Pricing and Hedging Financial Derivatives: A Guide for Practitioners

Contents

Preface

Acknowledgements

1 An Introduction to the Major Asset Classes

1.1 Equities

1.1.1 Introduction

1.1.2 Pricing equities

1.1.3 Fundamental analysis

1.1.4 Technical analysis

1.1.5 Quantitative analysis

1.1.6 The equity risk premium and the pre-FOMC announcement drift

1.2 Commodities

1.2.1 Introduction

1.2.2 Hedging

1.2.3 Backwardation and contango

1.2.4 Investment in commodities

1.2.5 Commodity fundamentals

1.2.6 Super-cycles in commodity prices

1.2.7 Future regulation

1.3 Fixed Income

1.3.1 Introduction

1.3.2 Credit risk

1.3.3 The empirical pattern of yield curve moves

1.3.4 Modelling interest rate movements

1.3.5 Modelling the risks of default

1.4 Foreign Exchange

1.4.1 Introduction

1.4.2 How foreign exchange rates are quoted

Summary

2 Derivatives: Forwards, Futures and Swaps

2.1 Derivatives

2.2 Forward Contracts

2.2.1 Definition

2.2.2 Payoffs of forward contracts

2.2.3 Forward price versus delivery price

2.3 Futures Contracts

2.4 Calculating Implied Forward Prices and Valuing Existing Forward Contracts

2.4.1 Calculating implied forward prices on equities

2.4.2 Calculating implied forward prices on foreign exchange rates

2.4.3 Calculating implied forward prices on commodities

2.4.4 Valuing existing forward contracts

2.5 Pricing Futures Contracts

2.6 Swaps

2.6.1 Introduction

2.6.2 Interest rate swaps

2.6.3 Commodity swaps

2.6.4 Commodity swap valuation

2.6.5 Commodity swaps with variable notional and price

2.6.6 Currency swaps

2.6.7 Equity swaps

Summary

3 Derivatives: ...