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What is included with this book?
Acknowledgements | |
The Origins and Growth of the Market | |
Definitions | |
Derivatives Building Blocks | |
Market Participants | |
Supporting Organizations | |
Early Origins of Derivatives | |
Derivatives in the USA | |
Overseas Developments, Innovation and Expansion | |
An Example of Recent Innovation: Weather Derivatives | |
Temperature-Linked Derivatives | |
The Wild Beast of Finance? | |
Lessons from Recent History | |
Creative Destruction and Contagion Effects | |
The Modern OTC Derivatives Market | |
The Exchange-Traded Derivatives Market | |
Chapter Summary | |
Equity and Currency Forwards | |
Introduction | |
Equity Forward Contract | |
The Forward Price | |
The Forward Price and Arbitrage Opportunities | |
The Forward Price and the Expected Payout | |
Foreign Exchange Forwards | |
Managing Currency Risk | |
Hedging with an Outright Forward FX Deal | |
The Forward Foreign Exchange Rate | |
The Forward FX Rate and Arbitrage Opportunities | |
Forward Points | |
FX Swaps | |
Applications of FX Swaps | |
Chapter Summary | |
Forward Rate Agreements | |
Introduction | |
FRA Case Study: Corporate Borrower | |
Results of the FRA Hedge | |
The FRA as Two Payment Legs | |
Dealing in FRAs | |
Forward Interest Rates | |
Chapter Summary | |
Commodity and Bond Futures | |
Introduction | |
The Margining System and the Clearing House | |
Users of Futures Contracts | |
Commodity Futures | |
Futures Prices and the Basis | |
US Treasury Bond Futures | |
US Treasury Bond Futures: Delivery Procedures | |
Gilt and Euro-Bund Futures | |
The Cheapest-to-Deliver (CTD) Bond | |
Chapter Summary | |
Interest Rate and Equity Futures | |
Introduction | |
Eurodollar Futures | |
Trading Eurodollar Futures | |
Hedging with Interest Rate Futures | |
Interest Rate Futures Prices | |
Equity Index Futures | |
Applications of S&P 500 Index Futures | |
FT-SE 100 Index Futures Contracts | |
Establishing Net Profits and Losses | |
Single Stock Futures (SSFs) | |
Chapter Summary | |
Interest Rate Swaps | |
Introduction | |
Interest Rate Swap Structure | |
Basic Single-Currency Interest Rate Swap | |
The Swap as a Package of Spot and Forward Deals | |
Rationale for the Swap Deal | |
Swap Terminology and Swap Spreads | |
Typical Swap Applications | |
Interest Rate Swap Variants | |
Cross-Currency Interest Rate Swaps | |
Net Borrowing Costs using a Cross-Currency Swap | |
Inflation Swaps | |
Chapter Summary | |
Equity and Credit Default Swaps | |
Introduction to Equity Swaps | |
Equity Swap Case Study | |
Other Applications of Equity Swaps | |
Equity Index Swaps | |
Hedging an Equity Index Swap | |
Credit Default Swaps | |
Credit Default Swap: Basic Structure | |
Credit Default Swap Applications | |
Credit Spreads | |
The CDS Premium and the Credit Spread | |
Pricing Models for CDS Premium | |
Index Credit Default Swaps | |
Basket Credit Default Swaps | |
Chapter Summary | |
Fundamentals of Options | |
Introduction | |
Definitions | |
Types of Options | |
Basic Option Trading Strategies | |
Long Call: Expiry Payoff Profile | |
Short Call: Expiry Payoff Profile | |
Long Put: Expiry Payoff Profile | |
Short Put: Expiry Payoff Profile | |
Summary: Intrinsic and Time Value | |
Hedging with Options | |
Chapter Overview | |
Futures Hedge Revisited | |
Protective Put | |
Hedging with ATM Put Option | |
Covered Call Writing | |
Equity Collar | |
Zero-Cost Equity Collar | |
Protective Put with a Barrier Option | |
Behaviour of Barrier Options | |
Chapter Summary | |
Exchange-Traded Equity Options | |
Introduction | |
Basic Concepts | |
CBOE Stock Options | |
UK Stock Options on NYSE Liffe | |
CME S&P 500 Index Options | |
FT-SE 100 Index Options | |
Chapter Summary | |
Currency or FX Options | |
Introduction | |
Users of Currency Options | |
Hedging FX Exposures with Options: Case Study | |
Graph Of Hedged And Unhedged Positions | |
Hedging with a Zero-Cost Collar | |
Reducing Premium on FX Hedges | |
Compound Options | |
Exchange-Traded Currency Options | |
Chapter Summary | |
Interest Rate Options | |
Introduction | |
OTC Interest Rate Options | |
OTC Interest Rate Option Case Study | |
Hedging a Loan with a Caplet | |
Interest Rate Cap | |
Interest Rate Collar | |
Interest Rate Swap and Swaption | |
Summary of Interest Rate Hedging Strategies | |
Eurodollar Options | |
Euro and Sterling Interest Rate Options | |
Bond Options | |
Exchange-Traded Bond Options | |
Chapter Summary | |
Option Valuation Concepts (1) | |
Introduction | |
The Concept of a Riskless Hedge | |
A Simple Option Pricing Model | |
Option Fair Value | |
Extending the Binomial Model | |
Cost of Dynamic Hedging | |
The Black-Scholes Option Pricing Model | |
Historical Volatility | |
Measuring and Using Volatility | |
Chapter Summary | |
Option Valuation Concepts (2) | |
Introduction | |
Problems with Historical Volatility | |
Implied Volatility | |
Black-Scholes Model Assumptions | |
Value of a Call Option | |
Value of a Put Option | |
Equity Index and Currency Options | |
Pricing Interest Rate Options | |
Chapter Summary | |
Option Sensitivities: The 'Greeks' | |
Introduction | |
Delta (¿ or ¿) | |
Delta Behaviour | |
Delta as the Hedge Ratio | |
The Effects of Changes in Delta | |
Readjusting the Delta Hedge | |
Gamma (¿ or ¿) | |
Gamma and the Spot Price of the Underlying | |
Gamma and Time to Expiry | |
Theta (¿) | |
Vega or Kappa (¿) | |
Rho (¿) | |
Summary of Greeks | |
Chapter Summary | |
Option Trading Strategies (1) | |
Introduction | |
Bull Spread | |
Bull Position with Digital Options | |
Spot Price and CON Value | |
Bear Spread | |
The Greeks for the Bear Spread | |
Put or Bear Ratio Spread | |
Long Straddle | |
Long Straddle Current Payoff Profile | |
Potential Risks with a Long Straddle | |
Chapter Summary | |
Option Trading Strategies (2) | |
Introduction | |
Chooser Option | |
Short Straddle | |
Short Straddle Current Payoff Profile | |
Potential Profits with a Short Straddle | |
Managing the Risk on a Short Straddle | |
Short Strangle | |
New Ways of Trading Volatility | |
Calendar or Time Spread | |
Chapter Summary | |
Convertible and Exchangeable Bonds | |
Introduction | |
Investors in Convertible Bonds | |
Issuers of Convertible Bonds | |
CB Measures of Value | |
Conversion Premium and Parity | |
Other Factors Affecting CB Values | |
Convertible Arbitrage | |
Convertible Arbitrage Example | |
Profits and Risks with the CB Arbitrage Trade | |
Mandatorily Convertibles and Exchangeables | |
Structuring a Mandatorily Exchangeable (ME) Bond | |
Chapter Summary | |
Structured Securities | |
Introduction | |
Capital Protection Equity-Linked Notes | |
Expiry Value of 100% Capital Protection Notes | |
100% Participation Equity-Linked Notes | |
Capped Participation Equity-Linked Notes | |
Average Price Notes | |
Locking in Interim Gains: Cliquet Options | |
Securitization and CDOs | |
The Basic CDO Structure | |
Rationale for Securitization | |
Synthetic CDOs | |
Chapter Summary | |
Clearing, Settlement and Operational Risk | |
Introduction | |
Risk Management in General | |
Settlement of Exchange-Traded Derivatives | |
Major Clearing Houses | |
Confirmation and Settlement of OTC Deals | |
Controlling Counterparty Risk on OTC Derivatives | |
Operational Risk | |
Best Practice in Operational Risk Management | |
Chapter Summary | |
Financial Calculations | |
Exotic Options | |
Glossary of Terms | |
Index | |
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