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O C T O B E R 2 5 TH , 2 0 1 0
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Ô Equity
Ô Debt
Ô Structured Products
Ô Securitization
Ô Currency and Commodity
Ô Swaps

Ô Over the Counter derivatives are often used by

Hedge Funds and large institutions

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Ô Preferred Stock
Ô Fixed Dividend
Ô Higher Place in Debt Structure
Ô Less Share Price Movement
Ô Less Volume
Ô Specific Active Large Shareholder
Ô Exotic Options
Ô Knock Out/In
Ô Barrier
Ô Asian ´Average Valueµ
Ô Himalayan ´Variable Payoutµ

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Ô Exchange Traded
Ô Long Calls
Ô Gives you the right to buy a stock at a price ´strikeµ at a set
time in the future
Ô Long Puts
Ô Gives you the right to sell a stock at a price ´strikeµ at a set
time in the future
Ô Time Premium in Options
Ô Option value to
Ô Short Options
Ô Selling options is unlimited to
 
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Ô Interest Rates
Ô Swaps
Ô Fixed for Floating
Ô Floating for Floating
Ô Interest Rate Cap ² Pay a maximum amount of interest for a
set notional amount over life of product
Ô Swaption ² Option that is the exact same product just on
swaps
Ô Right to enter into but not the obligation
Ô Also gets you out of a swap
Ô Interest Rate Futures
Ô Bond Futures, Eurodollars
 
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Ô Mortgage Backed Securities

Ô Pools Home Loans together
Ô Splits it into tranches that investors can purchase
Ô Commercial, Residential, Student Loans, Automotive, etc.
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Ô Collateralized Debt Obligation

Ô MBS of an MBS
Ô CDO Squared
Ô CDO of a CDO
Ô Credit Linked Notes
Ô CDS as a structured product with collateral
Ô Synthetic Collateralized Debt Obligation
Ô Bespoke Products
Ô Difficult to price, maintain quotes
  

Ô Credit Default Swaps

Ô Insurance Policy on a debt offering.
Ô Buyer of protection pays a premium
Ô Seller of protection receives premium.
Ô Credit Event causes seller to pay par for reference entity
Ô Variance
Ô Basic Volatility Play, Implied Volatility is higher than realized
Ô Correlation
Ô Implied correlation is also higher than realized
Ô Dividend
Ô More common in Europe
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Ô www.markit.com
Ô www.eurex.com
Ô Check out Scribd.com
Ô Financial Engineering
Ô http://www.global-
derivatives.com/index.php/pricing-models-
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Ô Send us an email at thetradinpitt@gmail.com or me

at steve.mcmannis@gmail.com
Ô Check out the website
http://www.pitt.edu/~sorc/trade/

Ô Trading Pitt Logo?

Ô Interested in Opportunities?