Derivatives Demystified: A Step-by-Step Guide to Forwards, Futures, Swaps and Options [Pehme köide]

1. The Market Background.
Derivatives 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 Payout.
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 Bonds.
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.

Andrew 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.