It is recalled that this study requires a very good
understanding of the course, I am
available for that during the classes and by mail but you are
responsible to keep the timing and method of monitoring the work below.
By experiences: it takes some time ...
2. Two documents have to be send the day before
the Oral Presentation (see Notation): Pricer Excel and Power Point
2003, not 2007, no xlsX, no pptX, no.Rar files,
maximum size per file 1Mo).
file Pricer contains
surface).It should be completed.
Marketing part can be started after having just understood the product
(so after the first course).
product must be
validated during the second course.
8. Before the last course make
sure you know how to answer each question.
all, save time, ask!
10. 10 days
before the Oral Presentation or the delivery of your case study, I will
not answer questions anymore (see Questions
Not using the
availability of the speaker (during the classes or by e-mail) and get a
job badly done: you will be in a loss-loss situation. Asking questions of
elementary level (I had some …) or contained in the FAQ ...
You have 2 files to
send in Office 2003 format only (if
give you a score): A
Point presentation (or Word), a tool to evaluate the price
of the product (price in Excel).
in 1 to 3 stars are for pairs, and 4 and 5 may be for trinomials or 4
students. The file Choice of Case Study provides
- I may
withdraw subjects with 1 star
more starts the more my indulgence, the more students per group the
more I’m demanding
believe there is enough case such that 2 groups did not take the same
subject (1 point of penalty if it’s the case).
The PowerPoint file
will be the basis of your oral presentation (needed even if there is no
formal Oral Presentation) and development of the marketing part:
for 8 points / 20, split in
- 50% for
creativity and marketing (names, slogans, logos, visuals, videos, ...),
20% for pedagogy (pros and cons, clarity, vocabulary, graphics,
...) and 20% for the quality of animation (broke the ice ! - enthusiasm, ...),
- Plus a
bonus of 10% on the Imagination, and
- A 10%
bonus for the quality of your question to the group before you during
the Oral Presentation (I consider the quality and relevance of the
The Excel file
contains all the calculations (Part Pricing) with
for 12 points / 20, each Excel file detailing the number of points per
this allocation, I would also consider various aspects including ...
- ... 40%
for the quality of the intellectual approach, 40% for the accuracy of
results and 20% for the “user-friendlyness”
- Plus a
bonus of 10% for your response to my question during the Oral
Before the Oral
Presentation, make sure you do not have technical problems (which
computer is used, test the overhead projector, compatibility of the USB
sticks, coffee and cakes ...). Remember that any delay du to
technical reason will be deduced to your time (about 10 mn).
Depending on the
timing of the course and submission of copies, I can decide to relieve
you of the Secondary Market part of your subject. In this case it
will be optional and if completed, you will earn up to 3 additional
No Oral Presentation
& / or delay to send the files (at the latest email them the day
BEFORE your Oral Presentation or if there is no Oral Presentation
before the day and time agreed in class): 1 point per hour of
delay (any hour started is due) up to 5 penalty points.
"Forgetting" to send the Excel file: rating on 8 points.
Earn points with the Exchange
Participation in courses (beyond the simple presence ...) I will round
up the score or even give you more points.
If you wonder why I
put so much energy to implement the Exchange Questions, please
note that in this profession you must be humble and ask rather than
make a mistake, often very expensive. All this enables me also to
reinforce my idea that you had all the means to make a perfect copy and
so I can satisfy my impulses to give severe rating.
Each mail you address
to me must contain the name of the case study in the subject, give me
your GSM number : a
Always keep the history of email attached to your new questions.
Each versions of Excel files (and Power
Point) have to end by an new number. Must be Office 2003, no Rar file.
simplicity of the Excel file are noted.
group is entitled to 3 email exchanges after that ... consider the Exchange
Questions. Ten days before the
Oral Presentation or the date of receipt of your duties, I will not
answer questions (cf. Exchange
Exchange Questions Top
principle is to connect those who have further questions (applicants)
and those who have some knowledge and time (suppliers). To create this
market and to encourage suppliers, each supplier will increase its
rating by 0.50 points by simply registering on the Stock Exchange and
answer at least one question (pay as Market Maker ... I would uncover
the sleeping "partners" and other free-rider).
you will find the value of each question in base 100 (100 QP = 20
points or 5 Qp = 1 point on the final grade; Question QP's Point).
How works this market?
- The suppliers reported by mail to the
CHEQ (Clearing House Exchange Questions ... ie
me) if they want to participate in this market and thus earn 0.50
points as soon as they answer to one question (even though they are not the ones
selected as the best answer);
- Applicants shall send questions to the
CHEQ with QP price you're willing to pay (it is rational to propose a
price below what the question really is worth...)
- CHEQ matches anonymously buyers and
sellers, the latter one that offers the most accurate answer (verified
at 100% by CHEQ) and the fastest wins the double of the price offered
by the applicant,
- CHEQ records the
The QP used
(applicants) or credited (suppliers) will be converted into points (5 QP = 1 point) and will impact the final grade.
a. Team 1
offers 1QP to answer a question worth 5QP (proposal send at the CHEQ).
The price is low because, for example, Team 1 has already answered part
of the question.
b. The Team
2 and Team 3 are as listed as offers and accept the demand (and therefore the price), sent
their reply to the CHEQ and receive QP 2.5 (or 0.50 points), simply by
being active on this market (Welcome Bonus applicable only for the first
c. The CHEQ
selects the best response (eg. Team 2),
check/correct it and sends it to the Team 1.
2QP as teh Winner Price (or less if the correction by CHEQ is important).
The Team 1 is charged 1QP.
e. Imagine that
during the final evaluation, the response is evaluated 4.5QP on 5 then
in net: Team 1 will get 4.5 - 1 = 3.5QP (vs. 0QP if no answer or wrong
answer), Team 2 will have Welcome Bonus + Winner Pric e= 2.5 + 1 x 2 = 4.5 QP.
Do not include fees
that may appear in your brochure. Also, if the initial or final level
is calculated from an average, please disregard it and consider only 1
Question Flash Top
this part use your imagination while respecting the characteristics of
the product: new bank name and product, new slogan ... creativity is
encouraged and the humour is allowed.
Calculation of a performance Top
(Final Value - Initial Value) / Initial Value. This calculation is
sometimes modified by changing the denominator (reference value).
To recall, the option offers a performance but:
- Payment in euros (cash Settlment) the amount of gain,
- Physical delivery of the underlying against payment of the exercise
price (= Physical Settlment).
Finally, if your case study provides the calculation of an average of
course does not take into account and consider only one value and not
the average (either for the first or the last level).
(or expected price of this asset).
Two approaches are possible and equivalent. Whether you consider the
probability distribution followed by the underlying and compute the
expected value in T year. Either follow the
principle of no arbitrage opportunity (see courses).
product if we look towards the
future. To do this, we recalculate each parameter needed to price the
product. Except in this part (Secondary Market), I remind you that we
are at the time of issuing the product.
The calculation of the product may be refined taking into account the
real market conditions. Any purchase of product is done at the Ask
price (amount requested for the purchase) and sales at the Bid (resp.
offer). The difference between ask price and bid price is called the
spread Bid-Ask (Ask> = Bid then spread Ask Price - Bid Price).
Remember, if to build the product you buy an instrument (paid price =
Ask), you have to reevaluate it at its
resale value (Bid): value at which you can resell it if the client ask
to be redeem before maturity.
Rates Curve Top
default on an annual
basis, even for a rate maturing in less than 1 year.
The short term (up to 1 year) is Money Market (Act/360) basis, beyond the basis is Bond Basis (30/360).
By definition, short rates do not pay coupon (intermediate = before
maturity); long term rates pay coupons by default.
Zero Coupon Top
coupon during the life of the
product but only at maturity.
The course contains the formula for the transition from "coupons"-rates
to zero-coupon rates. Switch after to continuous rates. The ZC rate
continuous has to
be used in the B&S formula.
For information, the ZC 10 years discreet is worth 5.4898% and in continuous
5.3444% (curve with 0 shift).
Continuous Rate Top
The formula takes into account the frequency of composition by year (eg m = 2 for biannual rate, ie
who pays a coupon C / 2 each 6 months).
Volatility Surface Top
The volatility surface provides the expected volatility based on the
maturity and exercise price of the option. Indeed, to fill a gap in the
B & S model, the volatility is not unique, whatever the maturity of
the option and the exercise price of the option. It is an unique data as a function of these 2
variables. For the same maturity, volatility expressed in terms of
exercise price looks like a "Smile".
If you choose the linear interpolation: Y2> Y> Y1 and X2>
X> X1 then Y = Y1 + (X-X1) * (Y1-Y2) / (X2-X1).
The interpolation with a constant variance is seen during the course.
Initial Value Top
This value is
in the tab of the volatility surface cell C1. If you prefer, change it
to 100. Similarly, you can consider that the client invests 100 in the product.
Calculate the up-front margin Top
structure must achieve a certain margin (and therefore independent of market conditions). This margin is calculated today (ie up-front). The calculation of a margin is the
difference between the sale price and the cost of manufacturing the
Pricer Excel Top
will take the form of an Excel 2003 (to be completed if existing, do not rename,
no xlsX format, max. size 1Mo). It must be user-friendly (flexible, explicit, flexible,
... results automatically adjusted by changing settings or market data - such as maturity, indexation, volatility ... -).
The file will contain as many tab that questions in the subject (recall
each question, even if you do not respond in the tab).
The first tab should contain a summary of your results. BE SURE that
ALL your results are clearly visible
this sheet ...
Power Point Presentation Top
a presentation in Power Point 2003 format (not2007, no pptX, max. size 1Mo) of 15 to 20 slides for a duration of 12 minutes (practice it !). In case of Oral Presentation,
it will by your main support.
It will include, in bullet-point, two parts:
- The first customer-oriented (your audience), including the
- The second for your Boss: presentation of financial
instruments, to structuring schema, Pricing Part (results only), what
were the difficulties encountered, technical issue, Specific Questions
part, Secondary Market (only the last 2 questions), finish the
presentation by the Imagination part.
will last 10 to 12 minutes per case study. You start with the Client part then the Boss one. Normally, only the Power Point Presentation
will be shown.
The audience attentive and respectful of others' work will be rewarded
for any constructive question.
During the Oral Presentation I will take into account (see Notation):
- Your ability to "break the ice”, your conviction and ability to
- Your creativity and originality,
- The quality of arguments,
- Clarity and pedagogy,
In addition, two questions will be raised and noted:
- The first by the group that will follow,
- The second focused on
technical or pricing from me.