Financial Concepts course outline

The financial concepts programme is eleven days in length and modular in structure. Module
outlines are given below:

Introduction to Markets
The module introduces the content and structure of the overall programme, analyzes the
structure of Barclays Capital and undertakes a comparative analysis of BarCap relative to its
peers, and recaps on the key features of trading and market-making.

Risk Management
The module reviews the dimensions of risk and risk management, as well as BarCaps
approach to, and disclosures about, risk management. We review methodologies for
measuring market and credit risk, as well as approaches to liquidity and operational risk. We
also review the external regulatory environment.

Fixed income
The module covers the key features of fixed income products, price and yield calculations,
factors affecting price volatility, the yield curve and the major classes of product – government
and corporate bonds and money market products.

Credit products
The module reviews the differences between debt and equity products, the nature of credit
risk and how covenants and collateral can protect lenders. We review the differences
between many types of product including senior and subordinate debt, private placements,
and high-yield debt.

Financial statement analysis

No prior financial /accounting knowledge is assumed, and we begin by looking at the role and
content of the key financial statements. We then examine the main steps in performing
effective financial analysis, before reviewing a powerful framework for analyzing trends and
financial ratios

Equities and corporate finance

The module reviews the differences between equity and debt products, the main types of
equity products and the concept and calculation of the cost of equity. We then review the
weighted average cost of capital calculation and application, before reviewing the main
approaches to equity valuation and look at the implications for BarCap’s advisory business.

Introduction to foreign exchange

The module reviews the main details of the FX market, and what drives demand for
currencies globally. We review how prices are quoted and traded, the calculation of cross
rates and forward points.

Introduction to derivatives
The module reviews the differences between derivative and cash market products, before
examining the structure of forward contracts and futures contracts. We discuss the
calculation and application of contract margin, and how fair values on forward contracts can
be calculated. We look at a wide range of futures contracts, including commodities and
financial futures, including government bond futures, and we discuss the concept of cheapest-
to-deliver.

Interest rate swaps and CDS

The module examines the structure of an interest rate swap and the economic arguments as
to why swaps are a good idea. We show how plain “vanilla” swaps can be combined to
produce more structured products such as amortizing and accreting swaps and forward start
swaps. We then look at the structure and operation of credit default swaps and look at the
process for settlement after a credit event. We look at more complex basket CDS products,
and review recent market changes such as SNAC.
Securitization
The module reviews the rationale for securitization - balance sheet and arbitrage - and the
generic structure of cash and synthetic collateralized debt obligations. We look at a number
of practical case studies including Commercial Mortgage Backed Securities.

Introduction to options
The module introduces the key features of options and defines the basic terminology – puts,
calls, American and European exercise, intrinsic and time value and option premium. We
look at option payoff diagrams and then explore option price sensitivities and the main option
Greeks. Finally we show how options can be used to create structured investment products
and look at some of Barclays’ yield-enhanced and capital protected products.

Repo and settlement

The module explains the terms repo and reverse repo, and shows how repo simplifies the
process of borrowing or lending cash or securities. We calculate the termination legs of a
typical repo deal. We then look at the generic process of clearing and settling trades,
including the role of custodians, clearing houses and central securities depositaries.

Client derivative strategies

The module looks at how corporate, investment management and hedge fund clients, use
derivatives to execute trade ideas and to hedge their underlying market positions. The
module has a number of practical exercises and case studies, including a fund management
simulation exercise.