Derivatives and Risk Management
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,...
| Otros Autores: | |
|---|---|
| Formato: | Libro electrónico |
| Idioma: | Inglés |
| Publicado: |
Pearson India
2011.
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| Edición: | 1st edition |
| Ver en Biblioteca Universitat Ramon Llull: | https://discovery.url.edu/permalink/34CSUC_URL/1im36ta/alma991009629251206719 |
Tabla de Contenidos:
- Cover
- About the Author
- Contents
- Preface
- Chapter 1: Introduction
- Learning Objectives
- 1.1 What Are Derivatives?
- 1.2 Derivatives Markets
- 1.3 Forward Contracts
- 1.4 Futures Contracts
- 1.5 Options Contracts
- 1.6 Swap Contracts
- 1.7 Uses of Derivatives
- 1.8 What is Risk?
- 1.8.1 Operating or Business Risk
- 1.8.2 Event Risk
- 1.8.3 Price Risk
- 1.9 Risk Management
- 1.10 A Brief History of Risk Management
- 1.11 Implications for Hedging
- 1.12 Upside and Downside Risks
- 1.13 Commodity Price Risk
- 1.13.1 Volatility
- 1.13.2 Liquidity
- 1.14 Interest Rate Risk
- 1.14.1 Deregulation and Interest Rate as a Tool for Developing Monetary Policy
- 1.14.2 Floating Rate Loans
- 1.14.3 Interest Rates and Inflation
- 1.14.4 Components of Interest Rate Risk
- 1.15 Currency Risk
- 1.16 Approaches to Risk Management
- 1.17 Risks in Derivatives Trading
- Chapter Summary
- Review Questions
- Problems
- Case Study
- Chapter 2: The Derivatives Market in India
- Learning Objectives
- 2.1 The International Derivatives Market
- 2.2 Derivatives in India
- 2.3 Operations of Derivatives Exchanges
- 2.4 The Trading System
- 2.4.1 Types of Orders
- 2.4.2 Order-matching Rules
- 2.4.3 Order Conditions
- 2.5 The Clearing and Settlement System
- 2.5.1 The Members of the Clearing House
- 2.5.2 The Clearing Mechanism
- 2.5.3 Margin and Margin Accounts
- 2.5.4 The Settlement System
- 2.5.5 Risk Management
- 2.6 The Trading Process
- 2.7 Online Trading
- 2.8 The OTC Derivatives Market
- 2.9 The Regulation of Derivatives Trading in India
- Chapter Summary
- Review Questions
- Exhibit 2 .1: List of Contracts Available in Indian Exchanges
- Chapter 3: Interest Rates
- Learning Objectives
- 3.1 What Is Interest rate?
- 3.2 Simple and Compound Interest Rates
- 3.3 Future Value and Present Value.
- 3.3.1 Present Value
- 3.4 Effective Interest Rates for Different Compounding Periods
- 3.4.1 Present Value for Different Compounding Periods
- 3.4.2 Relation Between Rate Under Continuous Compounding and Rate Under Compounding for m Periods
- 3.5 Risk-free Interest Rate
- 3.5.1 Interest Rate Risk
- 3.5.2 Default Risk
- 3.5.3 Call Risk
- 3.5.4 Liquidity Risk
- 3.6 Risk-free Rates
- 3.6.1 Government Security
- 3.6.2 Interbank Rates
- 3.6.3 Repurchase Agreement Rate (Repo Rate)
- 3.7 Interest Rate Risk and Forward Rates
- 3.8 Term Structure of Interest Rates
- 3.8.1 Implied Forward Rates
- 3.8.2 Why Implied Forward Rates?
- 3.8.3 Calculating Implied Forward Rate from Coupon Bonds
- Chapter Summary
- Review questions
- Problems
- Case Study
- Chapter 4: Forward Contracts
- Learning Objectives
- 4.1 What Is a Forward Contract?
- 4.2 The Purpose of Forward Contracts
- 4.3 Advantages of Forward Contracts
- 4.4 Problems with Forward Contracts
- 4.4.1 Parties with Matching Needs
- 4.4.2 Non-performance
- 4.4.3 Non-transferability
- 4.5 The Pricing of Commodity Forward Contracts
- 4.6 Currency Forward Contracts
- 4.6.1 The Operation of the Currency Forward Market
- 4.6.2 Characteristics of Currency Forward Contracts
- 4.6.3 The Pricing of Currency Forward Contracts
- 4.6.4 Covered Interest Arbitrage
- 4.6.5 Rolling Over Currency Forward Contracts
- 4.7 Interest Rate Forwards
- 4.7.1 Mechanics of FRAs
- 4.7.2 The FRA Payment Amount
- 4.7.3 An Alternative View of an FRA and the Settlement Amount
- 4.7.4 Uses of FRAs
- 4.8 Non-deliverable Forwards
- Chapter Summary
- Review Questions
- Problems
- Case Study
- Chapter 5: Futures Contracts
- Learning Objectives
- 5.1 What Is a Futures Contract?
- 5.2 Futures Contracts Versus Forward Contracts
- 5.2.1 Negotiability
- 5.2.2 Standardization
- 5.2.3 Liquidity.
- 5.2.4 Performance
- 5.2.5 Cash Needs
- 5.2.6 Ability to Reduce Losses
- 5.3 Participants in Futures Markets
- 5.3.1 Hedgers
- 5.3.2 Speculators
- 5.3.3 Arbitragers
- 5.4 Specifications of Futures Contracts
- 5.4.1 The Underlying Asset
- 5.4.2 The Contract Size
- 5.4.3 Delivery Arrangements: Location
- 5.4.4 Delivery Arrangements: Alternative Grade
- 5.4.5 Delivery Month
- 5.4.6 Delivery Notification
- 5.4.7 Daily Price Movement Limits
- 5.4.8 Position Limits
- 5.5 Closing out the Positions
- 5.6 Arbitrage Between the Futures Market and the Spot Market
- 5.7 Performance of Contracts
- 5.8 The Clearinghouse
- 5.9 Margins and Marking-to-Market
- 5.10 Price Quotes
- 5.11 Settlement Price
- 5.12 Open Interest
- 5.13 The Pattern of Prices
- 5.14 The Relation Between Futures Price and Spot Price
- 5.15 Delivery
- 5.16 Cash Settlement
- 5.17 Types of Orders
- 5.17.1 Market Orders
- 5.17.2 Limit Orders
- 5.17.3 Stop Orders
- 5.17.4 Stop-Limit Orders
- 5.17.5 Other Orders
- 5.18 How to Trade in Futures?
- 5.19 Pricing of Futures Contracts
- Chapter Summary
- Review questions
- Problems
- Case Study
- Chapter 6: Hedging Strategies Using Futures
- Learning Objectives
- 6.1 The Principles of Hedging
- 6.2 Long Hedges
- 6.3 Short Hedges
- 6.4 Should Hedging Be Undertaken?
- 6.5 Risks in Hedging
- 6.6 Basis Risk
- 6.7 Factors Affecting Basis Risk
- 6.8 The Hedge Ratio
- 6.9 Static and Dynamic Hedging
- 6.10 Strip Hedges and Stack Rolling Hedges
- 6.11 Losses from Hedging Using Futures
- Chapter Summary
- Review questions
- Problems
- Case Study
- Chapter 7: Single Stock Futures and Stock Index Futures
- Learning Objectives
- 7.1 Single Stock Futures
- 7.2 What is a Stock Futures Contract?
- 7.3 Hedging Using Single Stock Futures
- 7.3.1 What Type of Hedging Is Appropriate?.
- 7.3.2 Which Instrument to Use?
- 7.3.3 How Many Contracts to Use?
- 7.3.4 When to Take an Open Position?
- 7.3.5 When to Close the Position?
- 7.3.6 Risks in Hedging Using Single Stock Futures
- 7.4 Speculation Using Stock Futures
- 7.5 Pricing of Single Stock Futures Contracts
- 7.6 Single Stock Futures and Arbitrage
- 7.7 Using Stock Futures for Insurance Purposes
- 7.8 Using Stock Futures for Investment Purposes
- 7.9 Stock Indexes
- 7.10 Stock Index Futures
- 7.11 Stock Index Futures Contracts Traded on the BSE and the NSE
- 7.12 How do Index Futures Work?
- 7.13 Pricing of Index Futures Contracts
- 7.14 Speculation Using Index Futures
- 7.15 Portfolio Insurance Using Index Futures
- 7.16 Index Arbitrage
- 7.17 Program Trading
- 7.18 Hedging the Value of a Portfolio of Shares Using Index Futures
- 7.19 Adjusting Equity Portfolio Beta Using Index Futures
- 7.20 Issues in Using Index Futures
- Chapter Summary
- Review Questions
- Problems
- Case Study
- Chapter 8: Interest Rate Futures
- Learning Objectives
- 8.1 The Impact of Interest Rate Risk and the Need for Hedging
- 8.2 Interest Rate Futures in India
- 8.3 Contract Specification
- 8.4 Conversion Factor
- 8.5 Cheapest-to-deliver Bonds
- 8.6 The Pricing of Bond Futures
- 8.7 Uses of Long-term Interest Rate Futures
- 8.7.1 Directional Trading
- 8.7.2 Arbitrage
- 8.7.3 Calendar-spread Trading
- 8.7.4 Hedging
- 8.7.5 Fixed Income Portfolio Management
- 8.7.6 Changing a Fixed Income Loan to a Floating-rate Loan
- 8.8 Short-term Interest Rate Futures
- 8.9 Pricing of T-bill Futures Contracts
- 8.10 Hedging Using Bill Futures Contracts
- 8.11 Uses of Short-term Interest Rate Futures Contracts
- 8.11.1 Hedging Borrowing Costs
- 8.11.2 Hedging an Investment Yield
- 8.11.3 Hedging a Floating-rate Loan or Strip Hedging
- 8.11.4 Directional Trades.
- 8.11.5 Spread Trades
- 8.11.6 Arbitrage Transactions
- 8.11.7 Adjusting the Duration of the Portfolio
- 8.11.8 Cross-hedging
- 8.12 Cautions in Using Interest Rate Futures
- Chapter Summary
- Review Questions
- Problems
- Case Study
- Chapter 9: Currency Futures
- Learning Objectives
- 9.1 What Are Currency Futures?
- 9.2 The Specifications of Exchange-traded Currency Futures Contracts
- 9.3 The Pricing of Currency Futures
- 9.4 Hedging with Currency Futures
- 9.5 Basis Risk While Using Currency Futures
- 9.6 Speculation Using Currency Futures
- 9.7 Arbitraging with Currency Futures Contracts
- Chapter Summary
- Review Questions
- Problems
- Case Study
- Chapter 10: Swaps
- Learning Objectives
- 10.1 What Are Swaps?
- 10.2 Types of Swaps
- 10.3 Terminologies in Swaps
- 10.4 Interest Rate Swaps
- 10.5 Swap Rates
- 10.6 Rationale for Swap Arrangements
- 10.7 Swap with Intermediaries
- 10.8 Forward Swaps
- 10.9 Swaptions
- 10.10 Uses of Interest Rate Swaps
- 10.11 Valuation of Interest Rate Swaps
- 10.12 Currency Swaps
- 10.12.1 Differences Between an Interest Rate Swap and a Currency Swap
- 10.12.2 Basic Structure of Currency Swaps
- 10.13 Currency Risk in Currency Swaps
- 10.14 Comparative Advantages of Currency Swaps
- 10.15 Uses of Currency Swaps
- 10.16 The Valuation of a Currency Swap
- 10.17 Equity Swaps
- 10.18 The Valuation of an Equity Swap
- 10.19 Commodity Swaps
- 10.20 Risks While Entering into Interest Rate Swaps
- Chapter Summary
- Review Questions
- Problems
- Case Study
- Chapter 11: Fundamentals of Options
- Learning Objectives
- 11.1 Options Issued by Corporations
- 11.1.1 Warrants
- 11.1.2 Employee Stock Options
- 11.1.3 Convertible Bonds
- 11.1.4 Callable Bonds
- 11.1.5 Put Bonds
- 11.1.6 Rights
- 11.2 Options Contracts Between Private Parties
- 11.3 Exchange-traded Options.
- 11.4 Options Contracts: An Example.
