## Derivatives Demystified: A Step-by-Step Guide to Forwards, Futures, Swaps and OptionsThe 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 | |

### Other editions - View all

Derivatives Demystified: A Step-by-Step Guide to Forwards, Futures, Swaps ... Andrew M. Chisholm No preview available - 2005 |

Derivatives Demystified: A Step-by-step Guide to Forwards, Futures, Swaps ... Andrew Chisholm No preview available - 2004 |

Derivatives Demystified: A Step-by-Step Guide to Forwards, Futures, Swaps ... Andrew M. Chisholm No preview available - 2005 |

### Common terms and phrases

100 million arbitrage bank borrowing buyer call option capital protection cash flows cash market cents Chapter commodity compounding cost coupon credit default swap currency deal dealer delta hedge delta neutral dividends dollars equity index euro Eurodollar example exchange rate exchange-traded exercised expected payout expiry payoff exposure Figure fixed rate floating rate forward contract forward price forward rate forward rate agreements fund futures contract gamma in-the-money index futures initial premium interest rate futures interest rate swap intrinsic value investment investor LIBOR LIBOR rate LIFFE loan long position maturity notional principal option contract out-of-the-money parties payment payoff profile period portfolio present value profit and loss purchased put option re-investing receive risk sell seller short call short position spot price spot rate sterling straddle strategy Suppose swaption Table three months trading transaction Treasury underlying asset underlying share volatility zero