Treasury & Financial Derivatives - Outline

Course: Treasury & Financial Derivatives

Instructor: Mr. Eraj Hashmi, CFA

Class Details
Course Timing and Venue 02:00 PM To 05:15 PM – Main Campus, IBA
Session Day Saturday
Consultation Time Students are encouraged to participate and express their views during the class. After
class sessions and even after the course completion, Instructor also encourage students
to apply the knowledge in their financial matters and connect/consult via email, text
message or whatsapp to gain more learning on new developments in the field.
Instructor Email eraj.hashmi@gmail.com

Class Description
Treasury and Financal Derivatives concepts are very important to master the dynamic field of Investments, Fund
Management & Hedging. The use of contemporary best practices and the amount of information available through
CFA curriculum and publications on the treasury markets and the market makers has introduced sophistication in
investment techniques. This course is offered as an elective course for MBA students. This course introduces areas
of Treasury and the extensive differentiation between domestic and global market practices. We are going to do a
lot of short calculation in real life scenarios as well as analyzing available investment avenues to gain expertise of
the subject. Students learn to work in the class room environment using investment concepts to prepare, present,
edit/modify, and protect their investment decisions in view of changing factors which influences the profitability
along with interpretation of economic news and financial information required for intelligent investment decisions.

Prerequisite Skills & Knowledge

“Treasury & Financial Derivatives” is a practical exposure oriented course so students can embrace and understand
working of a dealing room or treasury office. Enrolled students are expected to have knowledge of basic investment
and economics courses taught during university degree programs to ensure that they have grasped understanding of
financial markets and investment techniques, how the roles are defined of all stakeholders, how numbers and data
is interpreted, what factors influence capital markets which involves economic activities and fundamental news etc.
Financial Newspaper reading and knowledge on SBP economic data is mandatory for this course. Economic and
Business Review - Dawn Business Section; Business Recorder, Wall Street Journal and Financial Times etc.

Treasury Management
Treasury management (or treasury operations) includes management of an enterprise's investment holdings, with
the ultimate goal of managing the firm's liquidity to cater operational, financial and business requirements. Treasury
Management includes a firm's collections, disbursements, concentration, investment, funding and hedging activities.
Scope also includes type of ALM, Debt Securities, FX, financial derivatives and financial risk management. Also,
emphasis is made on comparison between Pakistan - Global Financial Markets practices.
The editable contents of this course outline are copyright and intellectual property of "Eraj Hashmi". Do not copy without permission.

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 Instructor Profile
 MSc Finance & Economic Development (University of Glasgow) - Chevening Scholarship
 CFA Charterholder
 MBA - Finance
Course Plan
Sessions Session Topic
1 Treasury: Introduction
2 Liquidity Management –
Position Keeping
3 Fixed Income Markets
(funding instruments of the Bank) Primary Dealers
3 Debt Securities
4 Debt Securities (cont.)
5&6 Fixed Income Investments
7 Money Market Transactions
and Risks Associated with Repo Transactions - Pricing
Investing in Bonds
Discussions
Main Financial Market Participants
Treasury of a Commercial Bank
Classification of Securities
Treasury Markets Information Canvass – Quote Making
Basic Understandings of Treasury Market
KIBOR – Detailed Understanding
LIBOR and Negative Interest Rates – Understanding
Sunset of Libor
Term Loan with periodic repricing – Calculations
Role of Regulatory Framework on Financial Market Activities
What is Monetary Policy
State Bank Tools – To Manage Liquidity Available to Economy
Interest Rate Corridor: Understanding Interest Rates
Opportunity Cost of Deposit and Reserve Management - Hand Out
Interpolated (broken date) Interest Rates
Breakeven – Mismatch Management
Comparing Investments With Different Maturities – Annual And Semi-
Annual Interest Rates
Day Count Conventions / Day Basis – Calculations
Financial Markets Classifications
Classification of Securities by Creditworthiness of Issuer
Treasury Bills - Introduction
Real time T Bill Auction – Calculations
Basic Concepts of Investments
Categories of Bonds
Pakistan Investment Bonds (PIBs)
Inflation – the important consideration in interest rate projections
Time Path of Bond Price
Pricing and Coupon Dates
Days Count Conventions
Term Finance Certificates
Term Finance Certificates – Structure and Indenture
Pricing Bonds
Type of Yields
Difference between IRR and YTM
Embedded Options
Type of Options
Activities in Interbank
Market Treasury Bills
Market Treasury Bills - Pricing
Mutual Funds
Categories of Mutual Funds in Pakistan
Risk-Return of Mutual Fund Investments
Types of Money Market Transactions
Repo & Clean Transactions
Clean Transactions - Pricing
Types of Risks
Portfolio duration
Yield Curve risk
Current yield curves of USA and Pakistan
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 8 FX Markets Foreign Exchange Markets
Foreign Exchange Markets & FX Exposure
FX Market Participants – Pakistan Case
1997 Asian Financial Crises (Case study)
Bid Ask Spread
Real Exchange Rate ( REER and NEER)
Real World : Rule of Currency Dominance
Real World : Dealing Conventions
Factors - Forward Rates v/s Spot Rates
Direct and Indirect Methods of FX Quotes
Base Currency & Price Currency
Cross Rates
Calculate and interpret currency cross rates, given two spot exchange
quotations involving three currencies.
Forward Points
9 FX Markets (cont.) Real World : Rule of Currency Dominance
Real World : Dealing Conventions
Factors - Forward Rates v/s Spot Rates
Direct and Indirect Methods of FX Quotes
Base Currency & Price Currency
Cross Rates
Calculate and interpret currency cross rates, given two spot exchange
quotations involving three currencies.
Forward Points
10&11 Derivatives Derivatives – Introduction
Pros and Cons
Forward Rates
Forward Rate Agreements (FRA)
Forward Rate Agreements (FRA) - pricing
Options
Options – Valuations

Mode of Delivery and Course Content

Presentations: Instructor designs and delivers course lectures from Presentations and real world exercises, as per
enrolled students caliber and grip on knowledge related to investments. These Presentations and Exercises require
knowledge on various treasury and fund management areas, products, calculations and case studies from both global
and domestic markets.
Teaching Facilities include, but not limited to:
• Congenial Class Environment
• White Board
• Multimedia
• Handouts ( Excerpts / Publications / Case Studies)
However, books recommended are:
• Fixed Income Securities by Pietro Veronesi
• Interest Rate Markets by Sidhartha Jha
• SBP Publications on Treasury Bill, Pakistan Investment Bonds, Sukuks etc.
• Regular reviews of Updates on SBP Economic Data
• IMF Country Reports on Pakistan

The editable contents of this course outline are copyright and intellectual property of "Eraj Hashmi". Do not copy without permission.

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