CIDA REVIEW COURSE (22 CPE)

Please bring a calculator and notecards to this class

The Certified Investments & Derivatives Auditor (CIDA) Review Course helps candidates ensure a successful completion of the CIDA exam. Although the course is not mandatory, this review course will facilitate a learning experience which will prepare candidates for the exam. While this class is very fast paced, intense and packed with more knowledge in three days than one might ever imagine, we average a 95 percent pass rate from our review course participants. In addition, given the massive amount of material covered in three days, this review course will help investment and derivative auditors fine-tune their audit skills in this highly specialized area even if they elect not to take the exam. The Fall CIDA exam will take place on November 15, 2010.

COURSE FEATURES

• Review the Investment Process: trade processing, settlement and clearance.
• Learn the Short-Term Market: T-bills, commercial paper, banker’s acceptance, CDs, repurchase agreements, eurodollars, and agencies.
• Discuss the Capital Markets: 1) fixed income securities – treasuries, corporate bonds, zero-coupon bonds, asset-backed securities, mortgage-backed securities, and municipals. 2) Equities: preferred, common, equity-linked notes. 3) mutual funds
• Study the Derivatives Markets: forwards, futures, options, swaps, credit derivatives – credit default swaps, total return swaps. Examples in all industries.
• Discuss the Investment and Derivatives Risks: market, liquidity, legal, credit, operational, management, FX, interest rate, price, weather, etc.
• Learn the different types of basis risk: locational, product, timing, and cash to futures.
• Alternative Assets: general partnerships structures, private equity, hedge funds, real estate funds.
• Develop techniques to review complicated derivative strategies and to analyze risks within the strategies.
• Discuss the derivative case studies and current market issues.
• Learn the roles and responsibilities of the front, back and middle offices of a typical investment, and derivative environment.

COURSE OUTLINE

Introduction to Course

• The CIDA Program
• Understanding the Exam and How to Study
• Review Course Topics and Objectives

Understanding the Investment Environment

• Introduction to the Investment Process
• Understanding the Short-term market
• Reviewing the Major Securities in the Capital Markets
• Understanding the Alternative Asset Class: Private Equity and Hedge Funds

Understanding the Cash Management and Debt Activities

• Reasons to Hold Cash in the Portfolio
• Best Practices for “Economizing” Cash
• Internal Controls in the Cash Management Process
• Best Practices in Cash Management
• Different Funding Alternatives – Issuing Debt
• Hedging activities for FX risk
• Audit Concerns in hedging FX with derivatives

Understanding the Derivative Environment

• The Importance of Auditing Derivatives
• What’s Going Wrong? What’s Going Right?
• Derivative Debacles of the Past
• Hedging vs. Speculation
• Introduction to Derivative Risk Management

The Forward and Futures Contracts

• Defining the Forward Contract
• Why Forwards rather than Futures
• Mechanics of Forward Contract
• Accounting for a Forward Contract
• Defining the Futures Contract
• Characteristics of Exchange-Traded Contracts
• The Mechanics of Margin
• Using Futures to Hedge Price Uncertainty

The Option Market

• Fundamentals of Options
• Option Terminology
• Analyzing the Option Premium
• Types of Options
• Exchange-Traded
• Caps and Floors
• Collars

The Swap Market

• SWAP Mechanics
• SWAP and SWAPTION Terminology
• Understanding SWAPS examples
• Credit Derivatives – Default SWAPS

Understanding and Auditing the Investment and Derivative Infrastructure

• The Roles of the Back Office
• Back office systems and controls
• Understanding the pitfalls of investment reporting
• The Roles of the Front Office
  • Discussing the portfolio management process
  • Front Office Red Flags
• The Roles of the Middle Office
  • Discussing the risk management role
  • Discussing the Compliance Role
  • Is it really independent?

The Asset and Liability Management Function

• Significance of the Asset and Liability Function
• The key risks in the ALM function
  • Audit Objectives in reviewing the ALM Function
  • Reviewing best practices in the ALM process

Controlling Derivative Activities

• Management Risk
  • Segregation of Duties
  • Management’s Responsibilities
  • Internal Controls and Audit Considerations
• Market Risk
  • VAR
  • The three methods of computing VAR
  • Using VAR to establish trading limits
  • Model Verification
  • Pro and Cons
  • Internal Controls and Audit Considerations
• Counterparty & Legal Risk
  • Master Agreements
  • Credit Enhancements – Credit Metrics
  • Internal Controls and Audit Considerations
  • Legal Risk
  • Netting Enforceability
  • Foreign Counterparties
  • Internal Controls and Audit Considerations
• Operational Risk
  • Most common operational problems in derivative settlements with counterparties
  • Confirmation issues to be concerned about
  • Internal Controls and Audit considerations

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