Contents - Index

Teaching with the FTS Real Time Cases
©2010 OS Financial Trading System

This is primarily achieved through Projects and the Analytical Support System


o Equity valuation

§ DOW case, S&P 100 case, Euro STOXX 50 case, ASX50 case, ...
§ Example: Free Cash Flow to Equity
We provide a template: calculating FCFE from financial statements, estimating discount rates, etc.
Students then have to apply the technique to actual companies
Work through financial statements
Could be in groups, could analyze 2-3 different types of companies
Come up with their own estimates, input into the analytic support system
Based on analysis, develop a (simple) trading strategy
Could then repeat with a different model, evaluate differences between models
Could compare to analyst forecasts, etc.
Trading motivates the analysis


o Diversification, portfolio construction

§ DOW case, S&P 100 case, Euro STOXX 50 case, ASX50 case
§ US Sector ETF case
§ Global ETF case
§ Example: Create a tracking portfolio, manage its risk and return relative to benchmark
Understand risk, return, performance measures, rebalancing
§ Example: Global Diversification
See if global strategy can outperform domestic benchmark


o Equity Futures: arbitrage, hedging

§ S&P 500 futures case
§ Example: Arbitrage futures of different maturities
Requires modeling of basis
§ Example: hedge underlying position using futures


o  Equity Options: hedging and risk management, arbitrage, volatility trading

§ S&P 100 options, S&P 500 options, DJX options, VIX options
§ Example: managing volatility risk
Using options  on S&P 500 
Using VIX options


o FX currency trading, exchange rate risk

§ Spot FX, FX options, FX futures
§ Example: managing currency risk
§ Example: carry trades


o Interest rate risk

§ Bonds, Euro dollar futures, Fed funds futures
§ Example: Hedging Interest Rate Risk
§ Example:  Deriving information about monetary policy from Fed Fund Futures


Virtually any textbook problem can be made into a current real time project

o Students  analyze the problem
o Create their own estimates of analytic parameters
o Implement into the system
o Analyze the performance
o Students acquire relevant real world experience whilst learning