Derivatives / Wendy L. Pirie, CFA.

Format:

Book

Author/Creator:

Pirie, Wendy L., author.

Series:

CFA Institute Investment

CFA Institute investment series

Language:

English

Subjects (All):

Derivative securities.

Physical Description:

1 online resource (624 pages) : illustrations

Edition:

1st ed.

Place of Publication:

Hoboken, New Jersey : Wiley, 2017.

Summary:

The complete guide to derivatives, from the experts at the CFA Derivatives is the definitive guide to derivatives, derivative markets, and the use of options in risk management. Written by the experts at the CFA Institute, this book provides authoritative reference for students and investment professionals seeking a deeper understanding for more comprehensive portfolio management. General discussion of the types of derivatives and their characteristics gives way to detailed examination of each market and its contracts, including forwards, futures, options, and swaps, followed by a look at credit derivatives markets and their instruments. Included lecture slides help bring this book directly into the classroom, while the companion workbook (sold separately) provides problems and solutions that align with the text and allows students to test their understanding while facilitating deeper internalization of the material. Derivatives have become essential to effective financial risk management, and create synthetic exposure to asset classes. This book builds a conceptual framework for understanding derivative fundamentals, with systematic coverage and detailed explanations. * Understand the different types of derivatives and their characteristics * Delve into the various markets and their associated contracts * Examine the use of derivatives in portfolio management * Learn why derivatives are increasingly fundamental to risk management The CFA Institute is the world's premier association for investment professionals, and the governing body for the CFA, CIPM, and Investment Foundations Programs. Those seeking a deeper understanding of the markets, mechanisms, and use of derivatives will value the level of expertise CFA lends to the discussion, providing a clear, comprehensive resource for students and professionals alike. Whether used alone or in conjunction with the companion workbook, Derivatives offers a complete course in derivatives and their markets.

Contents:

Cover

Title Page

Copyright

Contents

Foreword

Preface

Acknowledgments

About the CFA Institute Investment Series

Chapter 1 Derivative Markets and Instruments

Learning Outcomes

1. Introduction

2. Derivatives: Definitions and Uses

3. The Structure of Derivative Markets

3.1. Exchange-Traded Derivatives Markets

3.2. Over-the-Counter Derivatives Markets

4. Types of Derivatives

4.1. Forward Commitments

4.2. Contingent Claims

4.3. Hybrids

4.4. Derivatives Underlyings

5. The Purposes and Benefits of Derivatives

5.1. Risk Allocation, Transfer, and Management

5.2. Information Discovery

5.3. Operational Advantages

5.4. Market Efficiency

6. Criticisms and Misuses of Derivatives

6.1. Speculation and Gambling

6.2. Destabilization and Systemic Risk

7. Elementary Principles of Derivative Pricing

7.1. Storage

7.2. Arbitrage

8. Summary

Problems

Chapter 2 Basics of Derivative Pricing and Valuation

2. Fundamental Concepts of Derivative Pricing

2.1. Basic Derivative Concepts

2.2. Pricing the Underlying

2.3. The Principle of Arbitrage

2.4. The Concept of Pricing versus Valuation

3. Pricing and Valuation of Forward Commitments

3.1. Pricing and Valuation of Forward Contracts

3.2. Pricing and Valuation of Futures Contracts

3.3. Pricing and Valuation of Swap Contracts

4. Pricing and Valuation of Options

4.1. European Option Pricing

4.2. Binomial Valuation of Options

4.3. American Option Pricing

5. Summary

Chapter 3 Pricing and Valuation of Forward Commitments

2. Principles of Arbitrage-Free Pricing and Valuation of Forward Commitments

3. Pricing and Valuing Forward and Futures Contracts

3.1. Our Notation.

3.2. No-Arbitrage Forward Contracts

3.3. Equity Forward and Futures Contracts

3.4. Interest Rate Forward and Futures Contracts

3.5. Fixed-Income Forward and Futures Contracts

3.6. Currency Forward and Futures Contracts

3.7. Comparing Forward and Futures Contracts

4. Pricing and Valuing Swap Contracts

4.1. Interest Rate Swap Contracts

4.2. Currency Swap Contracts

4.3. Equity Swap Contracts

Chapter 4 Valuation of Contingent Claims

2. Principles of a No-Arbitrage Approach to Valuation

3. Binomial Option Valuation Model

3.1. One-Period Binomial Model

3.2. Two-Period Binomial Model

3.3. Interest Rate Options

3.4. Multiperiod Model

4. Black-Scholes-Merton Option Valuation Model

4.1. Introductory Material

4.2. Assumptions of the BSM Model

4.3. BSM Model

5. Black Option Valuation Model

5.1. European Options on Futures

5.2. Interest Rate Options

5.3. Swaptions

6. Option Greeks and Implied Volatility

6.1. Delta

6.2. Gamma

6.3. Theta

6.4. Vega

6.5. Rho

6.6. Implied Volatility

7. Summary

Chapter 5 Derivatives Strategies

2. Changing Risk Exposures with Swaps, Futures, and Forwards

2.1. Interest Rate Swap/Futures Examples

2.2. Currency Swap/Futures Examples

2.3. Equity Swap/Futures Examples

3. Position Equivalencies

3.1. Synthetic Long Asset

3.2. Synthetic Short Asset

3.3. Synthetic Assets with Futures/Forwards

3.4. Synthetic Put

3.5. Synthetic Call

3.6. Foreign Currency Options

4. Covered Calls and Protective Puts

4.1. Investment Objectives of Covered Calls

4.2. Investment Objective of Protective Puts

4.3. Equivalence to Long Asset/Short Forward Position

4.4. Writing Cash-Secured Puts.

4.5. The Risk of Covered Calls and Protective Puts

4.6. Collars

5. Spreads and Combinations

5.1. Bull Spreads and Bear Spreads

5.2. Calendar Spread

5.3. Straddle

5.4. Consequences of Exercise

6. Investment Objectives and Strategy Selection

6.1. The Necessity of Setting an Objective

6.2. Spectrum of Market Risk

6.3. Analytics of the Breakeven Price

6.4. Applications

Chapter 6 Risk Management

2. Risk Management as a Process

3. Risk Governance

4. Identifying Risks

4.1. Market Risk

4.2. Credit Risk

4.3. Liquidity Risk

4.4 Operational Risk

4.5. Model Risk

4.6. Settlement (Herstatt) Risk

4.7. Regulatory Risk

4.8. Legal/Contract Risk

4.9. Tax Risk

4.10. Accounting Risk

4.11. Sovereign and Political Risks

4.12. Other Risks

5. Measuring Risk

5.1. Measuring Market Risk

5.2. Value at Risk

5.3. The Advantages and Limitations of VaR

5.4. Extensions and Supplements to VaR

5.5. Stress Testing

5.6. Measuring Credit Risk

5.7. Liquidity Risk

5.8. Measuring Nonfinancial Risks

6. Managing Risk

6.1. Managing Market Risk

6.2. Managing Credit Risk

6.3. Performance Evaluation

6.4. Capital Allocation

6.5. Psychological and Behavioral Considerations

References

Chapter 7 Risk Management Applications of Forward and Futures Strategies

2. Strategies and Applications for Managing Interest Rate Risk

2.1. Managing the Interest Rate Risk of a Loan Using an FRA

2.2. Strategies and Applications for Managing Bond Portfolio Risk

3. Strategies and Applications for Managing Equity Market Risk

3.1. Measuring and Managing the Risk of Equities

3.2. Managing the Risk of an Equity Portfolio.

3.3. Creating Equity out of Cash

3.4. Creating Cash out of Equity

4. Asset Allocation with Futures

4.1. Adjusting the Allocation among Asset Classes

4.2. Pre-Investing in an Asset Class

5. Strategies and Applications for Managing Foreign Currency Risk

5.1. Managing the Risk of a Foreign Currency Receipt

5.2. Managing the Risk of a Foreign Currency Payment

5.3. Managing the Risk of a Foreign-Market Asset Portfolio

6. Futures or Forwards?

7. Final Comments

Chapter 8 Risk Management Applications of Option Strategies

2. Option Strategies for Equity Portfolios

2.1. Standard Long and Short Positions

2.2. Risk Management Strategies with Options and the Underlying

2.3. Money Spreads

2.4. Combinations of Calls and Puts

3. Interest Rate Option Strategies

3.1. Using Interest Rate Calls with Borrowing

3.2. Using Interest Rate Puts with Lending

3.3. Using an Interest Rate Cap with a Floating-Rate Loan

3.4. Using an Interest Rate Floor with a Floating-Rate Loan

3.5. Using an Interest Rate Collar with a Floating-Rate Loan

4. Option Portfolio Risk Management Strategies

4.1. Delta Hedging an Option over Time

4.2. Gamma and the Risk of Delta

4.3. Vega and Volatility Risk

5. Final Comments

6. Summary

Chapter 9 Risk Management Applications of Swap Strategies

2.1. Using Interest Rate Swaps to Convert a Floating-Rate Loan to a Fixed-Rate Loan (and Vice Versa)

2.2. Using Swaps to Adjust the Duration of a Fixed-Income Portfolio

2.3. Using Swaps to Create and Manage the Risk of Structured Notes

3. Strategies and Applications for Managing Exchange Rate Risk.

3.1. Converting a Loan in One Currency into a Loan in Another Currency

3.2. Converting Foreign Cash Receipts into Domestic Currency

3.3. Using Currency Swaps to Create and Manage the Risk of a Dual-Currency Bond

4. Strategies and Applications for Managing Equity Market Risk

4.1. Diversifying a Concentrated Portfolio

4.2. Achieving International Diversification

4.3. Changing an Asset Allocation between Stocks and Bonds

4.4. Reducing Insider Exposure

5. Strategies and Applications Using Swaptions

5.1. Using an Interest Rate Swaption in Anticipation of a Future Borrowing

5.2. Using an Interest Rate Swaption to Terminate a Swap

5.3. Synthetically Removing (Adding) a Call Feature in Callable (Noncallable) Debt

5.4. A Note on Forward Swaps

6. Conclusions

Glossary

About the Editors and Authors

Index

EULA.

Notes:

Includes index.

Description based on online resource; title from PDF title page (ebrary, viewed April 19, 2017).

ISBN:

9781119381761

1119381762

OCLC:

980847518