Fixed income derivatives trading is a complex financial transaction with the potential for great reward as well as great risk. To get a handle on what's involved in trading, investing in or accounting for such opportunities as equity fixed income derivatives, fixed income credit derivatives and structured income derivative products, look to experts in training.

Because the international fixed income derivative market is booming, you'll find the most popular and respected training resources operating out of London, long a global financial powerhouse. You don't need to travel to Europe to get training for fixed income derivatives, however, though you can if you want; training courses are offered in person in cities around the world, or online through e-learning plans. To learn more about fixed income derivatives:

1. Start with basic training for fixed income derivatives resources.

2. Immerse yourself in intensive professional training and certification for international fixed income derivative trading.

3. Explore opportunities for training in fixed-income derivatives accounting and auditing.

Action Steps
The best contacts and resources to help you get it done

Learn about fixed-income derivatives with basic resources

Training for fixed income derivatives investment, trading or accounting begins with a basic understanding of the principles involved. Make use of online resources, self-study and introductory courses that lay the foundation for more in-depth training in the arcane world of fixed income derivatives.

I recommend: Get a basic fixed income derivatives definition, along with a general introduction to the financial math involved in this form of trading, at Global Derivatives' Quantitative Finance 101 page. Acquire a copy of John C. Hall's Options, Futures and Other Derivatives (6th edition), the leading textbook on derivatives, fixed income and beyond, and use it for self-study. Contact the Global Financial Markets Institute or Taylor Associates Financial Training for information on basic and intermediate training for fixed income derivatives courses available in traditional or e-learning contexts.

Take advantage of intensive professional level training for fixed income derivatives trading

The global fixed-income derivatives market is booming, and opportunities for intensive advanced training and certification are available worldwide. Designed for investment and finance professionals, these fixed income securities and derivatives courses require a hefty investment in fees, but pay off in fixed income derivative expertise.

I recommend: Euromoney Financial Trading is a leading provider of professional training for fixed income derivatives; opportunities include a 4-day intensive Fixed Income Instruments Course and a 5-day Fixed Income Summer School. Be one of 18 participants in an Advanced Derivatives: Pricing & Hedging Training Course from Ethan Hathaway. To become certified in international fixed income derivative trading, enroll in the International Fixed Income and Derivatives (IFID) certification program administered by the International Capital Market Association (ICMA); students have 6 months to complete the online certification training, and can sit for the exam in major cities around the world.

Obtain specialized training for fixed income derivative accounting

The rules for fixed income derivatives accounting and auditing are as complex as the stochastic calculus behind fixed-income derivatives trading. Fortunately, you can find accounting training for fixed income derivatives, including introductory seminars and distance learning certification.

I recommend: Take a reasonably priced 1-day course in Accounting for Fixed Income Securities and Derivatives from Securities Operations Forum; designed for middle management, the course has no prerequisites and offers CPE credits. Increase your career potential by preparing for and passing the Certified Investments and Derivatives Auditor (CIDA) exam through the Investment Training and Consulting Institute.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Because the leading providers of training for fixed income derivatives are located in London, you'll find training costs quoted in British pounds or euros. These firms have a global outreach, however, so ask about converting fees to US dollars and attending training seminars held in US cities.

Fixed income derivatives are standard tools for managing your financial risk. Companies around the globe use fixed income derivatives to manage their interest rate risk exposure. It is vital for any business professional involved in corporate or financial risk management to have an accurate grasp of fixed income and financial engineering.

Whether you are interested in over-the-counter or exchange-traded services, you should understand the basics involved in fixed income derivatives trading. Consider the following steps to acquaint yourself with fixed income derivatives basics:

1. Educate yourself about fixed income derivatives.

2. Learn about derivatives in fixed income trading and how to participate.

3. Download and order financial instruments that will aid you in assessing and trading fixed income derivatives.

Action Steps
The best contacts and resources to help you get it done

Learn about fixed income derivatives and fixed income credit derivatives

Understanding the basics of fixed income and derivatives will help your business make successful investments and guard against any surprises. You will want to understand the difference between equity fixed income derivatives, a structured income derivative and an international fixed income derivative.

I recommend: For fixed income derivatives definition options, check out the A-Z derivatives concept glossary at The Financial Pipeline. To get more depth, register for a tutorial on fixed income derivatives from Frank J. Fabozzi Associates. Goldseek.com provides an article entitled, "Credit Derivatives Dangers in 2008 & Beyond." View "The Inevitable Growth of Derivatives Exchanges," provided by Information Arbitrage. Collateralized debt obligations and other fixed income derivatives were at the root of the international credit crisis of 2008; read coverage in The New York Times.

Learn about and partake in fixed income derivatives trading

Gain a better understanding of what is involved in and required of fixed income securities and derivatives trading. There are a multitude of financial companies and institutions ready to handle your financial business needs but be sure to review the services offered before signing up for membership. These companies have the know-how to manage your investment portfolio, develop models and structure transactions.

I recommend: View the trading services and financial instruments provided by Nomura and, if interested, obtain contact information. Learn about the TradeXpressSTP network and sign up for a free trial at Tradeweb.

Download financial tools to help you model derivatives fixed income

Ease your mind and workload by downloading or ordering financial tools dealing with fixed income derivatives as they can be quite complicated and extensive. Financial instruments will be helpful to your business and will require you to spend a fraction of the cost of financial consulting services.

I recommend: Visit Free Download Manager to access downloads of financial modeling tool kits for derivatives. You can also access information about and order trial software of the Financial Derivatives Toolbox 5.3 at The MathWorks before purchasing.

Tips & Tactics

Helpful advice for making the most of this Guide

• •  Keep in mind that over-the-counter markets have advantages over exchange-traded markets. With over-the-counter fixed income derivatives you can customize trading, lower costs and allow for more efficient management.

Fixed income derivatives are a very large, important group of financial securities. They are used to manage risk, or to take a position on the future value of interest rates, corporate bond prices, or house prices. Fixed income derivatives include futures contracts on Treasury bonds and interest rate swaps, both of which are traded on an exchange. The mortgage backed security, an over-the-counter (OTC) product, had been a very popular fixed income derivative until the economic and housing crisis that began in 2008.

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Treasury bond

Several derivatives are available for Treasury bonds. A Treasury bond is a bond issued by the U.S. government. Several maturities of bond exist, so some bonds are called notes, to reflect the fact that they have less than 30 years to maturity when they were issued. Interest rates on Treasury bonds are an important benchmark for financial markets, so this is a very large, important group of derivatives.

I recommend: Investor Glossary has a very thorough definition of a Treasury bond.

Mortgage backed security

A mortgage backed security is a fixed income contract that collects mortgage payments from thousands of mortgages and then redistributes those payments to investors. These are very complex instruments, and the market for them is very large. Since these are not exchange-traded products, mortgage backed securities can be customized to suit each investor's needs.

I recommend: Risk Glossary has an excellent explanation of mortgage backed securities and related items.

Exchange

Most fixed income derivatives trade on an organized exchange. An exchange is a structure created to facilitate trading of financial securities. An exchange facilitates trading by offering standardized contracts, and acting as the counterparty for each trader. This eliminates a great deal of risk for exchange-traded products.

I recommend: Check out BusinessDictionary.com for a definition of an exchange, and several related terms.

Over-the-counter

An over-the-counter product is the opposite of an exchange-traded product. Over-the-counter, or OTC, derivatives are non-standardized and are traded privately, without going through an exchange or other third party. Therefore, counterparty risk is very high in over-the-counter products. Many fixed income derivatives, like mortgage backed securities, are traded over-the-counter.

I recommend: Investopedia provides an excellent discussion of over-the-counter products.

Futures

Many fixed income derivatives are futures. A futures contract allows you to set a price for a particular fixed income security today, for the future purchase or sale of the security. For example, if you own a Treasury bond, you can enter a futures contract to sell the bond at some point in the future, but you set the price today, thereby reducing price risk.

I recommend: Go to Trade Ideas for good information about futures.

Options

Options are available for Treasury securities. An option gives the owner of the option the right to buy or sell the underlying security. An option is distinguished from a futures contract because an option is a right, whereas a futures contract is an obligation. Options can be purchased for the fixed income security itself, or for a futures contract written on the security. Thus, they offer a great deal of flexibility to the owner.

I recommend: Check out TheFreeDictionary.com for a good definition of options.