Mastering Derivatives Markets, 4th Edition

13

Equity Derivatives

‘Firstly, how does “the market” move? Secondly, how do the individual shares that make up the market move? Derivatives are available to cover both alternatives.’

Introduction

Background

Single stocks or equity indices?

Stock index futures

Stock index options

Single stock options

Equity index swaps

INTRODUCTION

The derivatives that are used to hedge against equity risk or to speculate upon it are the same as the derivatives that we have studied in previous chapters. There are only three classifications of derivatives: futures, options and swaps. When we apply these techniques to equity the results are:

• stock index futures, universal stock futures
• options on stock index futures or options on single stocks
• equity index ...