Objective:  3-day course examining all key aspects of arbitrage trading in the real world

·          Careful explanation of “proper” arbitrage

·          Detailed examination of “real world” arbitrage

·          Illustration of many public domain arbs

·           Implementation of “sensible” arbitrage trading/operations

·           Proprietary arbitrage, and searching for & “proving” arbs

Will learn: to answer questions like:

·          When is an arb really an arb

·          Which real arbs can I trade

·          What alterations will destroy the arb, and create a punt.

·          How to manage arbitrage positions as an arb business

Audience:

·          Traders

·          Management

·          Risk Management

Table of Contents

1)   Overview: consider the basics of arbitrage valuation and “what we do for a living”

2)   Arbitrage Basics: detailed examination of both idealised and real world arbitrage, and the requirements of the possibility of arbitrage opportunities, the degree of possible profitability, etc.

3)   Review of Key Risk/Return Concepts/Tools: review of standard measured of risk (sensitivity, variance, etc) review of statistical measure of performance (P&L distributions), review of pros/cons of various risk/return measure, and connection of risk/return measures to arbitrage measures.

4)   Arbitrage Valuation Foundations: detailed derivation of both spot and forward arbitrage free/risk neutral valuation methodologies that illustrate both the idealised and real world aspects of the requirements for the existence and trading of arbs.

5)   Implementation of an Arbitrage Business: trading discipline for entry/exit, measure of characteristics that define an arb, measuring deviation from arb/at what point is at a “punt”, when is an arb a hedge, critical operational elements (trans costs, credit, time zones etc.).

6)   (Some) Public Domain Arbs (non-contingent): Examination of several key types of arbs in several asset classes that illustrate not only the arbitrage trading process, but also important types of idiosyncrasies as applicable to outright primarily static trades, including: Cash&Carry arbs, Index/Future Equity arbs, IRP FX/IR arbs, Cash/Future Bond Basis arbs, Delivery arbs, cross-currency tertiary arbs, etc.

7)   (Some) Public Domain Arbs (options/contingent): Examination of several key types of arbs in several asset classes that illustrate not only the arbitrage trading process, but also important types of idiosyncrasies as arise in options/volatility and structured products and possibly requiring dynamic methods, including:  Traditional Delta/Vol arb, Traditional Vega/Term-Structure of Vol arb, Model arb (via FX options), Implied Vol arb (convertible bonds), etc.

8)   Finding & Calibration of Arbs & Abuses: examination of the use fundamental, statistical, and financial methods in the search for arbs, examination of PaR forward/backward simulation to not only find, but also “prove” arbs, and also considering abuses in the creation/management of arbs.

Note: in-house versions of this seminar can be easily extended to include arbitrage and analyses of specific structures/asset classes of interest to your trading, portfolios, etc.

Extras