Derivatives Essentials

An Introduction to Forwards, Futures, Options and Swaps
(352 Seiten)
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Aron Gottesman
Wiley Finance Editions
eBook Typ:
Adobe Digital Editions
eBook Format:
Adobe DRM [Hard-DRM]

A clear, practical guide to working effectively with derivative securities products
Derivatives Essentials is an accessible, yet detailed guide to derivative securities. With an emphasis on mechanisms over formulas, this book promotes a greater understanding of the topic in a straightforward manner, using plain-English explanations. Mathematics are included, but the focus is on comprehension and the issues that matter most to practitioners--including the rights and obligations, terms and conventions, opportunities and exposures, trading, motivation, sensitivities, pricing, and valuation of each product. Coverage includes forwards, futures, options, swaps, and related products and trading strategies, with practical examples that demonstrate each concept in action. The companion website provides Excel files that illustrate pricing, valuation, sensitivities, and strategies discussed in the book, and practice and assessment questions for each chapter allow you to reinforce your learning and gauge the depth of your understanding.

Derivative securities are a complex topic with many "moving parts," but practitioners must possess a full working knowledge of these products to use them effectively. This book promotes a truly internalized understanding rather than rote memorization or strict quantitation, with clear explanations and true-to-life examples.
* Understand the concepts behind derivative securities
* Delve into the nature, pricing, and offset of sensitivities
* Learn how different products are priced and valued
* Examine trading strategies and practical examples for each product

Pricing and valuation is important, but understanding the fundamental nature of each product is critical--it gives you the power to wield them more effectively, and exploit their natural behaviors to achieve both short- and long-term market goals. Derivatives Essentials provides the clarity and practical perspective you need to master the effective use of derivative securities products.



About the Author

Part One: Introduction to Forwards, Futures, and Options

Chapter 1: Forwards and Futures


1.1 Forward contract characteristics

1.2 Long forward payoff

1.3 Long forward P&L

1.4 Short forward payoff

1.6 Short forward P&L

1.7 Long forward P&L diagram

1.8 Short forward P&L diagram

1.9 Forwards are zero-sum games

1.10 Counterparty credit risk

1.11 Futures contracts

Chapter 2: Call Options


2.1 Call option characteristics

2.2 Long call payoff

2.3 Long call P&L

2.4 Short call payoff

2.5 Short call P&L

2.6 Long call P&L diagram

2.7 Short call P&L diagram

2.8 Call options are zero-sum games

2.9 Call option moneyness

2.10 Exercising a call option early

2.11 Comparison of call options and forwards/futures

Chapter 3: Put Options


3.1 Put option characteristics

3.2 Long put payoff

3.3 Long put P&L

3.4 Short put payoff

3.5 Short put P&L

3.6 Long put P&L diagram

3.7 Short put P&L diagram

3.8 Put options are zero-sum games

3.9 Put option moneyness

3.10 Exercising a put option early

3.11 Comparison of put options, call options and forwards/futures

Part Two: Pricing and Valuation

Chapter 4: Useful Quantitative Concepts


4.1 Compounding conventions

4.2 Calculating future value and present value

4.3 Identifying continuously compounded interest rates

4.4 Volatility and historical standard deviation

4.5 Interpretation of standard deviation

4.6 Annualized standard deviation

4.7 The standard normal cumulative distribution function

4.8 The z-score

Chapter 5: Introduction to Pricing and Valuation


5.1 The concepts of price and value by a forward contract

5.2 The concepts of price and value by an option

5.3 Comparison of price and value concepts for forwards and options

5.4 Forward value

5.5 Forward price

5.6 Option value: The Black-Scholes model

5.7 Calculating the Black-Scholes model

5.8 Black-Scholes model assumptions

5.9 Implied volatility

Chapter 6: Understanding Pricing and Valuation


6.1 Review of payoff, price, and value equations

6.2 Value as the present value of expected payoff

6.3 Risk-neutral valuation

6.4 Probability and expected value concepts

6.5 Understanding the Black-Scholes equation for call value

6.6 Understanding the Black-Scholes equation for put value

6.7 Understanding the equation for forward value

6.8 Understanding the equation for forward price

Chapter 7: The Binomial Option Pricing Model


7.1 Modeling discrete points in time

7.2 Introduction to the one-period binomial option pricing model

7.3 Option valuation, one-period binomial option pricing model

7.4 Two-period binomial option pricing model, European-style option

7.5 Two-period binomial model, American-style option

7.6 Multi-period binomial option pricing models

Part Three: The Greeks

Chapter 8: Introduction to the Greeks


8.1 Definitions of the Greeks

8.2 Characteristics of the Greeks

8.3 Equations for the Greeks

8.4 Calculating the Greeks

8.5 Interpreting the Greeks

8.6 The accuracy of the Greeks

Chapter 9: Understanding Delta and Gamma


9.1 Describing sensitivity using Delta and Gamma

9.2 Understanding Delta

9.3 Delta across the underlying asset price

9.4 Understanding Gamma

9.5 Gamma across the underlying asset price

Chapter 10: Understanding Vega, Rho, and Theta


10.1 Describing sensitivity using Vega, Rho, and Theta

10.2 Understanding Vega

10.3 Understanding Rho

10.4 Understanding Theta

Part Four: Trading Strategies

Chapter 11: Price and Volatility Trading Strategies


11.1 Price and volatility views

11.2 Relating price and volatility views to Delta and Vega

11.3 Using forwards, calls, and puts to monetize views

11.4 Introduction to straddles

11.5 Delta and Vega characteristics of long and short straddles

11.6 The ATM DNS strike price

11.7 Straddle: numerical example

11.8 P&L diagrams for long and short straddles

11.9 Breakeven points for long and short straddles

11.10 Introduction to strangles

11.11 P&L diagrams for long and short strangles

11.12 Breakeven points for long and short strangles

11.13 Summary of simple price and volatility trading strategies

Chapter 12: Synthetic, Protective, and Yield-Enhancing Trading Strategies


12.1 Introduction to put-call parity and synthetic positions

12.2 P&L diagrams of synthetic positions

12.3 Synthetic positions premiums and ATMF

12.4 The Greeks of synthetic positions

12.5 Option arbitrage

12.6 Protective puts

12.7 Covered calls

12.8 Collars

Chapter 13: Spread Trading Strategies


13.1 Bull and bear spreads using calls

13.2 Bull and bear spreads using puts

13.3 Risk reversals

13.4 Butterfly spreads

13.5 Condor spreads

Part Five: Swaps

Chapter 14: Interest Rate Swaps


14.1 Interest rate swap characteristics

14.2 Interest rate swap cash flows

14.3 Calculating interest rate swap cash flows

14.4 How interest rate swaps can transform cash flows

Chapter 15: Credit Default Swaps, Cross-Currency Swaps, and Other Swaps


15.1 Credit default swap characteristics

15.2 Key determinants of the credit default swap spread

15.3 Cross-currency swap characteristics

15.4 Transforming cash flows using a cross-currency swap

15.5 Other swap varieties

Appendix: Solutions to Knowledge Check Questions


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