Over-the-Counter (OTC) Derivatives

Financial Regulation Courses (FRC)

Overview

The Over-the-Counter (OTC) Derivatives course, offered by Financial Regulation Courses (FRC), provides a detailed exploration of OTC derivatives markets, focusing on the unique characteristics of non-exchange-traded derivative products.
This course covers various OTC products, including forwards, swaps, and credit derivatives, highlighting their customisable nature and the role they play in hedging, arbitrage, and speculation.
Learners will gain a deep understanding of the pricing, trade processes, and risks associated with OTC derivatives, as well as the regulations governing this market, such as EMIR in the EU and Dodd-Frank in the US.

Learning Objectives

By the end of this course, learners will:

• Understand the structure and features of key OTC derivatives, including forwards, swaps, and credit derivatives.


• Learn the principles of OTC derivative pricing, including factors such as spot and forward rates, interest rates, and credit spreads.


• Explore the application of OTC derivatives in hedging, arbitrage, and speculative strategies.


• Comprehend the trade lifecycle of OTC derivatives, from trade capture to settlement, and the importance of documentation and collateral management.


• Recognise the risks involved in OTC trading, including counterparty risk, liquidity risk, and credit risk.


• Understand the regulatory framework governing OTC derivatives, including the role of ISDA Master Agreements and the impact of regulations like EMIR and Dodd-Frank.


• Analyse how OTC markets differ from exchange-traded derivatives in terms of customisation, transparency, and market participants.

Learning Outcomes

Upon successful completion of the course, learners will:

• Be able to assess and manage the risks associated with OTC derivatives, including counterparty and market risk.


• Confidently navigate OTC derivative pricing mechanisms and apply these to various products such as forwards, swaps, and options.


• Understand the trade processing workflow for OTC derivatives, including trade verification, documentation, and collateral management.


• Apply the principles of hedging and arbitrage using OTC derivatives to achieve desired financial outcomes.


• Interpret and implement the regulatory requirements for OTC derivatives trading, including adherence to ISDA agreements and clearing obligations under EMIR or Dodd-Frank.


• Differentiate between OTC and exchange-traded derivatives, understanding the benefits and drawbacks of both markets.


• Identify and mitigate the operational and legal risks involved in trading OTC derivatives.