Beruflich Dokumente
Kultur Dokumente
1 Introduction 1
Learning Objectives 1
1.1 What Are Derivatives? 2
1.2 Derivatives Markets 3
1.3 Forward Contracts 3
1.4 Futures Contracts 4
1.5 Options Contracts 4
1.6 Swap Contracts 5
1.7 Uses of Derivatives 5
1.8 What is Risk? 6
1.8.1 Operating or Business Risk 6
1.8.2 Event Risk 6
1.8.3 Price Risk 6
1.9 R isk Management 7
1.10 A Brief History of Risk Management 8
1.11 Implications for Hedging 8
1.12 Upside and Downside Risks 9
1.13 Commodity Price Risk 9
1.13.1 Volatility 10
1.13.2 Liquidity 10
1.14 Interest Rate Risk 10
1.14.1 Deregulation and Interest Rate as a Tool for Developing
Monetary Policy 10
1.14.2 Floating Rate Loans 11
1.14.3 Interest Rates and Inflation 12
1.14.4 Components of Interest Rate Risk 13
1.15 C urrency Risk 13
1.16 Approaches to Risk Management 15
1.17 R isks in Derivatives Trading 15
Chap ter Summary 16
Multiple-Choice questions 16
R eview Questions 17
SELF-ASSESMENT TEST 18
Case Study 18
eview Questions 59
SELF-ASSESMENT TEST 59
Cas e Study 60
4 Futures Contracts 63
Learning Objectives 63
4.1 What Is a Futures Contract? 64
4.2 Futures Contracts Versus Forward Contracts 64
4.2.1 Negotiability 64
4.2.2 Standardization 65
4.2.3 Liquidity 65
4.2.4 Performance 65
4.2.5 Cash Needs 65
4.2.6 Ability to Reduce Losses 65
4.3 Participants in Futures Markets 66
4.3.1 Hedgers 66
4.3.2 Speculators 67
4.3.3 Arbitragers 68
4.4 Specifications of Futures Contracts 68
4.4.1 The Underlying Asset 68
4.4.2 The Contract Size 69
4.4.3 Delivery Arrangements: Location 69
4.4.4 Delivery Arrangements: Alternative Grade 69
4.4.5 Delivery Month 70
4.4.6 Delivery Notification 70
4.4.7 Daily Price Movement Limits 70
4.4.8 Position Limits 71
4.5 C losing out the Positions 71
4.6 Arbitrage Between the Futures Market and the Spot Market 72
4.7 Performance of Contracts 73
4.8 T he Clearinghouse 73
4.9 Margins and Marking-to-Market 75
4.10 Price Quotes 79
4.11 Settlement Price 81
4.12 Open Interest 81
4.13 T he Pattern of Prices 83
4.14 T he Relation Between Futures Price and Spot Price 83
4.15 Delivery 83
4.16 C ash Settlement 84
4.17 T ypes of Orders 84
4.17.1 Market Orders 84
4.17.2 Limit Orders 84
4.17.3 Stop Orders 84
4.17.4 Stop–Limit Orders 84
4.17.5 Other Orders 84
4.18 How to Trade in Futures? 85
4.19 Pricing of Futures Contracts 86
Chap ter Summary 86
Multiple-Choice questions 87
eview Questions 87
SELF-ASSESMENT TEST 88
Cas e Study 89
6 Swaps 111
Learning Objectives 111
6.1 What are Swaps? 111
6.2 T ypes of Swaps 112
6.3 T erminologies in Swaps 112
6.4 Interest Rate Swaps 113
6.5 Swap Rates 114
6.6 R ationale for Swap Arrangements 114
6.7 Swap with Intermediaries 115
6.8 Forward Swaps 116
6.9 Swaptions 118
6.10 Uses of Interest Rate Swaps 119
6.11 V aluation of Interest Rate Swaps 119
6.12 C urrency Swaps 121
6.12.1 Differences Between an Interest Rate Swap and a Currency Swap 121
6.12.2 Basic Structure of Currency Swaps 121
6.13 C urrency Risk in Currency Swaps 123
6.14 C omparative Advantages of Currency Swaps 123
6.15 Uses of Currency Swaps 124