

Generic Structure

Calculating Settlement Amounts

Applications

Quotation

Swap Rates

Conventions

Calculating All-in Rates

Pricing

Formula

General Formulas

Convexity Adjustment

Revaluation

PV Method

Alternative Valuation Method

Market risk

Basis Point Value

Warehousing

Hedging with Futures

Hedging with Bonds

Funding the Bond Hedge

The Swap Spread

Asset Swaps

Resulting LIBOR Spread

Credit Risk

Forward Swaps

Overnight Index Swaps

Settlement Calculation

Applications

Inflation Swaps

Structures

Typical Users

How to Price Them

Other Variants

LIBOR-in-Arrears Swaps

Constant Maturity

Accreting, Amortising and Roller-coaster 

Currency Swaps

Overview

Structure and Applications

Product Comparisons

Basis Swaps

Pricing

Fixed/floating

Fixed/fixed

Conversion Factors

Equity Swaps

Overview

Contract Structure

Market Quotation

Application 

Futures Market Structure

Overview

Definition

Trading Procedures

Futures Exchanges

Initial Margin

Variation Margin

Settlement

Equity Index Futures

Overview

Definition

Price Trends

Applications

Synthetic Asset Allocation

Synthetic Asset Disposal

Beta-Weighted Hedging

Residual Hedging Risks

Pricing

Fair Futures Price

Futures Arbitrage 

Bond Futures

Overview

Definition

Contract Terms

Contract Months

Settlement

Delivery Settlement

Trading Applications

Pricing

Cash & Carry Arbitrage

Forward Pricing Formula

Conversion to Factors

Cheapest to Deliver

General Pricing Formula

Convexity

Implied Repro Rate

Using the Implied Repo Rate

Gross Basis

Example- Basis Trading

What Drives the Gross Basis?

Net Basis

Example – Cash-futures arbitrage

Net Basis and the Implied Repo Rate

Hedging

The Risk on a Bond Portfolio

The Hedge Ratio

Hedge Effectiveness

Eurocurrency Futures

Overview

Definition

Delivery Settlement

Prices

Applications

Example- Simple Hedge

The Breakeven

The Outcome

Futures and FRA’s

Pricing

The Futures Strip

Applying the Pricing Formula

Risk-weighted Futures Hedging

Convexity Bias

Equity Valuation Ratios

Overview

Price to Book Value

Earnings and Dividends

Earnings per Share

Dividends per Share

Price/Earnings Ratio

Definition

Prospective and Historic PER

Dividend Yield

Definition

Prospective and Historic DY

Total Return

The Yield Gap

Equity Pricing Models

Overview

Dividend Discount Models

One-stage Growth Model

Dividend Growth and Dividend Yield

Dividend Growth and P/E Ratio

Asset-based Models

Return on Net Asset Value

The Q Ratio

Return on Equity

Implied Return on Equity

Three Yield Model

CAPM

Fundamental CAPM Formula

Using CAPM to Pick Stocks 

The Income Statement

Overview

Profit and Loss

Accruals

Depreciation

Going Concern

Straight-line Depreciation

Reducing Balance Method

Fixed and Variable Costs

Company Ratio Analysis

Overview

Profitability

Profitability Ratios

Return on Assets

Operating Ratios

Equivalent Measures

Liquidity

Solvency

Operational Gearing

Predicting Failure

The Balance Sheet

Overview

Assets and Liabilities

Valuation Issues

The Going Concern Principal

Historic Cost Accounting

Industry Variations

Company Valuation

Overview

Cash Flows

Earnings are not Cash Flows

Free Cash Flows

Present Value

Alternate Methods

Costs of Capital

Residual Value

WACC & Gearing

Market Risk and Gearing

Benefits of Gearing

Economic Value Added

Eva and Free Cash Flow Valuation 

The Cash Flow Statement

Overview

The Cash Flow Statement

Spot FX

Settlement Date

Quotations

ACI Currency Codes

Interpreting Quotations

Direct and Indirect Quotations

Typical Deal

Market Making

Using the Spread

Shading the Rate

Operations

Cross Rates

Profit/Loss

Where is the Profit?

Example

Average Rate

Rollovers

Overnight Positions

Forward FX

Overview

Outright Contract

Arbitrage Pricing

Example – The Bid Side

The General Formula

Two-way Prices

Example -The Offered Side

Quotation

Interpreting the Rates

Forward Time Options

Typical Deal

Hedging the Risk

Cross Rates

Crosses from Money Markets

Example – Forward Crosses From Outrights

Synthetic Forwards

Non-deliverable forwards

Pricing NDFs

FX Swaps

Overview

Definition

A Funding Tool

Hedging Outright FX Exposure

Typical Deal

Quotation

Dealerspeak

Hitting the Correct Rate

Pricing Forward-forward Swaps

Profit/Loss

Mark to Market

Discounting the Cash Flows

Spot Risk

Residual FX Risk

Hedging the Spot Risk

General Formula

Forward FX and FRA’s

Forward-forward Gaps

Closing with FRAs

Residual FX Risk

Market Making

Synthetic Eurocurrencies

Foreign Investment

Interest Rate Arbitrage

Forward FX Cover

Short-dated Swaps

Conventions

Carrying Forward FX Positions 

Money Market Cash Instruments

Accrued Interest

Present and Future Value

General Formulas

Pricing CDs

Pricing CDs Example

Yield to Maturity

Market Quotation

Pricing Discount Paper

Settlement

Market Quotation

Yield Conversions

Discount Rate Concept

Discount Rate to Money Market Bond Equivalent Yield Concept

Money Market to Bond Equivalent Yield

Revaluations

The Yield Curve

Definition

The Shape of the Curve

Factors Affecting the Curve

Rate Interpolation

Strategy

Carry and Breakeven

Definition

Scenario 1 - Positive Curve

The Compounding Effect

Scenario 2 – Inverted Curve 

Repurchase Agreements

Definition

Contract Structure

Legal Status

Risk and Return on Collateral

Types of Repo

Applications

Securities Borrowing

Secured Borrowing

Main Market Participants

Managing Collateral

Initial Margin/Haircut

Calculating the Initial Margin

Variation Margin

Custody of Collateral

Rights of Substitution

GC and Specials

General collateral

Specials

Sell/Buy-backs

Explanation

Classic Repo Compared

Example

Pricing Sell/buy-backs

Risks

Counterparty Risk

Legal and Documentary Risk

Operational Risk

EUREPO

Forward Rate Agreements

Definition

Typical Confirmation Note

Settlement

Forward Rates

General Formula

Arbitrage Boundaries

Quotation

Forward Dates

Applications

Settlement Formula

Revaluation

Yield Curve Analysis

Overview

Yield Curve Dynamics

Official Rates

Open Market Operations

Discount window Operations

Yield Curve Dynamics

Long Yield Drivers

Short and Long Yield Interaction

Yield Curve Shape

Definition

Yield Curve Fitting

Linear Interpolation

Limitations

Logarithmic Interpolation

Limitations

Polynomial Fit

The Principal

Example

Properties

Cubic Splines

Properties

Spot Yields

Coupon Stripping

Background

Example

Bootstrapping

Spot Yields and Par Yields

Discount Factors

Example

General Formulas

Par from Spot Yields

The General Formula 

Forward Yields

Derivation

Forward, Par and Spot Yields

General Formula

Spot from Forward Yields

Derivation Example

General Formulas

Par from Forward Yields

Principles

Par Yields and Discount Factors

General Formula 

Bond Pricing and Yield

Overview

Valuation Formula

Pricing on a Coupon Date

The Pricing Formula

Pricing off a Coupon Date

Pricing Examples

Clean and Dirty Prices

Effect of a Coupon Payment

General Formula

Accrued Interest

Principal Conventions

Selected Markets

Current Yield

Definition

Adjusted current Yield

Yield to Maturity

Definition

Yield on Straight Bonds

The Yield Curve

Yield to Call/Put

Yield to Worst

Example

Valuing the Embedded Option

Yield to Best

Yield Conversions

Annual & Semi-annual Yields

The General Formula

Selected Markets

FRN Discount Margin

FRN Structure

Simple and Discount Margins

Horizon Yield

YTM and Horizon Compared

Inflation-linked Bonds

Inflation Hedging in Practice

Pricing and Settlement

Real Yields and Inflation

Implied Inflation

Estimating Implied Inflation

Break-even Inflation

After Tax Yield

Bond Market Risk

Overview

Fixed Income Laws

Macaulay Duration

Definition

Properties

The General Formula

Using Duration

Example – Asset and Liability Management

Duration-matching

Managing Duration

Modified Duration

Basis Point Value

Spread Trading

Yield Curve Spreads

Credit Spreads

Convexity

Definition

Measurement

Portfolio Construction

Bond Credit Risk

Overview

Corporate Ratings

Rating Mortality Tables

Debt Subordination

Default and Recovery

Default and Yield Spread

Limitations of this Technique

Yield Spreads as Option Premia

The Merton Model

The KMV Model

Outright and Spread Trading

Overview

Official Rates

Open Market Operations

Discount Window Operations

Yield Curve Dynamics

Long Yield Drivers

Short and Long Yield Interaction

Yield Curve Shape

Definition

Curve Fitting

Outright Strategies

Bull and Bear Positions

Riding the Curve

Spread Trading

Yield Curve Spreads

The Solution

Credit Spreads

Carry and Breakeven

Scenario 1 – Positive Curve

Scenario 2 – Inverted Curve