Derivatives Demystified: A Step-by-Step Guide to Forwards, Futures, Swaps and Options

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John Wiley & Sons, Jun 10, 2010 - Business & Economics - 250 pages
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The book is a step-by-step guide to derivative products. By distilling the complex mathematics and theory that underlie the subject, Chisholm explains derivative products in straightforward terms, focusing on applications and intuitive explanations wherever possible. Case studies and examples of how the products are used to solve real-world problems, as well as an extensive glossary and material on the latest derivative products make this book a must have for anyone working with derivative products.
 

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Contents

SWAPTIONS
EURODOLLAR OPTIONS
EURO AND STERLING INTEREST RATE OPTIONS
BOND OPTIONS
CHAPTER SUMMARY
INTRODUCTION
THE CONCEPT OF EXPECTED PAYOUT
INPUTS TO THE BLACKSCHOLES MODEL

FOREIGN EXCHANGE FORWARDS
MANAGING CURRENCY RISK
HEDGING WITH FX FORWARDS
THE FORWARD FX RATE
FORWARD POINTS
FX SWAPS
APPLICATIONS OF FX SWAPS
CHAPTER SUMMARY
INTRODUCTION
CORPORATE BORROWER
DEALING IN FRAs
FORWARD INTEREST RATES
CHAPTER SUMMARY
INTRODUCTION
COMMODITY FUTURES
BOND FUTURES
THE CHEAPESTTODELIVER
CHAPTER SUMMARY
INTRODUCTION
EQUITY INDEX FUTURES
THE MARGINING SYSTEM
SINGLE STOCK FUTURES
CHAPTER SUMMARY
INTRODUCTION
DOLLAR INTEREST RATE SWAP
SUMMARY OF IRS APPLICATIONS
SWAP RATES AND CREDIT RISK
CROSSCURRENCY SWAPS
CHAPTER SUMMARY
EQUITY SWAPS
OTHER APPLICATIONS OF EQUITY SWAPS
EQUITY INDEX SWAPS
CHAPTER SUMMARY
INTRODUCTION
INTRINSIC AND TIME VALUE
INTRINSIC AND TIME VALUE
CHAPTER SUMMARY
INTRODUCTION
FORWARD HEDGE REVISITED
PROTECTIVE PUT
PAYOFF PROFILE OF PROTECTIVE PUT
EQUITY COLLAR
COLLARS AND FORWARDS
PROTECTIVE PUT WITH BARRIER OPTION
COVERED CALL WRITING BUYWRITE
CHAPTER SUMMARY
INTRODUCTION
UK STOCK OPTIONS ON LIFFE
CALL EXPIRY PAYOFF
USLISTED STOCK OPTIONS
CME OPTIONS ON SP 500INDEX FUTURES
FTSE 100 INDEX OPTIONS
EXPIRY PAYOFF OF FTSE 100 CALL
EXERCISING FTSE 100 INDEX OPTIONS
CHAPTER SUMMARY
INTRODUCTION
CURRENCY OPTIONS AND FORWARDS
RESULTS FROM THE OPTION HEDGE
ZEROCOST COLLAR
REDUCING PREMIUM ON FX HEDGES
COMPOUND OPTIONS
EXCHANGETRADED CURRENCY OPTIONS
FX COVERED CALL WRITING
CHAPTER SUMMARY
INTRODUCTION
OTC INTEREST RATE OPTIONS
CAPS FLOORS AND COLLARS
HISTORICAL VOLATILITY
IMPLIED VOLATILITY
SHARE PRICE SIMULATIONS
VALUE OF A CALL AND PUT OPTION
PRICING CURRENCY OPTIONS
PRICING INTEREST RATE OPTIONS
CHAPTER SUMMARY
INTRODUCTION
DELTA
GAMMA
THETA
VEGA
RHO
SIGNS OF THE GREEKS
CHAPTER SUMMARY
INTRODUCTION
DELTA HEDGING AND GAMMA
PROFIT FROM A SHORT CALL POSITION
CHASING THE DELTA
PRACTICAL CONSTRAINTS ON HEDGING
CHAPTER SUMMARY
INTRODUCTION
BULL SPREAD
BULL POSITION WITH DIGITAL OPTIONS
BEAR SPREAD
PUT OR BEAR RATIO SPREAD
LONG STRADDLE
CHOOSER OPTION
SHORT STRADDLE
MANAGING THE GAMMA RISK
CALENDAR OR TIME SPREAD
CHAPTER SUMMARY
INTRODUCTION
INVESTORS IN CONVERTIBLE BONDS
ISSUERS OF CONVERTIBLE BONDS
CB MEASURES OF VALUE
CONVERSION PREMIUM AND PARITY
OTHER FACTORS AFFECTING CB VALUE
PARTICIPATION RATES
MANDATORILY CONVERTIBLES AND EXCHANGEABLES
STRUCTURING A MANDATORILY EXCHANGEABLE
CHAPTER SUMMARY
INTRODUCTION
CAPITAL PROTECTION EQUITYLINKED NOTES
EXPIRY VALUE OF 100 CAPITAL PROTECTION NOTES
100 PARTICIPATION NOTES
CAPPED PARTICIPATION NOTES
AVERAGE PRICE NOTES
CLIQUET OPTIONS
SECURITIZATION
SYNTHETIC SECURITIZATION
CHAPTER SUMMARY
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 AND FRAs
FORWARD RATES AND INTEREST RATE SWAPS
BLACKSCHOLES OPTION PRICING MODEL
BLACKSCHOLES WITH DIVIDENDS
HISTORICAL VOLATILITY
SOME SUGGESTED READING
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About the author (2010)

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.

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