Analysis of Derivatives for the Cfa Program,9780935015935

Analysis of Derivatives for the Cfa Program

by
ISBN13: 9780935015935
ISBN10: 0935015930
Format: Hardcover
Pub. Date: 2002-12-01
Publisher(s): Professional Book Distributors
List Price: $64.00

Buy Used

Usually Ships in 24-48 Hours
$48.00
Add to Cart

Rent Textbook

Select for Price
Add to Cart
There was a problem. Please try again later.

New Textbook

We're Sorry
Sold Out

eTextbook

We're Sorry
Not Available

Buy from our Marketplace starting at $3.10

How Marketplace Works:

  • This item is offered by an independent seller and not shipped from our warehouse
  • Item details like edition and cover design may differ from our description; see seller's comments before ordering.
  • Sellers much confirm and ship within two business days; otherwise, the order will be cancelled and refunded.
  • Marketplace purchases cannot be returned to eCampus.com. Contact the seller directly for inquiries; if no response within two days, contact customer service.
  • Additional shipping costs apply to Marketplace purchases. Review shipping costs at checkout.

Table of Contents

Preface iii
Foreword v
About the Author vii
CHAPTER 1 DERIVATIVE MARKETS AND INSTRUMENTS 1(24)
1 INTRODUCTION
1(1)
2 TYPES OF DERIVATIVES
2(6)
2.1 Forward Commitments
2(4)
2.2 Contingent Claims
6(2)
3 DERIVATIVE MARKETS: PAST AND PRESENT
8(2)
4 HOW BIG IS THE DERIVATIVES MARKET
10(3)
5 THE PURPOSES OF DERIVATIVE MARKETS
13(2)
6 CRITICISMS OF DERIVATIVE MARKETS
15(1)
7 ELEMENTARY PRINCIPLES OF DERIVATIVE PRICING
16(4)
KEY POINTS
20(1)
PROBLEMS
21(2)
SOLUTIONS
23(2)
CHAPTER 2 FORWARD MARKETS AND CONTRACTS 25(56)
1 INTRODUCTION
26(2)
1.1 Delivery and Settlement of a Forward Contract
26(1)
1.2 Default Risk and Forward Contracts
27(1)
1.3 Termination of a Forward Contract
27(1)
2 THE STRUCTURE OF GLOBAL FORWARD MARKETS
28(2)
3 TYPES OF FORWARD CONTRACTS
30(7)
3.1 Equity Forwards
30(3)
3.2 Bond and Interest Rate Forward Contracts
33(3)
3.3 Currency Forward Contracts
36(1)
3.4 Other Types of Forward Contracts
37(1)
4 PRICING AND VALUATION OF FORWARD CONTRACTS
37(24)
4.1 Generic Pricing and Valuation of a Forward Contract
38(7)
4.2 Pricing and Valuation of Equity Forward Contracts
45(5)
4.3 Pricing and Valuation of Fixed-Income and Interest Rate Forward Contracts
50(6)
4.4 Pricing and Valuation of Currency Forward Contracts
56(5)
5 CREDIT RISK AND FORWARD CONTRACTS
61(2)
6 THE ROLE OF FORWARD MARKETS
63(1)
KEY POINTS
64(3)
PROBLEMS
67(5)
SOLUTIONS
72(9)
CHAPTER 3 FUTURES MARKETS AND CONTRACTS 81(78)
1 INTRODUCTION
82(3)
1.1 A Brief History of Futures Markets
83(1)
1.2 Public Standardized Transactions
83(1)
1.3 Homogenization and Liquidity
84(1)
1.4 The Clearinghouse, Daily Settlement, and Performance Guarantee
85(1)
1.5 Regulation
85(1)
2 FUTURES TRADING
85(1)
3 THE CLEARINGHOUSE, MARGINS, AND PRICE LIMITS
86(6)
4 DELIVERY AND CASH SETTLEMENT
92(2)
5 FUTURES EXCHANGES
94(1)
6 TYPES OF FUTURES CONTRACTS
95(8)
6.1 Short-Term Interest Rate Futures Contracts
97(2)
6.2 Intermediate- and Long-Term Interest Rate Futures Contracts
99(2)
6.3 Stock Index Futures Contracts
101(1)
6.4 Currency Futures Contracts
102(1)
7 PRICING AND VALUATION OF FUTURES CONTRACTS
103(35)
7.1 Generic Pricing and Valuation of a Futures Contract
103(13)
7.2 Pricing Interest Rate Futures
116(13)
7.3 Pricing Stock Index Futures
129(6)
7.4 Pricing Currency Futures
135(2)
7.5 Futures Pricing: A Recap
137(1)
8 THE ROLE OF FUTURES MARKETS AND EXCHANGES
138(1)
KEY POINTS
139(4)
PROBLEMS
143(4)
SOLUTIONS
147(12)
CHAPTER 4 OPTION MARKETS AND CONTRACTS 159(110)
1 INTRODUCTION
160(1)
2 BASIC DEFINITIONS AND ILLUSTRATIONS OF OPTIONS CONTRACTS
161(3)
2.1 Basic Characteristics of Options
161(1)
2.2 Some Examples of Options
162(2)
2.3 The Concept of Moneyness of an Option
164(1)
3 THE STRUCTURE OF GLOBAL OPTIONS MARKETS
164(4)
3.1 Over-the-Counter Options Markets
164(2)
3.2 Exchange-Listed Options Markets
166(2)
4 TYPES OF OPTIONS
168(7)
4.1 Financial Options
169(4)
4.2 Options on Futures
173(1)
4.3 Commodity Options
174(1)
4.4 Other Types of Options
174(1)
5 PRINCIPLES OF OPTION PRICING
175(20)
5.1 Payoff Values
176(3)
5.2 Boundary Conditions
179(5)
5.3 The Effect of a Difference in Exercise Price
184(2)
5.4 The Effect of a Difference in Time to Expiration
186(1)
5.5 Put-Call Parity
187(5)
5.6 American Options, Lower Bounds, and Early Exercise
192(1)
5.7 The Effect of Cash Flows on the Underlying Asset
193(1)
5.8 The Effect of Interest Rates and Volatility
194(1)
5.9 Option Price Sensitivities
194(1)
6 DISCRETE-TIME OPTION PRICING: THE BINOMIAL MODEL
195(17)
6.1 The One-Period Binomial Model
195(5)
6.2 The Two-Period Binomial Model
200(4)
6.3 Binomial Put Option Pricing
204(1)
6.4 Binomial Interest Rate Option Pricing
205(6)
6.5 American Options
211(1)
6.6 Extending the Binomial Model
211(1)
7 CONTINUOUS-TIME OPTION PRICING: THE BLACK-SCHOLES-MERTON MODEL
212(16)
7.1 Assumptions of the Model
212(1)
7.2 The Black-Scholes-Merton Formula
213(3)
7.3 Inputs to the Black-Scholes-Merton Model
216(8)
7.4 The Effect of Cash Flows on the Underlying
224(1)
7.5 The Critical Role of Volatility
225(3)
8 PRICING OPTIONS ON FORWARD AND FUTURES CONTRACTS AND AN APPLICATION TO INTEREST RATE OPTION PRICING
228(10)
8.1 Put-Call Parity for Options on Forwards
229(4)
8.2 Early Exercise of American Options on Forward and Futures Contracts
233(1)
8.3 The Black Model
233(2)
8.4 Application of the Black Model to Interest Rate Options
235(3)
9 THE ROLE OF OPTIONS MARKETS
238(1)
KEY POINTS
239(4)
APPENDIX 4A
243(1)
PROBLEMS
244(6)
SOLUTIONS
250(19)
CHAPTER 5 SWAP MARKETS AND CONTRACTS 269(72)
1 INTRODUCTION
270(2)
1.1 Characteristics of Swap Contracts
270(1)
1.2 Termination of a Swap
271(1)
2 THE STRUCTURE OF GLOBAL SWAP MARKETS
272(2)
3 TYPES OF SWAPS
274(11)
3.1 Currency Swaps
274(4)
3.2 Interest Rate Swaps
278(3)
3.3 Equity Swaps
281(4)
3.4 Commodity and Other Types of Swaps
285(1)
4 PRICING AND VALUATION OF SWAPS
285(19)
4.1 Equivalence of Swaps and Other Instruments
286(1)
4.2 Pricing and Valuation
287(17)
4.3 Some Concluding Comments on Swap Valuation
304(1)
5 VARIATIONS OF SWAPS
304(1)
6 SWAPTIONS
305(6)
6.1 Basic Characteristics of Swaptions
306(1)
6.2 Uses of Swaptions
306(1)
6.3 Swaption Payoffs
307(2)
6.4 Pricing and Valuation of Swaptions
309(2)
6.5 Forward Swaps
311(1)
7 CREDIT RISK AND SWAPS
311(3)
8 THE ROLE OF SWAP MARKETS
314(1)
KEY POINTS
315(4)
PROBLEMS
319(7)
SOLUTIONS
326(15)
CHAPTER 6 RISK MANAGEMENT APPLICATIONS OF FORWARD AND FUTURES STRATEGIES 341(70)
1 INTRODUCTION
342(1)
2 STRATEGIES AND APPLICATIONS FOR MANAGING INTEREST RATE RISK
343(13)
2.1 Managing the Interest Rate Risk of a Loan Using an FRA
344(3)
2.2 Strategies and Aplications for Managing Bond Portfolio Risk
347(9)
3 STRATEGIES AND APPLICATIONS FOR MANAGING EQUITY MARKET RISK
356(13)
3.1 Measuring and Managing the Risk of Equities
356(2)
3.2 Managing the Risk of an Equity Portfolio
358(3)
3.3 Creating Equity out of Cash
361(5)
3.4 Creating Cash out of Equity
366(3)
4 ASSET ALLOCATION WITH FUTURES
369(9)
4.1 Adjusting the Allocation among Asset Classes
370(6)
4.2 Pre-Investing in an Asset Class
376(2)
5 STRATEGIES AND APPLICATIONS FOR MANAGING FOREIGN CURRENCY RISK
378(7)
5.1 Managing the Risk of a Foreign Currency Receipt
379(1)
5.2 Managing the Risk of a Foreign Currency Payment
380(2)
5.3 Managing the Risk of a Foreign-Market Asset Portfolio
382(3)
6 FUTURES OR FORWARDS
385(2)
7 FINAL COMMENTS
387(2)
KEY POINTS
389(3)
PROBLEMS
392(6)
SOLUTIONS
398(13)
CHAPTER 7 RISK MANAGEMENT APPLICATIONS OF OPTION STRATEGIES 411(94)
1 INTRODUCTION
412(1)
2 OPTION STRATEGIES FOR EQUITY PORTFOLIOS
413(36)
2.1 Standard Long and Short Positions
415(7)
2.2 Risk Management Strategies with Options and the Underlying
422(8)
2.3 Money Spreads
430(10)
2.4 Combinations of Calls and Puts
440(9)
3 INTEREST RATE OPTION STRATEGIES
449(21)
3.1 Using Interest Rate Calls with Borrowing
450(5)
3.2 Using Interest Rate Puts with Lending
455(5)
3.3 Using an Interest Rate Cap with a Floating-Rate Loan
460(4)
3.4 Using an Interest Rate Floor with a Floating-Rate Loan
464(2)
3.5 Using an Interest Rate Collar with a Floating-Rate Loan
466(4)
4 OPTION PORTFOLIO RISK MANAGEMENT STRATEGIES
470(10)
4.1 Delta Hedging an Option over Time
472(7)
4.2 Gamma and the Risk of Delta
479(1)
4.3 Vega and Volatility Risk
480(1)
5 FINAL COMMENTS
480(1)
KEY POI NTS
481(4)
PROBLEMS
485(7)
SOLUTIONS
492(13)
CHAPTER 8 RISK MANAGEMENT APPLICATIONS OF SWAP STRATEGIES 505(62)
1 INTRODUCTION
506(1)
2 STRATEGIES AND APPLICATIONS FOR MANAGING INTEREST RATE RISK
507(12)
2.1 Using Interest Rate Swaps to Convert a Floating-Rate Loan to a Fixed-Rate Loan (and Vice Versa)
508(4)
2.2 Using Swaps to Adjust the Duration of a Fixed-Income Portfolio
512(2)
2.3 Using Swaps to Create and Manage the Risk of Structured Notes
514(5)
3 STRATEGIES AND APPLICATIONS FOR MANAGING EXCHANGE RATE RISK
519(8)
3.1 Converting a Loan in One Currency into a Loan in Another Currency
519(4)
3.2 Converting Foreign Cash Receipts into Domestic Currency
523(2)
3.3 Using Currency Swaps to Create and Manage the Risk of a Dual-Currency Bond
525(2)
4 STRATEGIES AND APPLICATIONS FOR MANAGING EQUITY MARKET RISK
527(10)
4.1 Diversifying a Concentrated Portfolio
528(2)
4.2 Achieving International Diversification
530(2)
4.3 Changing an Asset Allocation between Stocks and Bonds
532(3)
4.4 Reducing Insider Exposure
535(2)
5 STRATEGIES AND APPLICATIONS USING SWAPTIONS
537(13)
5.1 Using an Interest Rate Swaption in Anticipation of a Future Borrowing
538(3)
5.2 Using an Interest Rate Swaption to Terminate a Swap
541(3)
5.3 Synthetically Removing (Adding) a Call Feature in Callable (Noncallable) Debt
544(6)
5.4 A Note on Forward Swaps
550(1)
6 CONCLUSIONS
550(1)
KEY POINTS
551(3)
PROBLEMS
554(5)
SOLUTIONS
559(8)
CHAPTER 9 RISK MANAGEMENT 567(57)
1 INTRODUCTION
568(1)
2 THE CONCEPT OF RISK MANAGEMENT
569(5)
2.1 Sources of Risk
570(1)
2.2 Why Manage Risk?
570(2)
2.3 How Risk Is Managed
572(2)
3 MANAGING MARKET RISK
574(14)
3.1 Traditional Notions of Market Risk
574(2)
3.2 Value at Risk
576(12)
3.3 Improvements and Supplements to VAR
588(1)
4 MANAGING CREDIT RISK
588(16)
4.1 Traditional Notions of Credit Risk
588(7)
4.2 Techniques for Managing Credit Risk
595(4)
4.3 Insurance and Credit Derivatives
599(5)
5 OTHER RISKS FACED BY AN ORGANIZATION
604(4)
5.1 Liquidity Risk
604(1)
5.2 Operations Risk
605(1)
5.3 Model Risk
605(1)
5.4 Settlement (Herstaatt) Risk
606(1)
5.5 Regulatory Risk
606(1)
5.6 Legal Risk
607(1)
5.7 Tax Risk
607(1)
5.8 Accounting Risk
607(1)
6 BEST PRACTICES IN RISK MANAGEMENT
608(4)
6.1 The G-30 Report: Best Practices for Derivatives Dealers and General End Users
609(1)
6.2 The Risk Standards Working Group Report: Best Practices for Investment Management Organizations
609(1)
6.3 Risk Governance
610(1)
6.4 Risk Budgeting and Performance Evaluation
611(1)
7 CONCLUDING COMMENTS
612(1)
KEY POINTS
612(4)
APPENDIX 9A THE GROUP OF 30 RECOMMENDATIONS ON DERIVATIVES AND RISK MANAGEMENT PRACTICES
616(5)
APPENDIX 9B RISK STANDARS WORKING GROUP RECOMMENDATIONS ON DERIVATIVES AND RISK MANAGEMENT PRACTICES FOR INSITUTIONAL INVESTORS
621(3)
PROBLEMS 624(5)
SOLUTIONS 629(6)
GLOSSARY 635(8)
INDEX 643(8)
EQUATIONS 651

An electronic version of this book is available through VitalSource.

This book is viewable on PC, Mac, iPhone, iPad, iPod Touch, and most smartphones.

By purchasing, you will be able to view this book online, as well as download it, for the chosen number of days.

Digital License

You are licensing a digital product for a set duration. Durations are set forth in the product description, with "Lifetime" typically meaning five (5) years of online access and permanent download to a supported device. All licenses are non-transferable.

More details can be found here.

A downloadable version of this book is available through the eCampus Reader or compatible Adobe readers.

Applications are available on iOS, Android, PC, Mac, and Windows Mobile platforms.

Please view the compatibility matrix prior to purchase.