FTS Interactive Market Trading Cases
Overview: Participating in an FTS interactive market lets you experience how financial markets work. In each trading case the price discovery problem is tied to a learning objective. In this way two important properties associated with financial markets, arbitrage and efficiency, drive learning in an FTS trading session. For example, suppose the learning objective is the time value of money. If someone in the market is not applying this concept correctly when trading, another trader can exploit it. By working through a case and preparing a support system to help you trade, you develop your analytical and model-building skills.
Instructors
- Teaching Guide
- Quick Start Instructions
- Market Microstructures
- All Case Workbooks
- Creating your own cases
- Performance evaluation: Performance is measured in every trial. A grade can account for participation and average rank across multiple trials; one example is 50% participation and 50% relative performance.
- Advanced: Program Trading
- New cases:
- Systemic risk
- Ethics (contact ftsweb@gmail.com for instructions)
Students
- Student Case Preparation Manual (with Excel and VBA examples)
- FTS Demo Trading Case: Go to FTS Web Trader and click “Connect to Demo” to participate in a class trading session for B02. The description below is a good way to learn the mechanics of trading.
Fixed Income Cases
- B01 — Introduction to FTS and the time value of money; zero and coupon bond markets in a constant interest-rate world.
- B02 — Zero and coupon bond markets in a non-constant interest-rate world; cash matching and the yield curve.
- B02A — B02 with interest-rate uncertainty and private information, extending it to market efficiency.
- B03 — Zero, coupon, and forward markets; time value of money, arbitrage-free pricing, and yield curves.
- B03A — B03 with interest-rate uncertainty and private information.
- B04 — Managing interest-rate risk using duration and the bond immunization theorem.
- B05 — An advanced fixed-income case introducing interest-rate trees.
- B06 — B05 with private information.
- GC1 — Zero and coupon bonds with a general interest-rate uncertainty structure and news headlines.
- Excel support: Specific Case Support.
Stock Cases
- RE1 — Introduces market efficiency: do prices reflect all available information?
- RE2 — Extends RE1 with arbitrage relationships.
- RE3 — Adds put and call markets and considers the role of options in market efficiency.
- RP1 — A three-stock mean-variance efficiency case.
- RP2 — RP1 with analyst forecasts.
- CA0 — Managing the risk and return of a position from a trading perspective.
- CA1 — Price discovery for risk assets and risk premiums; introduction to CAPM.
- CA2 — Managing risk and return with exogenous prices.
- CA2P — CA2 with news headlines.
- CA3 — The CA1 environment with risk-loving traders.
- GC2 — Stock and bond price discovery with news headlines.
- Note: The RE spreadsheet also contains one-stock versions of RE1 with and without private information in double-auction, quote-driven, and order-driven markets, plus variations of RE2.
Option Cases: Binomial Option Pricing World
- OP1 — One-period option pricing, synthetic equivalents, and put-call parity.
- OP2 — Two-period OP1 with American options.
- OP3 — Three-period OP1 with a delta-hedging problem.
- OP4 — OP2 with information and European options.
- OP5 — OP4 with American options.
- OP6 — OP3 with private information and additional strike prices.
- OP7 — OP6 with American options.
- OP8 — A realistic underlying risk-management problem.
- OP9 — Price discovery in all markets, including the underlying.
Option Cases: Continuous-Time World
- ST1 — Delta hedging in a Brownian-motion world with exogenous prices.
- ST2 — ST1 with price discovery.
- XR1 — Managing currency risk and option strategies using real-time support.
- XR2 — Managing currency risk and options during exchange-rate crises.
- Option Case Support
Forward and Futures Cases
Swap and Related Markets
- SW0NoDayCount — One swap desk and equal half-year periods.
- SW0NoDayCountInfo — SW0 with private information.
- SW1 — Real-world day-count conventions and competing swap desks.
- SW1NoDayCount — Equal half-year periods and competing swap desks.
- SW2 — SW1 with private information.
- SW2NoDayCount — SW1 with private information and equal-length periods.
- RM1 — Synthetic fixed-rate loans using forward-rate agreements, caps, and floors.