The Handbook of Equity Derivatives

by Francis, Jack Clark; Toy, William W.; Whittaker, J. Gregg

• ISBN13: 9780471326038
• ISBN10: 0471326038
• Edition: 1st
• Format: Hardcover
• Copyright: 1999-11-08
• Publisher: Wiley

Summary

"There are so many ways to use derivatives that I'm almost surprised when someone doesn't use them. Producers and consumers, investors and issuers, hedgers and speculators, governments and financial institutions: almost everyone can use them." - From the Foreword by Fischer Black, Cocreator of the Black-Scholes Model Never before has there been so much interest in equity derivatives-or so much innovation in structuring these products. As new forms of instruments proliferate, their complexity has grown as well. Even equity derivatives professionals are unlikely to know all the details about every existing structure. With equity derivatives comprising one of the most important components of the capital markets, it's more crucial than ever for every financial professional, specialist and nonspecialist alike, to understand how derivative instruments behave, how they're structured, and how to use them profitably. Edited by leading thinkers in the field, The Handbook of Equity Derivatives, Revised Edition, assembles dozens of experts from universities and Wall Street to help the reader gain a practical grasp of the growing variety of financial instruments and how they work. Contributions from such respected authorities as Gary Gastineau, Mark Rubinstein, J. Gregg Whittaker, and Fischer Black outline the full range of the equity derivatives market, from classic warrants, options, and futures to the new and innovative PERCs, equity swaps, and equity-linked bonds. In nonmathematical language, the book provides a clear introduction to equity derivatives, including the fundamentals and history of options, basic equity structures, and pricing determinants, along with a historical perspective on their evolution. You'll find thorough surveys of: * The burgeoning field of synthetic structures-OTC options and exotics, equity swaps, SPINs, SIGNs, PENs, MITTs, and SuperShares * U.S. and foreign derivatives traded on organized exchanges * Issuer derivative structures, such as warrants, convertibles, PERCs, and unbundled stock units * The unique tax, legal, accounting, and regulatory features of derivatives * How to make the most profitable use of the many equity derivative products * Why some financial instruments succeed-and others fail * The future of the equity derivative market- place Whether you're a finance student becoming familiar with the field or a practicing professional seeking better ways to exploit the tremendous potential of equity derivatives for profit, The Handbook of Equity Derivatives, Revised Edition belongs on your bookshelf. "I heartily endorse The Handbook of Equity Derivatives . . . while the market is continuously inventing new instruments and discarding older ones, the clarity and straightforward nature of the handbook hints at a longevity that will make it useful for many years to come." - Stephen A. Ross Sterling Professor of Economics and Finance, MIT (on the first edition) The most relied-upon resource on equity derivative instruments, their structure, and diverse global markets- now extensively revised and updated Once, equity derivatives were exotic instruments relegated to the hands of specialists. Today, they are among the institutional investor's most popular tools for managing risk and uncovering new profit opportunities. Recognized for its authoritative contributors and its accessible, comprehensive coverage of the entire field, The Handbook of Equity Derivatives has become the standard reference on the subject for specialist and nonspecialist alike. Now, this essential resource has been carefully updated and revised to cover the most current innovations in these continually evolving investment vehicles, including: * Comprehensive coverage of the all-important OTC market * Basic equity structures and how they work * Pricing determinants * PERCs, SPIDERs, and WEBs

Author Biography

JACK CLARK FRANCIS is Professor of Economics and Finance at Bernard M. Baruch College in New York City and author of several well-known college textbooks. He previously served as a Federal Reserve economist and on the finance faculty of the University of Pennsylvania's Wharton School.<br> <br> WILLIAM W. TOY is a Vice President in the Equity Derivatives Department at Goldman, Sachs & Co. and a codeveloper of the Black-Derman-Toy interest rate options model. He holds a PhD in physics from MIT.<br> <br> GG WHITTAKER is a Managing Director and the global head of Credit Derivatives for Chase Securities in New York City and a former senior vice president of S. G. Warburg, where he headed the Equity-Structured Products Division. He earned a PhD in economics from the University of Wisconsin.

Table of Contents

Foreword	ix
Fischer Black
Preface	xii
About the Contributors	xv
PART 1 INTRODUCTION
Options Fundamentals	3	(31)
Tim Weithers
A Historical Perspective on Equity Derivatives	34	(21)
Joanne M. Hill
Barbara Dunn
PART 2 PRODUCTS TRADED ON ORGANIZED EXCHANGES IN THE UNITED STATES
U.S. Options Exchanges	55	(22)
Joan Junkus
U.S. Stock Index Futures Markets	77	(23)
Todd E. Petzel
Index Participation Units	100	(21)
Eric Kirzner
Exchange-Traded Equity Funds---Genesis, Growth, and Outlook	121	(21)
Gary L. Gastineau
Clifford J. Weber
International Equity Derivatives	142	(25)
Joan Junkus
PART 3 ISSUER DERIVATIVE STRUCTURES
Warrants	167	(17)
Emmett J. Harty
Japanese Warrants	184	(16)
Bernard Sucher
Jonathan Knight
Convertibles	200	(30)
Anand Aithal
Buy-Write Securities	230	(23)
Thomas McManus
Jack Clark Francis
Bernard M. Baruch
The Enigma of Tax-Driven Security Design: The Unbundled Stock Units and Other Experiences	253	(28)
Raaj Sah
Navendu Vasavada
PART 4 SYNTHETIC STRUCTURES
Applications of OTC Options and Other Structured Products	281	(20)
Mark A. Zurack
Americus Trust's Primes and Scores: Precursors to Leaps, Percs, Elks, Yeelds and Chips, and Supertrust	301	(28)
Emmett J. Harty
Public Equity-Linked Debt	329	(14)
William W. Toy
Michael D. Ryan
Equity Swaps: Structures, Uses, and Pricing	343	(25)
John F. Marshall
Robert P. Yuyuenyongwatana
Nikkei 225 Put Warrants	368	(27)
Michael D. Ryan
Robert J. Granovsky
Synthetic Warrants	395	(9)
Timothy Lindberg
Salomon Smith Barney
Supershares	404	(11)
Mark Rubinstein
Structured Equity Derivative Products	415	(18)
J. Gregg Whittaker
Janet Kim
A Practitioner's Guide to Structuring Listed Equity Derivative Securities	433	(32)
John C. Braddock
Benjamin D. Krause
PART 5 ACCOUNTING, TAX, AND REGULATORY ISSUES
Accounting Considerations for Equity Derivatives	465	(32)
Michael S. Joseph
Legal Issues Concerning Equity Derivative Instruments	497	(52)
Paul M. Gottlieb
John D. Gatsos
The U.S. Taxation of Equity Derivative Instruments	549	(60)
Edward D. Kleinbard
Developments in U.S. Derivatives Regulation	609	(22)
Thomas A. Russo
Marlisa Vinciguerra
PART VI SEARCHING FOR MEANINGFUL PATTERNS
Why Financial Instruments Fail or Succeed	631	(20)
Jack Clark Francis
What Lies Ahead?	651	(14)
Gary L. Gastineau
Louis I. Margolis
The Theory of Security Design	665	(24)
Arnoud W.A. Boot
Todd T. Milbourn
Anjuan V. Thakor
Edward J. Frey
Index	689