Mastering Derivatives Markets 3e A step-by-step guide to the products, applications and risks

by Taylor, Francesca

• ISBN13: 9780273709787
• ISBN10: 027370978X
• Edition: 3rd
• Format: Paperback
• Copyright: 2007-06-20
• Publisher: FT Press

Summary

Mastering Derivatives Markets is the most widely read book on the general derivatives market, and is read by everyone from bankers and brokers to journalists. The latest edition once again offers a comprehensive overview of everything a professional investor needs to know regarding the derivative process and its instruments. These include recent derivative changes, and explanations into options, swaps and futures across the key asset classes of rates, currency, equity, commodity and credit. In support of this, it also covers newer and more complex tools such as credit derivatives, and answers the following questions: bull; What happens after the deal is done? bull; What is benchmarking? bull; How does STP work in this market? bull; What are electronic templates? bull; How is technology evolving? bull; How do the new accounting regulations work, IAS 39, FASB 133? bull; How will MiFID affect what we do? This book is your passport to derivative success. Don't enter the market without it.

Author Biography

Francesca Taylor is the principle of Taylor Associates, one of the City’s leading financial training companies, specialising in derivatives, capital markets, risk and treasury training.

Table of Contents

Author's acknowledgements

Publisher's acknowledgements

Foreword

Contributors

Background and development of the derivatives markets

Introduction

Definition and key features

Uses of derivatives

Range of derivatives

Increasing use of the Central Counterparty Model (CCP)

Risk and benchmarking

Market volumes

Users and uses of derivatives

Straight Through Processing (STP)

Market fundamentals

Introduction

How banks generate income

Three key assumptions

Role and use of LIBOR

Day counts

Financial maths

Calculating forward rates

Marking to market

Yield curves

Quiz

Derivatives fundamentals

Range of derivatives

What is a vanilla trade?

Settlement

Triggers

Liquidity and credit risk

Understanding the underlying

Benchmarks

Fair value

Dealing with derivatives

Basic option concepts

Introduction

Option pricing

Option mechanics

Interest rate derivatives - single settlement instruments

Background and development

Single settlement interest rate derivatives

Financial futures contracts

Forward rate agreements (FRAs)

Interest rate options (IROs)

Premium determinantsQuiz

Interest rate derivatives

Introduction

Interest rate caps and floors

Interest rate collars

Interest rate swapsQuiz

Benchmarking in the OTC derivatives markets

Financial benchmarking for derivatives

Operational risk measurements for derivatives

Markit Annual Scorecard

Conclusion

Credit derivatives

Introduction

What is credit risk?

Style of trading

Default data

The first deals

Range of credit derivatives

Credit default swaps

Total return swaps

Beyond a vanilla CDS

Introduction

Credit indices

CDOs

Where next?

Currency derivatives

Introduction

Over the counter currency options

Currency options: reduced premium strategies

Simple exotic structures

Currency swaps

Exchange-traded instruments

ConclusionQuiz

Equity derivatives

Introduction

Background

Single stocks or equity indices?

Stock index futures

Stock index options

Single stock options

Equity index swaps

Using equity derivatives in investment products

Equity investment

The development of the UK and European markets for equity-based retail products

Constructing a capital protected growth product with equity derivatives

Income paying capital-at-risk products

Calculation of income level

The risk to capital

The most common structural variations used in the equity derivative market

Commodity derivatives

Introduction

Exchange-traded energy derivatives

Exchange-tr

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