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Derivatives Fundamentals Course (DFC®)

 

Understand the World of Derivatives

The DFC® provides a general understanding of derivatives, such as forwards, futures, swaps and options, and their use by investors and corporations.

Learn About:

  • Derivatives what they are, types, where they trade, etc.
  • Key differences between exchange-traded and over-the-counter products
  • Exchange-traded options, pricing, hedging, speculating
  • OTC options like caps, floors, collars and exotics
  • Swaps including basic features, role of the swap dealer, and types
  • How investment funds and structured products use derivatives
  • The function of exchanges and clearinghouses
  • Futures contracts (basic features, types pricing, hedging, speculating)
  • OTC forwards and other futures contracts
  • The inherent risks and the need for understanding, objectives, and controls

Learning Experience

CSI’s online learning system helps you meet your study goals. You'll benefit from:

  • Online access to course readings in PDF format
  • Interactive exercises and practice quizzes
  • Course updates to ensure you’re learning the most current and up-to-date practical material in your studies
  • An online study planner that shows you how to complete your studies in a 3-, 6-, 9-, and 12-month window
  • Access to online discussion forums and assistance from CSI's academic support specialists

What's New

  • Significantly edited each chapter to improve the readability of the material
  • Removed reference to ICE Futures Canada following the transfer of the trading of the exchange’s contracts to ICE Futures U.S.
  • Removed reference to ICE Clear Canada that had the sole responsibility for clearing ICE Futures Canada trades
  • Revised the material on the quotation of currency rates

What you'll learn

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Topics covered in this chapter are:

  • What Is a Derivative?

  • Common Features of All Derivative Instruments

  • Types of Derivative Instruments

  • Key Differences Between Option-Based and Forward-Based Derivatives

  • Exchange-Traded and Over-the-Counter Derivatives

  • Key Differences Between Exchange-Traded and Over-the-Counter Derivatives

  • Types of Underlying Interests

  • Commodities

  • Financials

  • Why Are Derivatives Useful?

  • Operational Considerations

  • Who Uses Derivatives and to What Extent Are They Used?

Topics covered in this chapter are:

  • What Is a Forward-Based Derivative?

  • Types of Forward-Based Derivatives

  • Key Differences Between Exchange-Traded and OTC Forward-Based Products

Topics covered in this chapter are:

  • A Brief Overview of Forward-Based Derivatives

  • A History of Forwards

  • What Is a Forward Agreement?

  • What Is a Futures Contract?

  • Organized Futures Markets

  • Buying and Selling a Futures Contract

  • Cash Settlement

  • Margin Requirements and Marking-to-Market

  • Futures Trading and Leverage

  • Reading a Futures Quotation Page

  • Contract Size and the Value of the Underlying Interest

Topics covered in this chapter are:

  • Exchanges

  • Futures Exchange Functions

  • Clearinghouses

  • Clearinghouse Functions

Topics covered in this chapter are:

  • A Brief Overview of Futures Pricing

  • Futures Market versus Cash Market

  • Cost of Carry

  • Basis

  • Cash and Carry Arbitrage

  • Reverse Cash and Carry Arbitrage

  • Conditions that Facilitate Arbitrage

  • Inverted Markets

  • Convergence

Topics covered in this chapter are:

  • Hedging

  • Types of Hedges

  • Imperfect Hedges

  • Optimal Hedge Ratio

Topics covered in this chapter are:

  • What Attracts Speculators?

  • Types of Speculators

  • Price Forecasting Techniques

  • Fundamental Analysis

  • Technical Analysis

Topics covered in this chapter are:

  • Overview of interest rate futures

  • What Is an Interest Rate Futures Contract?

  • Bond and Note Futures

  • Money Market Interest Rate Futures

  • Pricing of Interest Rate Futures

  • Pricing of Money Market Interest Rate Futures

  • Applications for Interest Rate Futures

Topics covered in this chapter are:

  • Stock Index Futures

  • What Are Equity Futures Contracts?

  • Pricing of Equity Futures

  • Equity Futures Applications

Topics covered in this chapter are:

  • Foreign Exchange Markets

  • Pricing of Currency Futures Contracts

  • Currency Futures Applications

Topics covered in this chapter are:

  • Forwards versus Futures

  • Forward Rate Agreements

  • Forward Exchange Agreements

  • Contracts for Differences (CFDs)

  • Weather Derivatives

  • Volatility Derivatives

Topics covered in this chapter are:

  • What Is an Option-Based Derivative?

  • Types of Option-Based Contracts

  • Similarities Between Options and Forwards

  • Key Differences Between Options and Forwards

Topics covered in this chapter are:

  • The History of Options

  • Key Option Terminology and Definitions

  • Application of Key Terms and Definitions

  • Why Options Are Bought

  • Why Options Are Written

  • Other Related Benefits of Options

  • Advantages of Exchange-Traded Options versus Over-the-Counter Options

  • Reading Option Quotations

  • Common Questions Pertaining to the Options Market

Topics covered in this chapter are:

  • Pricing of Options

  • Major Factors that Affect the Price of an Option

  • Intrinsic Value

  • Time Value

  • Delta

Topics covered in this chapter are:

  • Exchange-Traded Options Strategies

  • Bullish Option Strategies

  • Bearish Option Strategies

  • Other Option Strategies

Topics covered in this chapter are:

  • Non-Equity Options

  • Stock Index Options

  • Foreign Currency Options

  • Options on Futures

  • A Last Word on Non-Equity Options

Topics covered in this chapter are:

  • Over-the-Counter Interest Rate Options

  • Interest Rate Caps

  • Interest Rate Floors

  • Interest Rate Collars

  • Exotic Options

Topics covered in this chapter are:

  • Overview of the Swap Market

  • What Is a Swap?

  • Role of the Swap Dealer

  • History of Swaps

  • OTC Derivatives Market Reform

Topics covered in this chapter are:

  • Plain Vanilla Interest Rate Swap

  • A Note on Rate and Day Count Conventions

  • The Structure of an Interest Rate Swap

  • Pricing an Interest Rate Swap

  • Indication Pricing Schedule

  • Credit Risk

  • Terminating an Interest Rate Swap

  • Why are Interest Rate Swaps Used?

  • Deliverable Interest Rate Swap Futures and Centrally Cleared Swaps

  • Other Types of Interest Rate Swaps

  • Swaptions

Topics covered in this chapter are:

  • The Structure of a Currency Swap

  • Currency Swaps as a Portfolio of Fixed- and/or Floating-Rate Bonds

  • Pricing of Currency Swaps

  • Reasons for Currency Swaps

Topics covered in this chapter are:

  • Credit Derivatives

  • The Role of Credit Derivatives

  • The Structure of Credit Default Swaps (CDSs)

  • What are Index CDSs?

  • Why are CDSs and Index CDSs Used?

Topics covered in this chapter are:

  • Equity Swaps

  • Commodity Swaps

Topics covered in this chapter are:

  • Derivatives Use by Investment Funds and Structured Products

  • Regulatory Restrictions on Derivatives Use by Mutual Funds

  • Mutual Fund Use of Derivatives

  • Derivatives for Non-Hedging Purposes

  • Potential Risks of Derivatives Use by Mutual Funds

Topics covered in this chapter are:

  • Hedge Funds – What Are They?

  • Hedge Fund and Commodity Pool Regulation

  • How Hedge Funds Use Derivatives

  • Risks of Derivatives

  • Advantages of Derivatives

  • Disadvantages of Derivatives

Topics covered in this chapter are:

  • Principal-Protected Notes (PPNs) – What Are They?

  • PPN Structures and the Use of Derivatives

  • CPPI and Zero-Coupon Bond Plus Call Option Structures — Key Differences

Topics covered in this chapter are:

  • Introduction

  • Commodity ETFs

  • Swap-Based ETFs and the Synthetic Replication of Indexes

  • Leveraged and Inverse ETFs

Topics covered in this chapter are:

  • Derivatives – Friend or Foe?

  • Types of Risks Associated with Derivatives

  • Measuring Risk

  • Internal Control and Monitoring

  • The Amaranth Debacle

Topics covered in this chapter are:

  • Accounting

  • Financial Reporting and Disclosure

  • Taxation

Approximate Hours of Study**
Hours of Study 60 - 90 hours

** In order to provide some guidance to course participants as to the length of time it will take to be sufficiently prepared to write the final examination, CSI has prepared this estimate of the number of hours an average participant could possibly expect to spend studying for a course. Please note that these are only recommended hours of study developed based on research and our course content, however, this does not mean that some students with exceptional backgrounds would not take less time than recommended or that students with no background at all in finance or economics would not take longer than the maximum.

EXAM WEIGHTINGS
(weightings are approximate)
 
An Overview of Derivatives 3%
Futures Contracts 40%
Exchange-Traded Options 42%
Swaps 8%
How Investment Funds and Structured Products Use Derivatives 5%
Operational Considerations 2%
EXAM INFORMATION  
Exams 1
Exam Format Paper Or Computer Based
Exam Duration 2 Hours
Question Format Multiple Choice
Questions Per Exam 65
Attempts Allowed Per Exam 3*
Passing Grade 60%
Assignments None
ENROLMENT PERIOD  
Enrolment Period 1 year
COURSE COMPLETION NOTICE AND WALL CERTIFICATE

On successful completion of this course you will be able to download a Notice of Course Completion available through your student profile. This will remain on your profile as formal indication of course completion.

CSI will mail you a wall certificate within 4 - 6 weeks of course completion. Frames to display your certificate are available. Please ensure that your First and Last Name on your profile match your First and Last Name on your Government Issued Photo identification - this will ensure you receive an accurate certificate.

CSI will be pleased to issue an Honors Certificate to all students who obtain a final course mark of 85% or higher.

*There is no charge for your first attempt at a paper-based exam within Canada, as long as it's at a regular exam center and you provide a minimum of 14 days notice before the date that you want to write the exam. If you would like to write a computer-based exam, an additional fee will be required.

Each subsequent paper-based exam attempt at a regular exam centre within Canada will also require an additional fee. This fee is in addition to any special, computer-based or international fees that may apply. You must provide a minimum of 14 days notice within Canada at a regular exam centre and 4 weeks notice for all other centres. Please note that the date of the exam is not part of any notice period.

†Please note: Access to your online materials will close 2 weeks after successful course completion or course expiry (whichever comes first). This course can be extended by 1 year provided you have not exceeded the attempts allowed for each exam. Extension fees apply. Your enrolment period can only be extended one time.

Important: During a student's enrolment period, CSI may update this course. In that case, details about the update and how it may affect students will be posted online via My CSI. Students are held responsible for and are examinable on the content in the course textbook(s) provided at the time of enrollment unless stated otherwise in My CSI. Students are encouraged to check My CSI regularly throughout their enrolment period.

Continuing Education (CE) Credits

Click the links below or the buttons at the top of the page on the right side to access CE accreditation information. To search for specific course information, press Ctrl + F and then enter the course name to search the document for the information you are interested in.

National/Provincial (Excluding Quebec)
Download CE Chart (PDF, 163 kb)

Quebec (IQPF/CSF)
Download IQPF/CSF Chart (PDF, 182 kb)

Please note: While CSI makes every effort to ensure that the information is up-to-date, we are unfortunately unable to fully guarantee its accuracy. The information listed in the charts above may be subject to change.

More detailed information on CE Credits are available.