DEVELOPING
FELLOWSHIP
AMOUNG THE FINANCIAL MARKETERS
ACI CERTIFICATES
ACI Dealing Certificate Examination Clinic Programme-2012
As part of the Association’s endeavors’ to develop the local market and as it is a regulatory requirement for our members to obtain a relevant qualification with regard to treasury dealing and treasury operations we will be conducting the above study programs for members and back office staff.

We are pleased to present the programmes on the following basis;

05 th to 08 th March 2012‘ACI Operations Certificate’ (3 ½ days)
from 9.00 a.m. to 5.00 p.m.
Central Bank Training Institute, Rajagiriya (Non – Residential)


About Examready
Examready is a BANKSETA Accredited, financial markets consulting entity that provides both consulting and training solutions to the global financial services sector.

Examready specializes in the areas of Trading, Compliance, Risk, in-house & graduate programmes and Client Relationship Management (CRM), throughout Africa, the Middle East and Asia.

Examready’s Head office is located in Johannesburg with a satellite office in the London.Over the past few years, Examready has successfully grown its consulting and training arms in Africa, the Middle East & Asia and its product brand is now well established in these markets.

Examready is deemed a market leader in the industry. This has been achieved through its unique programme design, ability to interlink hard & soft skills and its state of the art trading simulation models, which combined, result in an exclusive product delivery to the client’s delight.

This International Learning & Development Model has propelled Examready to the forefront of consulting & training within the Global Financial Market sphere!

For further information about us, please peruse our website on www.examready.com
INTRODUCTION
The ACI Dealing Certificate is a foundation programme that allows candidates to acquire a working knowledge of the structure and operation of the major foreign exchange and money markets, including the ability to apply the fundamental mathematics used in these markets, and their core products (cash, forwards and derivatives), and the basic skills required for competent participation, including the ability to apply the fundamental mathematics used in these markets. Candidates should also be able to apply The Model Code to their situation.
THE COURSE IS DESIGNED FOR THE FOLLOWING GROUPS
  • new entrants and junior dealers (0-18 month’s experience) in the dealing room
  • middle office and operations personnel
  • auditors and compliance officers
PROGRAMME OUTLINE
Section 1 - Basic Interest Rate Calculations

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Overall Objective:

To understand the principles of the time value of money. To be able to calculate short-term interest rates and yields, including forward-forward rates, and to use these interest rates and yields to calculate payments and evaluate alternative short-term funding and investment opportunities. Candidates should know what information is plotted in a yield curve, the terminology describing the overall shape of and basic movements in a curve, and the classic theories that seek to explain changes in the shape of a curve. They should also know how to plot a forward curve and understand the relationship between a yield curve and forward curves.

At the end of this section, candidates will be able to:
  • calculate present value and future value using the arithmetic techniques of discounting and compounding for both a money market instrument terminated at maturity and one that is rolled over at maturity
  • calculate simple interest rates using different day count and annual basis conventions
  • identify the day count and annual basis conventions for the euro, sterling, Swiss franc, US dollar and Japanese yen
  • fix same-day, next-day, spot and forward value dates, and maturities under the modified following business day convention and end/end rule
  • fix the conventional frequency and timing of payments by cash money market instruments, including those with an original term to maturity of more than one year
  • calculate broken dates and rates through linear (straight line) interpolation
  • define EURIBOR, LIBOR and EONIA
  • convert interest rates and yields between the money market basis and bond basis in currencies for which there is a difference
  • convert interest rates and yields between annual and semi-annual compounding frequencies
  • calculate a forward-forward rate from two mismatched cash rates
  • calculate a cash rate from a series of forward-forward rates for consecutive periods
  • calculate the value of a discount-paying money market instrument from its discount rate (straight discount) and convert a discount rate directly into a true yield
  • plot a yield curve, describe its shape and the basic changes in its shape using market terminology, and outline how the Pure Expectations Theory, Liquidity Preference Theory and Market Segmentation Hypothesis explain the shape of the curve

Section 2 - Cash Money Markets

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Overall Objective:

To understand the function of the money market, the differences and similarities between the major types of cash money market instrument and how they satisfy the requirements of different types of borrower and lender. To know how each type of instrument is quoted, the quotation, value date, maturity and payment conventions that apply and how to perform standard calculations using quoted prices. Given the greater inherent complexity of repo, a good working knowledge is required of its nature and mechanics.

At the end of this section, candidates will be able to:
  • define the money market
  • describe the main features of the basic types of cash money market instrument --- i.e. interbank deposits, bank bills or bankers' acceptances, treasury or central bank bills, commercial paper, certificates of deposit and repos --- in terms of whether or not they are securitised, transferable or secured; in which form they pay return (i.e. discount, interest or yield); how they are quoted; their method of issuance; minimum and maximum terms; and the typical borrowers/issuers and lenders/investors that use each type
  • use generally-accepted terminology to describe the cashflows of each type of instrument
  • understand basic dealing terminology as explained in The Model Code
  • distinguish between and define what is meant by domestic, foreign and euro- (offshore) money markets, and describe the principal advantages of euromarket
  • money instruments
  • describe the differences and similarities of classic repos and sell/buy-backs in terms of their legal, economic and operational characteristics
  • define initial margin and margin maintenance
  • list and outline the main types of custody arrangements in repo
  • calculate the value of each type of instrument using quoted prices, including the secondary market value of transferable instruments
  • calculate the present and future cashflows of a repo given the value of the collateral and an agreed initial margin
  • define general collateral (GC) and specials
  • describe what happens in a repo when income is paid on collateral during the term of the repo, in an event of default and in the event of a failure by
  • one party to deliver collateral

Section 3 - Foreign Exchange
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Section 4 - Forward-forwards, FRAs and Money Market Futures & Swaps
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Section 5 - Options

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Overall Objective:

To understand the fundamentals of options. To recognise the principal classes and types, and understand the terminology, how they are quoted in the market, how their value changes with the price of the underlying asset and the other principal factors determining the premium, how the risk on an option is measured and how they are delta hedged. To recognise basic option strategies and understand their purpose.

At the end of this section, candidates will be able to:
  • define an option, and compare and contrast options with other instruments
  • define strike price, market price, the underlying, premium and expiry
  • calculate the cash value of a premium quote
  • describe how OTC and exchange-traded options are quoted, and when a premium is conventionally paid
  • define call and put options
  • explain the terminology for specifying a currency option
  • describe the pay-out profiles of long and short positions in call and put options
  • describe the exercise rights attached to European, American, Bermudan and Asian (average rate) styles of option
  • define the intrinsic and time values of an option, and identify the main determinants of an option premium
  • explain what is meant by in the money, out of the money or at the money
  • define the delta, gamma, theta, rho and vega
  • interpret a delta number
  • outline what is meant by delta hedging
  • outline how to construct long and short straddles and strangles, and explain their purpose
  • outline how options can be used to synthesise a position in the underlying asset
  • define an interest rate guarantee
  • describe the function of cap and floor options, and how they are used to produce long and short collars

Section 6 - Principles of Risk

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Overall Objective:

To identify and distinguish between the principal types of risk in the markets, and to explain the main policies and procedures used to mitigate these risks. To understand the principles of position-keeping and valuation, using spot FX as an example.

At the end of this section, candidates will be able to:
  • define and distinguish between credit, market, liquidity, operational, legal, settlement and basis risks, and identify these risks in basic money market instruments
  • define and distinguish between transaction, translation and economic currency exposures
  • define replacement cost
  • explain the purpose of netting, and distinguish between bilateral and multilateral netting
  • define settlement risk in FX and outline how this is managed through the Continuous Linked Settlement (CLS) system
  • describe how the credit risk on spot and forward FX instruments changes over time
  • explain which risks are hedged by collateral and which risks are introduced
  • calculate the position and average rate of a series of spot FX transactions, and the profit or loss for a given revaluation rate
  • explain the purpose of documentation
  • explain the purpose of risk capital
  • define nostro and vostro accounts, and outline their function
  • explain what is meant by reconciliation
  • distinguish between overnight and daylight limits
  • distinguish between position, loss and risk (VaR-type) limits
  • distinguish between hedging and arbitrage
  • explain what is meant by long and short positions, how short positions are created and the risk on a short position

Section 7 - The Model Code
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Examination Procedure

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Overall Objective:

To understand the principles of the time value of money. To be able to calculate short-term interest rates and yields, including forward-forward rates, and to use these interest rates and yields to calculate payments and evaluate alternative short-term funding and investment opportunities. Candidates should know what information is plotted in a yield curve, the terminology describing the overall shape of and basic movements in a curve, and the classic theories that seek to explain changes in the shape of a curve. They should also know how to plot a forward curve and understand the relationship between a yield curve and forward curves.

At the end of this section, candidates will be able to:
  • calculate present value and future value using the arithmetic techniques of discounting and compounding for both a money market instrument terminated at maturity and one that is rolled over at maturity
  • calculate simple interest rates using different day count and annual basis conventions
  • identify the day count and annual basis conventions for the euro, sterling, Swiss franc, US dollar and Japanese yen
  • fix same-day, next-day, spot and forward value dates, and maturities under the modified following business day convention and end/end rule
  • fix the conventional frequency and timing of payments by cash money market instruments, including those with an original term to maturity of more than one year
  • calculate broken dates and rates through linear (straight line) interpolation
  • define EURIBOR, LIBOR and EONIA
  • convert interest rates and yields between the money market basis and bond basis in currencies for which there is a difference
  • convert interest rates and yields between annual and semi-annual compounding frequencies
  • calculate a forward-forward rate from two mismatched cash rates
  • calculate a cash rate from a series of forward-forward rates for consecutive periods
  • calculate the value of a discount-paying money market instrument from its discount rate (straight discount) and convert a discount rate directly into a true yield
  • plot a yield curve, describe its shape and the basic changes in its shape using market terminology, and outline how the Pure Expectations Theory, Liquidity Preference Theory and Market Segmentation Hypothesis explain the shape of the curve