Derivatives Demystified [Paperback]A Step–by–Step Guide to Forwards, Futures, Swaps and Optionsby Andrew M. Chisholm
Usually ships within 2 to 4 working days Description of Derivatives DemystifiedDerivatives are everywhere in the modern world and it is important for everyone in banking, investment and finance to have a good understanding of the subject. Derivatives Demystified provides a step–by–step guide to the subject, enabling the reader to have a solid, working understanding of key derivative products.Adopting a highly accessible approach, the author explains derivative products in straightforward terms and without the complex mathematics that underlie the subject, focusing on practical applications, case studies and examples of how the products are used to solve real–world problems. Derivatives Demystified follows a sequence that is designed to show that, although there are many applications of derivatives, there are only a small number of basic building blocks, namely forwards and futures, swaps and options. The book shows how each building block is applied to different markets and to the solution of various risk management and trading problems. Thoroughly up–to–date, the author includes explanations of later–generation products such as barrier options, cliquets and choosers. There are also sections on credit default and equity swaps and there are full chapters devoted to convertible and exchangeable bonds and to structured products such as equity–linked notes and bonds issued through synthetic securitization. The final chapter has information on the financial calculations that underpin the derivatives market, for those who wish to explore this topic. Derivatives Demystified is essential reading for everyone who operates in the financial markets or within the corporate environment who requires a good understanding of these important financial instruments. Title Information
Write a review of this book Customer Reviews from AmazonAbout Andrew M. ChisholmAndrew M. Chisholm has designed, developed and taught programmes in derivatives and finance since 1984. In that time he has worked with many of the largest financial institutions around the world, teaching corporate financiers, traders, sales and marketing staff, risk managers, analysts, fund managers, operations and technology professionals. He has worked extensively on seminars at senior management level as well as training programmes designed to introduce new graduate and MBA entrants to the securities industry. He was formerly Head of Professional Development for Europe at JP Morgan and is author of An Introduction to Capital Markets published by John Wiley & Sons in 2002.Contents of Derivatives Demystified1. The Market BackgroundDerivatives Building Blocks Market Participants Origins & Development of Derivatives The Modern OTC Derivatives Market Exchange-Traded Futures and Options Chapter Summary 2. Equity & Currency Forwards Introduction The Forward Price Components of the Forward Price Forward Price and Expected Payou Foreign Exchange Forwards Managing Currency Risk Hedging with FX Forwards The Forward FX Rate Forward Points FX Swaps Applications of FX Swaps Chapter Summary 3. Forward Rate Agreements Introduction FRA Application - Corporate Borrower Results of the FRA Hedge FRA Payment Dates & Settlement The FRA as two Payment Legs Dealing in FRAs Forward Interest Rates Chapter Summary 4. Commodity & Bond Futures Introduction Commodity Futures Futures Prices and the Basis Bond Futures Gilt and Euro Bund Futures The Cheapest-to-Deliver (CTD) Chapter Summary 5. Interest Rate & Equity Futures Introduction Interest Rate Futures Trading Interest Rate Futures Hedging with Interest Rate Futures Interest Rate Futures Prices Equity Index Futures The Margining System Single Stock Futures Chapter Summary 6. Interest Rate Swaps Introduction Sterling Interest Rate Swap Hedging with Interest Rate Swaps Dollar Interest Rate Swap Summary of IRS Applications Swap Rates & Credit Risk Cross-Currency Swaps Gains from Cross-Currency Swap Chapter Summary 7. Equity & Credit Default Swaps Equity Swaps Monetizing Corporate Cross-Holdings Other Applications of Equity Swaps Equity Index Swaps Hedging Equity Swaps Credit Default Swaps Credit Default Swap Premium Chapter Summary 8. Fundamentals of Options Introduction Call Value: Intrinsic and Time Value Long Call Expiry Payoff Short Call Expiry Payoff Put Option: Intrinsic and Time Value Long Put Expiry Payoff Short Put Expiry Payoff Chapter Summary 9. Hedging with Options Introduction Forward Hedge Revisited Protective Put Payoff Profile of Protective Put Changing the Put Strike Equity Collar Zero-Cost Equity Collar Collars and Forwards Protective Put with Barrier Option Covered Call Writing (Buy-Write) Chapter Summary 10. Exchange-Traded Equity Options Introduction UK Stock Options on LIFFE Stock Options: Call Expiry Payoff US Listed Stock Options CME Options on S&P Futures FT-SE 100 Index Options Expiry Payoff of FT-SE Call Exercising FT-SE Index Options Chapter Summary 11. Currency Options Introduction Currency Options & Forwards Results from the Option Hedge Zero Cost Collar Reducing Premium on FX Hedges Compound Options Exchange-Traded Currency Options Hedging with Exchange-Traded Options FX Covered Call Writing Chapter Summary 12. Interest Rate Options Introduction OTC Interest Rate Options Hedging with Interest Rate Calls Caps, Floors & Collars Swaptions Eurodollar Options Euro & Sterling Interest Rate Options Bond Options Exchange-Traded Bond Options Bund & Gilt Bond Options Chapter Summary 13. Option Valuation Concepts Introduction The Concept of Expected Payout Inputs to the Black-Scholes Model Historical Volatility Implied Volatility Share Price Simulations Value of a Call & Put Option Pricing Currency Options Pricing Interest Rate Options Chapter Summary 14. Option Sensitivities - the 'Greeks' Introduction Delta Delta Shown Graphically Gamma Gamma and Expiry Theta Vega Rho Signs of the 'Greeks' Chapter Summary 15. Managing Trading Risks on Options Introduction Delta Risk on a Short Call Delta Hedging & Gamma Delta Hedging Shown Graphically Profit from a Short Call Position Chasing the Delta Practical Constraints on Hedging Chapter Summary 16. Option Trading Strategies Introduction Bull Spread Bull Position with Digital Options Bear Spread Put Ratio Spread Long Straddle Chooser Option Short Straddle Managing the Gamma Risk Calendar or Time Spread Chapter Summary 17. Convertible & Exchangeable Bonds Introduction Investors in Convertible Bonds Issuers of Convertible Bondss CB Measures of Value Conversion Premium & Parity Other Factors Affecting CB Value Participation Rates Mandatorily Convertibles & Exchangeables Structuring a Mandatorily Exchangeable Chapter Summary 18. Structured Securities: Examples Introduction Capital Protection Equity-Linked Notes Expiry Value of 100% Capital Protection Note 100% Participation Notes Capped Participation Notes Average Price Notes Locking in Interim Gains - Cliquet Options Securitization Synthetic Securitization Chapter Summary Appendix A: Financial Calculations Time Value of Money Future Value (FV) Annual Equivalent Rate (AER) Present Value (PV) Yield or Return on Investment Term Structure of Interest Rates Calculating Forward Interest Rates Forward Rates & FRAs Forward Rates & Interest Rate Swaps Black-Scholes Option Pricing Model Black-Scholes with Dividends Historical Volatility Appendix B: Glossary of Terms Appendix C: Further Information Index |
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