Derivatives and Risk Management

Derivatives and Risk Management

by Sundaram Janakiramanan
Released February 2011
Publisher(s): Pearson India
ISBN: 9788131755143

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Book description

Derivatives and Risk Management provides readers with a thorough knowledge of the functions of derivatives and the many risks associated with their use. Besides discussing the particular derivative instruments available in India, the book concentrates on four types of derivatives—forward contracts, futures contracts, swap contracts and options contracts. It is targeted at postgraduate students of commerce, finance and management, and blends theory, problems and cases to introduce the basic concepts in a lucid, engaging manner. It will also be of use to fund managers, risk-management specialists, treasury managers, students taking the CFA examinations and anyone who wants to understand the derivatives market in India.

Table of contents

  1. Cover
  2. Title Page
  3. Contents
  4. About the Author
  5. Dedication
  6. Preface
  7. 1 - Introduction
    1. Learning Objectives
    2. 1.1 - What are Derivatives?
    3. 1.2 - Derivatives Markets
    4. 1.3 - Forward Contracts
    5. 1.4 - Futures Contracts
    6. 1.5 - Options Contracts
    7. 1.6 - Swap Contracts
    8. 1.7 - Uses of Derivatives
    9. 1.8 - What is Risk?
      1. 1.8.1 - Operating or Business Risk
      2. 1.8.2 - Event Risk
      3. 1.8.3 - Price Risk
    10. 1.9 - Risk Management
    11. 1.10 - A Brief History of Risk Management
    12. 1.11 - Implications for Hedging
    13. 1.12 - Upside and Downside Risks
    14. 1.13 - Commodity Price Risk
      1. 1.13.1 - Volatility
      2. 1.13.2 - Liquidity
    15. 1.14 - Interest Rate Risk
      1. 1.14.1 - Deregulation and Interest Rate as a Tool for Developing Monetary Policy
      2. 1.14.2 - Floating Rate Loans
      3. 1.14.3 - Interest Rates and Inflation
      4. 1.14.4 - Components of Interest Rate Risk
    16. 1.15 - Currency Risk
    17. 1.16 - Approaches to Risk Management
    18. 1.17 - Risks in Derivatives Trading
      1. Chapter Summary
      2. Review Questions
      3. Problems
      4. Case Study
  8. 2 - The Derivatives Market in India
    1. Learning Objectives
    2. 2.1 - The International Derivatives Market
    3. 2.2 - Derivatives in India
    4. 2.3 - Operations of Derivatives Exchanges
    5. 2.4 - The Trading System
      1. 2.4.1 - Types of Orders
      2. 2.4.2 - Order-matching Rules
      3. 2.4.3 - Order Conditions
    6. 2.5 - The Clearing and Settlement System
      1. 2.5.1 - The Members of the Clearing House
      2. 2.5.2 - The Clearing Mechanism
      3. 2.5.3 - Margin and Margin Accounts
      4. 2.5.4 - The Settlement System
      5. 2.5.5 - Risk Management
    7. 2.6 - The Trading Process
    8. 2.7 - Online Trading
    9. 2.8 - The OTC Derivatives Market
    10. 2.9 - The Regulation of Derivatives Trading in India
      1. Chapter Summary
      2. Review Questions
      3. Exhibit 2.1
  9. 3 - Interest Rates
    1. Learning Objectives
    2. 3.1 - What is Interest Rate?
    3. 3.2 - Simple and Compound Interest Rates
    4. 3.3 - Future Value and Present Value
      1. 3.3.1 - Present Value
    5. 3.4 - Effective Interest Rates for Different Compounding Periods
      1. 3.4.1 - Present Value for Different Compounding Periods
      2. 3.4.2 - Relation between Rate under Continuous Compounding and Rate under Compounding for m Periods
    6. 3.5 - Risk-free Interest Rate
      1. 3.5.1 - Interest Rate Risk
      2. 3.5.2 - Default Risk
      3. 3.5.3 - Call Risk
      4. 3.5.4 - Liquidity Risk
    7. 3.6 - Risk-free Rates
      1. 3.6.1 - Government Security
      2. 3.6.2 - Interbank Rates
      3. 3.6.3 - Repurchase Agreement Rate (Repo Rate)
    8. 3.7 - Interest Rate Risk and Forward Rates
    9. 3.8 - Term Structure of Interest Rates
      1. 3.8.1 - Implied Forward Rates
      2. 3.8.2 - Why Implied Forward Rates?
      3. 3.8.3 - Calculating Implied Forward Rate from Coupon Bonds
      4. Chapter Summary
      5. Review Questions
      6. Problems
      7. Case Study
  10. 4 - Forward Contracts
    1. Learning Objectives
    2. 4.1 - What is a Forward Contract?
    3. 4.2 - The Purpose of Forward Contracts
    4. 4.3 - Advantages of Forward Contracts
    5. 4.4 - Problems with Forward Contracts
      1. 4.4.1 - Parties with Matching Needs
      2. 4.4.2 - Non-performance
      3. 4.4.3 - Non-transferability
    6. 4.5 - The Pricing of Commodity Forward Contracts
    7. 4.6 - Currency Forward Contracts
      1. 4.6.1 - The Operation of the Currency Forward Market
      2. 4.6.2 - Characteristics of Currency Forward Contracts
      3. 4.6.3 - The Pricing of Currency Forward Contracts
      4. 4.6.4 - Covered Interest Arbitrage
      5. 4.6.5 - Rolling over Currency Forward Contracts
    8. 4.7 - Interest Rate Forwards
      1. 4.7.1 - Mechanics of FRAs
      2. 4.7.2 - The FRA Payment Amount
      3. 4.7.3 - An Alternative View of an FRA and the Settlement Amount
      4. 4.7.4 - Uses of FRAs
    9. 4.8 - Non-deliverable Forwards
      1. Chapter Summary
      2. Review Questions
      3. Problems
      4. Case Study
  11. 5 - Futures Contracts
    1. Learning Objectives
    2. 5.1 - What is a Futures Contract?
    3. 5.2 - Futures Contracts Versus Forward Contracts
      1. 5.2.1 - Negotiability
      2. 5.2.2 - Standardization
      3. 5.2.3 - Liquidity
      4. 5.2.4 - Performance
      5. 5.2.5 - Cash Needs
      6. 5.2.6 - Ability to Reduce Losses
    4. 5.3 - Participants in Futures Markets
      1. 5.3.1 - Hedgers
      2. 5.3.2 - Speculators
      3. 5.3.3 - Arbitragers
    5. 5.4 - Specifications of Futures Contracts
      1. 5.4.1 - The Underlying Asset
      2. 5.4.2 - The Contract Size
      3. 5.4.3 - Delivery Arrangements: Location
      4. 5.4.4 - Delivery Arrangements: Alternative Grade
      5. 5.4.5 - Delivery Month
      6. 5.4.6 - Delivery Notification
      7. 5.4.7 - Daily Price Movement Limits
      8. 5.4.8 - Position Limits
    6. 5.5 - Closing out the Positions
    7. 5.6 - Arbitrage between the Futures Market and the Spot Market
    8. 5.7 - Performance of Contracts
    9. 5.8 - The Clearinghouse
    10. 5.9 - Margins and Marking-to-Market
    11. 5.10 - Price Quotes
    12. 5.11 - Settlement Price
    13. 5.12 - Open Interest
    14. 5.13 - The Pattern of Prices
    15. 5.14 - The Relation between Futures Price and Spot Price
    16. 5.15 - Delivery
    17. 5.16 - Cash Settlement
    18. 5.17 - Types of Orders
      1. 5.17.1 - Market Orders
      2. 5.17.2 - Limit Orders
      3. 5.17.3 - Stop Orders
      4. 5.17.4 - Stop–Limit Orders
      5. 5.17.5 - Other Orders
    19. 5.18 - How to Trade in Futures?
    20. 5.19 - Pricing of Futures Contracts
      1. Chapter Summary
      2. Review Questions
      3. Problems
      4. Case Study
  12. 6 - Hedging Strategies Using Futures
    1. Learning Objectives
    2. 6.1 - The Principles of Hedging
    3. 6.2 - Long Hedges
    4. 6.3 - Short Hedges
    5. 6.4 - Should Hedging be Undertaken?
    6. 6.5 - Risks in Hedging
    7. 6.6 - Basis Risk
    8. 6.7 - Factors Affecting Basis Risk
    9. 6.8 - The Hedge Ratio
    10. 6.9 - Static and Dynamic Hedging
    11. 6.10 - Strip Hedges and Stack Rolling Hedges
    12. 6.11 - Losses from Hedging Using Futures
      1. Chapter Summary
      2. Review Questions
      3. Problems
      4. Case Study
  13. 7 - Single Stock Futures and Stock Index Futures
    1. Learning Objectives
    2. 7.1 - Single Stock Futures
    3. 7.2 - What is a Stock Futures Contract?
    4. 7.3 - Hedging Using Single Stock Futures
      1. 7.3.1 - What Type of Hedging is Appropriate?
      2. 7.3.2 - Which Instrument to Use?
      3. 7.3.3 - How Many Contracts to Use?
      4. 7.3.4 - When to Take an Open Position?
      5. 7.3.5 - When to Close the Position?
      6. 7.3.6 - Risks in Hedging Using Single Stock Futures
    5. 7.4 - Speculation Using Stock Futures
    6. 7.5 - Pricing of Single Stock Futures Contracts
    7. 7.6 - Single Stock Futures and Arbitrage
    8. 7.7 - Using Stock Futures for Insurance Purposes
    9. 7.8 - Using Stock Futures for Investment Purposes
    10. 7.9 - Stock Indexes
    11. 7.10 - Stock Index Futures
    12. 7.11 - Stock Index Futures Contracts Traded on the BSE and the NSE
    13. 7.12 - How do Index Futures Work?
    14. 7.13 - Pricing of Index Futures Contracts
    15. 7.14 - Speculation Using Index Futures
    16. 7.15 - Portfolio Insurance Using Index Futures
    17. 7.16 - Index Arbitrage
    18. 7.17 - Program Trading
    19. 7.18 - Hedging the Value of a Portfolio of Shares Using Index Futures
    20. 7.19 - Adjusting Equity Portfolio Beta Using Index Futures
    21. 7.20 - Issues in Using Index Futures
      1. Chapter Summary
      2. Review Questions
      3. Problems
      4. Case Study
  14. 8 - Interest Rate Futures
    1. Learning Objectives
    2. 8.1 - The Impact of Interest Rate Risk and the Need for Hedging
    3. 8.2 - Interest Rate Futures in India
    4. 8.3 - Contract Specification
    5. 8.4 - Conversion Factor
    6. 8.5 - Cheapest-to-deliver Bonds
    7. 8.6 - The Pricing of Bond Futures
    8. 8.7 - Uses of Long-term Interest Rate Futures
      1. 8.7.1 - Directional Trading
      2. 8.7.2 - Arbitrage
      3. 8.7.3 - Calendar-spread Trading
      4. 8.7.4 - Hedging
      5. 8.7.5 - Fixed Income Portfolio Management
      6. 8.7.6 - Changing a Fixed Income Loan to a Floating-rate Loan
    9. 8.8 - Short-term Interest Rate Futures
    10. 8.9 - Pricing of T-bill Futures Contracts
    11. 8.10 - Hedging Using Bill Futures Contracts
    12. 8.11 - Uses of Short-term Interest Rate Futures Contracts
      1. 8.11.1 - Hedging Borrowing Costs
      2. 8.11.2 - Hedging an Investment Yield
      3. 8.11.3 - Hedging a Floating-rate Loan or Strip Hedging
      4. 8.11.4 - Directional Trades
      5. 8.11.5 - Spread Trades
      6. 8.11.6 - Arbitrage Transactions
      7. 8.11.7 - Adjusting the Duration of the Portfolio
      8. 8.11.8 - Cross-hedging
    13. 8.12 - Cautions in Using Interest Rate Futures
      1. Chapter Summary
      2. Review Questions
      3. Problems
      4. Case Study
  15. 9 - Currency Futures
    1. Learning Objectives
    2. 9.1 - What are Currency Futures?
    3. 9.2 - The Specifications of Exchange-traded Currency Futures Contracts
    4. 9.3 - The Pricing of Currency Futures
    5. 9.4 - Hedging with Currency Futures
    6. 9.5 - Basis Risk While Using Currency Futures
    7. 9.6 - Speculation Using Currency Futures
    8. 9.7 - Arbitraging with Currency Futures Contracts
      1. Chapter Summary
      2. Review Questions
      3. Problems
      4. Case Study
  16. 10 - Swaps
    1. Learning Objectives
    2. 10.1 - What are Swaps?
    3. 10.2 - Types of Swaps
    4. 10.3 - Terminologies in Swaps
    5. 10.4 - Interest Rate Swaps
    6. 10.5 - Swap Rates
    7. 10.6 - Rationale for Swap Arrangements
    8. 10.7 - Swap with Intermediaries
    9. 10.8 - Forward Swaps
    10. 10.9 - Swaptions
    11. 10.10 - Uses of Interest Rate Swaps
    12. 10.11 - Valuation of Interest Rate Swaps
    13. 10.12 - Currency Swaps
      1. 10.12.1 - Differences between an Interest Rate Swap and a Currency Swap
      2. 10.12.2 - Basic Structure of Currency Swaps
    14. 10.13 - Currency Risk in Currency Swaps
    15. 10.14 - Comparative Advantages of Currency Swaps
    16. 10.15 - Uses of Currency Swaps
    17. 10.16 - The Valuation of a Currency Swap
    18. 10.17 - Equity Swaps
    19. 10.18 - The Valuation of an Equity Swap
    20. 10.19 - Commodity Swaps
    21. 10.20 - Risks While Entering into Interest Rate Swaps
      1. Chapter Summary
      2. Review Questions
      3. Problems
      4. Case Study
  17. 11 - Fundamentals of Options
    1. Learning Objectives
    2. 11.1 - Options Issued by Corporations
      1. 11.1.1 - Warrants
      2. 11.1.2 - Employee Stock Options
      3. 11.1.3 - Convertible Bonds
      4. 11.1.4 - Callable Bonds
      5. 11.1.5 - Put Bonds
      6. 11.1.6 - Rights
    3. 11.2 - Options Contracts between Private Parties
    4. 11.3 - Exchange-traded Options
    5. 11.4 - Options Contracts: An Example
    6. 11.5 - What is an Options Contract?
    7. 11.6 - Options Terminologies
      1. 11.6.1 - The Underlying Asset
      2. 11.6.2 - Call and Put Options
      3. 11.6.3 - The Option Premium
      4. 11.6.4 - Exercising Options
      5. 11.6.5 - The Exercise Price or the Strike Price
      6. 11.6.6 - The Exercise Date or the Strike Date
      7. 11.6.7 - American and European Options
      8. 11.6.8 - Buyers and Writers of Options
      9. 11.6.9 - The Contract Size
      10. 11.6.10 - In-the-money, At-the-money and Out-of-money Options
    8. 11.7 - Exchange-traded and OTC Options: A Comparison
      1. 11.7.1 - Guarantee of Performance in Exchange-traded Options
      2. 11.7.2 - Margin Requirements
      3. 11.7.3 - Margin Calculation
      4. 11.7.4 - Standardization of Contracts
      5. 11.7.5 - Exercise Dates
      6. 11.7.6 - Exercise Prices
      7. 11.7.7 - Options Classes and Options Series
    9. 11.8 - Trading of Options
      1. 11.8.1 - Types of Orders
      2. 11.8.2 - Offsetting Orders
    10. 11.9 - Price Quotes
    11. 11.10 - Protection Against Corporate Actions
      1. Chapter Summary
      2. Review Questions
      3. Problems
      4. Case Study
  18. 12 - Call and Put Options
    1. Learning Objectives
    2. 12.1 - What are Call Options?
    3. 12.2 - The Terminal Value of a Call Option
    4. 12.3 - Gains and Losses from Purchasing Call Options
    5. 12.4 - Value of a Call Option Before Maturity
    6. 12.5 - Minimum and Maximum Values of a Call
    7. 12.6 - When to Exercise an American Call Option
    8. 12.7 - From a Call Option Writer's Point of View
      1. 12.7.1 - The Terminal Value of a Written Call
      2. 12.7.2 - Gains and Losses for a Call Writer
    9. 12.8 - Comparison between the Gains Made by a Call Buyer and a Call Writer
    10. 12.9 - When to Buy and When to Write a Call Option?
    11. 12.10 - Put Options
      1. 12.10.1 - What are Put Options?
      2. 12.10.2 - Rationale for Put Options
    12. 12.11 - The Terminal Value of a Put Option
    13. 12.12 - Gains and Losses from Purchasing Put Options
    14. 12.13 - Value of a Put Option Before Maturity
    15. 12.14 - Minimum and Maximum Values of Put
    16. 12.15 - When to Exercise a Put Option
    17. 12.16 - From a Put Option Writer's Point of View
      1. 12.16.1 - The Terminal Value of a Written Put
      2. 12.16.2 - Gains and Losses for a Put Writer
    18. 12.17 - Comparison between the Gains Made by a Put Buyer and a Put Writer
    19. 12.18 - When to Buy and When to Write a Put Option
    20. 12.19 - Comparison between Calls and Puts
      1. Chapter Summary
      2. Review Questions
      3. Problems
      4. Case Study
  19. 13 - Combinations of Options: Trading Strategies
    1. Learning Objectives
    2. 13.1 - Naked or Uncovered Positions
      1. 13.1.1 - Naked Long Stock Positions
      2. 13.1.2 - Naked Short Stock Positions
      3. 13.1.3 - Naked Bought Calls
      4. 13.1.4 - Naked Written Calls
      5. 13.1.5 - Naked Bought Puts
      6. 13.1.6 - Naked Written Puts
    3. 13.2 - Hedge or Covered Positions
      1. 13.2.1 - Covered Call Writing
      2. 13.2.2 - Reverse Hedges
      3. 13.2.3 - Protective Puts
      4. 13.2.4 - Short Stocks and Short Puts
      5. 13.2.5 - Partial Hedges
      6. 13.2.6 - Summary of Hedged Positions
    4. 13.3 - Spread Positions
      1. 13.3.1 - Money Spread Using Calls
      2. 13.3.2 - Money Spreads Using Puts
      3. 13.3.3 - Box Spreads
      4. 13.3.4 - Butterfly Spreads
      5. 13.3.5 - Calendar Spreads
      6. 13.3.6 - Iron Condor Spreads
    5. 13.4 - Combinations of Puts and Calls
      1. 13.4.1 - Straddles
      2. 13.4.2 - Strips
      3. 13.4.3 - Straps
      4. 13.4.4 - Strangles
      5. 13.4.5 - Other Pay-offs
    6. 13.5 - Losses from Options Trading
      1. Chapter Summary
      2. Review Questions
      3. Problems
      4. Case Study
  20. 14 - Put–Call Parity
    1. Learning Objectives
    2. 14.1 - Risk-free Security
    3. 14.2 - Strategies Using Options, a Risk-free Security and Underlying Assets
      1. 14.2.1 - Combination of Call Options and Risk-free Securities
      2. 14.2.2 - Combination of Long Stocks and Long Puts
    4. 14.3 - The Put–Call Relationship
    5. 14.4 - Put–Call Arbitrage
    6. 14.5 - Creation of Synthetic Securities
      1. 14.5.1 - Creation of Synthetic Puts
      2. 14.5.2 - The Written Put Strategy
      3. 14.5.3 - The Bought Call Strategy
      4. 14.5.4 - The Written Call Strategy
      5. 14.5.5 - The Strategy of Investing at a Risk-free Rate
      6. 14.5.6 - The Strategy for Borrowing at a Risk-free Rate
      7. 14.5.7 - Cautions in Creating Synthetic Positions
    7. 14.6 - Put–Call Parity for Dividend-paying Stocks: European Options
    8. 14.7 - Put–Call Parity for American Options
      1. 14.7.1 - Early Exercise of American Call Options: Non-dividend-paying Stock
      2. 14.7.2 - Early Exercise of Call Options: Dividend-paying Stock
      3. 14.7.3 - Early Exercise of Put Options: Non-dividend-paying Stock
      4. 14.7.4 - Put–Call Parity for American Options When Dividends are Not Paid
      5. 14.7.5 - Put–Call Parity for American Options When Dividends are Paid
    9. 14.8 - Implications of Put–Call Parity
    10. 14.9 - Put–Call Parity and Regulatory Arbitrage
      1. Chapter Summary
      2. Review Questions
      3. Problems
      4. Case Study
  21. 15 - The Binomial Options Pricing Model
    1. Learning Objectives
    2. 15.1 - The Binomial Options Pricing Model for Call Options
    3. 15.2 - The Binomial Options Pricing Model for Put Options
    4. 15.3 - The Relation between the Hedge Ratios for Call and Put Options
    5. 15.4 - The No-arbitrage Pricing Argument
    6. 15.5 - The Derivation of the Binomial Options Pricing Model
    7. 15.6 - The Single-period Binomial Options Pricing Model
    8. 15.7 - The Two-period Binomial Options Pricing Model
    9. 15.8 - The Multi-period Binomial Options Pricing Model
    10. 15.9 - The Determination of u and d
    11. 15.10 - The Valuation of a European Call Paying a Given Dividend Amount
    12. 15.11 - The Valuation of an American Call Paying a Given Dividend Amount
    13. 15.12 - The Binomial Put Options Pricing Model
      1. Chapter Summary
      2. Review Questions
      3. Problems
      4. Case Study
  22. 16 - The Black–Scholes Options Pricing Model
    1. Learning Objectives
    2. 16.1 - The History of Options Pricing Research
    3. 16.2 - Stock Price Behaviour
      1. 16.2.1 - Lognormal Distribution
      2. 16.2.2 - The Valuation of Options
    4. 16.3 - The Assumptions in the Black–Scholes Options Pricing Model
    5. 16.4 - The Black–Scholes Model for Pricing Call Options
    6. 16.5 - The Black–Scholes Model for Pricing Put Options
    7. 16.6 - Determinants of Options Prices
      1. 16.6.1 - The Current Price of the Underlying Asset
      2. 16.6.2 - The Exercise Price
      3. 16.6.3 - The Time to Expiration
      4. 16.6.4 - Volatility of the Underlying Asset
      5. 16.6.5 - The Risk-free Rate
    8. 16.7 - The Options Pricing Model for Securities that Pay Known Dividends
    9. 16.8 - Volatility
    10. 16.9 - Implied Volatility
    11. 16.10 - Volatility Smile
      1. Chapter Summary
      2. Review Questions
      3. Problems
      4. Case Study
  23. 17 - Currency Options, Interest Rate Options and Options on Futures
    1. Learning Objectives
    2. 17.1 - Currency Options
    3. 17.2 - Interest Rate Options
      1. 17.2.1 - Bond Options
      2. 17.2.2 - Embedded Bond Options
      3. 17.2.3 - Interest Rate Options
    4. 17.3 - Interest Rate Caps, Floors and Collars
      1. 17.3.1 - Interest Rate Caps
      2. 17.3.2 - Interest Rate Floors
      3. 17.3.3 - Interest Rate Collars
    5. 17.4 - Pricing Interest Rate Options
    6. 17.5 - Valuing an Interest Rate Cap or Floor
    7. 17.6 - Options on Futures or Futures Options
      1. 17.6.1 - Model for Valuing Options on Futures Contracts
      2. Chapter Summary
      3. Review Questions
      4. Problems
      5. Case Study
  24. 18 - Greeks in Options
    1. Learning Objectives
    2. 18.1 - Risks in Options Trading
    3. 18.2 - Characteristics of Options Hedging
      1. 18.2.1 - The Naked Position
      2. 18.2.2 - The Covered Position
      3. 18.2.3 - Hedging Through the Cap
    4. 18.3 - Greeks in Options Hedging
    5. 18.4 - Delta
      1. 18.4.1 - The Use of Futures in Delta Hedging
      2. 18.4.2 - The Delta of a Portfolio
    6. 18.5 - Gamma
      1. 18.5.1 - Making a Portfolio Gamma-neutral
      2. 18.5.2 - Calculating Gamma
    7. 18.6 - Theta
    8. 18.7 - The Relationship between Delta, Gamma and Theta
    9. 18.8 - Vega
    10. 18.9 - Rho
    11. 18.10 - Creating Portfolio Insurance Using Synthetic Puts
    12. 18.11 - Hedging Options Positions in Practice
      1. Chapter Summary
      2. Review Questions
      3. Problems
      4. Case Study
  25. 19 - Exotic Options
    1. Learning Objectives
    2. 19.1 - Differences between Plain Vanilla Options and Exotic Options
    3. 19.2 - Asian Options
    4. 19.3 - Barrier Options
      1. 19.3.1 - Down-and-out Options
      2. 19.3.2 - Down-and-in Options
      3. 19.3.3 - Up-and-in Barrier Options
      4. 19.3.4 - Up-and-out Barrier Options
    5. 19.4 - Chooser Options
    6. 19.5 - Compound Options
    7. 19.6 - Digital or Binary Options
    8. 19.7 - Exchange Options
    9. 19.8 - Basket Options
    10. 19.9 - Bermudan Options
    11. 19.10 - Cliquet/Ratchet Options
    12. 19.11 - Coupe Options
    13. 19.12 - Extendible Options
    14. 19.13 - Hawaiian Options
    15. 19.14 - Instalment Options
    16. 19.15 - Israeli Options
    17. 19.16 - Parisian Options
    18. 19.17 - Passport Options
    19. 19.18 - Rainbow Options
    20. 19.19 - Russian Options
    21. 19.20 - Shout Options
    22. 19.21 - Spread Options
    23. 19.22 - Quanto Options
    24. 19.23 - Forward Start Options
    25. 19.24 - Edokko Options or Tokyo Options
    26. 19.25 - Lookback Options
    27. 19.26 - Extreme Spread Options
    28. 19.27 - Mountain Range Options
      1. Chapter Summary
      2. Review Questions
  26. 20 - Credit Derivatives
    1. Learning Objectives
    2. 20.1 - An Introduction to Credit Derivatives
    3. 20.2 - Credit Risk
    4. 20.3 - What are Credit Derivatives?
    5. 20.4 - Basic Credit Derivatives Structures
    6. 20.5 - Credit Default Swaps
      1. 20.5.1 - Credit Events
      2. 20.5.2 - Contingent Payments
      3. 20.5.3 - Notional Value
      4. 20.5.4 - Protection Buyers
      5. 20.5.5 - Protection Sellers
      6. 20.5.6 - Premium
      7. 20.5.7 - The Tenure
      8. 20.5.8 - The Threshold Risk
      9. 20.5.9 - The Settlement
    7. 20.6 - An Example of a CDS
    8. 20.7 - Counterparty Risk and Synthetic Lending
    9. 20.8 - Contingent Credit Swaps
    10. 20.9 - Dynamic Credit Swaps
    11. 20.10 - Total Return Swaps
    12. 20.11 - Credit Options
    13. 20.12 - Credit-linked Notes
    14. 20.13 - Credit Derivatives Versus Financial Guarantee Products
  27. Notes
    1. Chapter 2
    2. Chapter 4
    3. Chapter 5
    4. Chapter 9
    5. Chapter 20
  28. Bibliography
  29. Glossary
  30. Acknowledgements
  31. Copyright

Product information

  • Title: Derivatives and Risk Management
  • Author(s): Sundaram Janakiramanan
  • Release date: February 2011
  • Publisher(s): Pearson India
  • ISBN: 9788131755143