Derivatives: Markets, Valuation, and Risk Management

Description

Robert Whaley has more than twenty-five years of experience in the world of finance, and with this book he shares his hard-won knowledge in the field of derivatives with you. Divided into ten information-packed parts, Derivatives shows you how this financial tool can be used in practice to create risk management, valuation, and investment solutions that are appropriate for a variety of market situations. Derivatives: Markets, Valuation, and Risk Management Contents Preface DERIVATIVE MARKETS FUNDAMENTALS OF VALUATION FORWARD/FUTURES/SWAP VALUATION OPTION VALUATION STOCK DERIVATIVES STOCK INDEX DERIVATIVES CURRENCY DERIVATIVES INTEREST RATE DERIVATIVES COMMODITY DERIVATIVES LESSONS LEARNED OPTVAL REFERENCES Acknowledgments About the Author Part I: Derivative Markets Chapter 1: Derivative Contracts and Markets FORWARDS OPTIONS WHY DO DERIVATIVES MARKETS EXIST? EVOLUTION OF DERIVATIVES MARKETS ATTRIBUTES OF EXCHANGE-TRADED DERIVATIVE MARKETS ATTRIBUTES OF OTC DERIVATIVE MARKETS SUMMARY REFERENCES AND SUGGESTED READINGS APPENDIX 1: SQUEEZING THE SOYBEAN MARKET40 Part II: Fundamentals of Valuation Chapter 2: Assumptions and Interest Rate Mechanics UNDERLYING ASSUMPTIONS INTEREST RATE MECHANICS DISCOUNT BONDS COUPON-BEARING BONDS TERM STRUCTURE OF INTEREST RATES STOCK VALUATION SUMMARY REFERENCES AND SUGGESTIONS FOR FURTHER READING APPENDIX 2A: TAYLOR SERIES EXPANSION OF BOND VALUE APPENDIX 2B: SUM OF A GEOMETRIC PROGRESSION Chapter 3: Relation between Return and Risk UTILITY THEORY PORTFOLIO THEORY CAPITAL ASSET PRICING MODEL PORTFOLIO PERFORMANCE MEASUREMENT SUMMARY REFERENCES AND SUGGESTED READINGS Part III: Forwards/Futures/Swap Valuation Chapter 4: No-Arbitrage Price Relations: Forwards, Futures, Swaps UNDERSTANDING CARRY COSTS/BENEFITS VALUING FORWARDS VALUING FUTURES IMPLYING FORWARD NET CARRY RATES VALUING SWAPS SUMMARY REFERENCES AND SUGGESTED READINGS Chapter 5: Risk Management Strategies: Futures EXPECTED RETURN AND RISK HEDGING PRICE RISK HEDGING REVENUE RISK HEDGING MARGIN RISK HEDGING PORTFOLIO VALUE HEDGING MULTIPLE SOURCES OF RISK ESTIMATION ISSUES SUMMARY REFERENCES AND SUGGESTED READINGS Part IV: Option Valuation Chapter 6: No-Arbitrage Price Relations: Options OPTIONS AND FORWARDS CONTINUOUS RATES DISCRETE FLOWS NO-ARBITRAGE FUTURES OPTIONS RELATIONS NO-ARBITRAGE INTER-MARKET RELATIONS SUMMARY REFERENCES AND SUGGESTED READINGS Chapter 7: Valuing Standard Options Analytically INTUITION OF RISK-NEUTRAL VALUATION LOG-NORMAL PRICE DISTRIBUTION VALUING A EUROPEAN-STYLE CALL OPTION VALUING A EUROPEAN-STYLE PUT OPTION MEASURING RISK OF EUROPEAN-STYLE OPTIONS SUMMARY REFERENCES AND SUGGESTED READINGS APPENDIX 7A: APPLICATIONS OF ITO’S LEMMA APPENDIX 7B: RELATION BETWEEN THE CONTINUOUSLY COMPOUNDED MEAN RETURN AND THE MEAN CONTINUOUSLY COMPOUNDED RETURN APPENDIX 7C: APPROXIMATION OF THE UNIVARIATE NORMAL PROBABILITY APPENDIX 7D: DERIVATION OF BLACK-SCHOLES/MERTON OPTION VALUATION FORMULA APPENDIX 7E: DERIVATION OF THE “ GREEKS” Chapter 8: Valuing Nonstandard Options Analytically ALL-OR-NOTHING OPTIONS GAP OPTIONS CONTINGENT PAY OPTIONS FORWARD-START OPTIONS RATCHET OPTIONS CHOOSER OPTIONS EXCHANGE OPTIONS OPTIONS ON THE MAXIMUM AND THE MINIMUM COMPOUND OPTIONS LOOKBACK OPTIONS BARRIER OPTIONS SUMMARY REFERENCES AND SUGGESTED READINGS APPENDIX 8A: APPROXIMATION OF THE BIVARIATE NORMAL PROBABILITY Chapter 9: Valuing Options Numerically BINOMIAL METHOD TRINOMIAL METHOD MONTE CARLO SIMULATION QUADRATIC APPROXIMATION MEASURING RISK NUMERICALLY SUMMARY REFERENCES AND SUGGESTED READINGS Chapter 10: Risk Management Strategies: Options EXPECTED RETURN AND RISK MANAGING UNEXPECTED CHANGES PROFIT FUNCTIONS BREAKEVEN PROBABILITIES EXPECTED TERMINAL PROFIT/RETURN SUMMARY REFERENCES AND SUGGESTED READINGS Part V: Stock Derivatives Chapter 11: Stock Products MARKETS VALUATION TRADING AND RISK MANAGEMENT STRATEGIES SUMMARY REFERENCES AND SUGGESTED READINGS APPENDIX 11A: EXACT VALUATION OF AMERICAN-STYLE CALL OPTION ON A DIVIDEND-PAYING STOCK Chapter 12: Corporate Securities VALUING CORPORATE BONDS VALUING SUBORDINATED DEBT VALUING WARRANTS VALUING CONVERTIBLE BONDS SUMMARY REFERENCES AND SUGGESTED READINGS Chapter 13: Compensation Agreements STANDARD EMPLOYEE STOCK OPTIONS VESTING PERIOD EARLY EXERCISE CONSTANT DIVIDEND YIELD MODELS ESOs WITH INDEXED EXERCISE PRICES ESOs WITH RELOAD FEATURES EMPLOYEE STOCK PURCHASE PLANS SUMMARY REFERENCES AND SUGGESTED READINGS Part VI: Stock Index Derivatives Chapter 14: Stock Index Products: Futures and Options MARKETS COMPOSITION OF STOCK INDEXES NO-ARBITRAGE RELATIONS AND VALUATION RISK MANAGEMENT LESSONS: BARINGS BANK PLC RETURN/RISK MANAGEMENT STRATEGIES SUMMARY REFERENCES AND SUGGESTED READINGS Chapter 15: Stock Index Products: Strategy Based INSURING STOCK PORTFOLIOS INDEX OPTION BUY-WRITE STRATEGIES VOLATILITY DERIVATIVES SUMMARY REFERENCES AND SUGGESTED READINGS APPENDIX 15A: CONSTRUCTION OF THE CBOE’S MARKET VOLATILITY INDEX ( VIX) Part VII: Currency Derivatives Chapter 16: Currency Products MARKETS VALUATION RISK MANAGEMENT LESSON: AWA LTD. RISK MANAGEMENT SUMMARY REFERENCES AND SUGGESTED READINGS Part VIII: Interest Rate Derivatives Chapter 17: Interest Rate Products: Futures and Options MARKETS NO-ARBITRAGE RELATIONS AND VALUATION RISK MANAGEMENT APPLICATIONS SUMMARY REFERENCES AND SUGGESTED READINGS Chapter 18: Interest Rate Products: Swaps ESTIMATING THE ZERO-COUPON YIELD CURVE INTEREST RATE SWAPS RISK MANAGEMENT LESSON: ORANGE COUNTY INVESTMENT POOL INTEREST RATE CAPS, FLOORS, AND COLLARS VALUATION OF SWAPTIONS SUMMARY REFERENCES AND SUGGESTED READINGS Chapter 19: Credit Products CREDIT PRODUCT MARKETS TOTAL RETURN SWAP CREDIT DEFAULT SWAP CREDIT-LINKED NOTES SYNTHETIC COLLATERALIZED DEBT OBLIGATIONS CREDIT SPREAD FORWARD RISK MANAGEMENT LESSON: STATE OF WISCONSIN INVESTMENT BOARD CREDIT SPREAD OPTIONS SUMMARY REFERENCES AND SUGGESTED READINGS Chapter 20: Valuing Interest Rate Products Numerically CONSTANT-PARAMETER MODELS NO-ARBITRAGE MODELS OF INTEREST RATES BOND VALUATION BOND OPTION VALUATION SUMMARY REFERENCES AND SUGGESTED READINGS Part IX: Commodity Derivatives Chapter 21: Commodity Products NET COST-OF-CARRY RELATION ENERGY: PETROLEUM RISK MANAGEMENT LESSONS: MG REFINING & MARKETING AGRICULTURAL: SOYBEANS METALS: GOLD OTHER: WINE SUMMARY REFERENCES AND SUGGESTED READINGS Part X: Lessons Learned Chapter 22: Key Lessons Appendices Appendix A: Elementary Statistics OBJECTIVES POPULATION VERSUS SAMPLE RANDOM VARIABLES PROPERTIES OF EXPECTATION OPERATORS ESTIMATION PROBABILITY DISTRIBUTIONS REFERENCES AND SUGGESTED READINGS Appendix B: Regression Analysis OBJECTIVES SIMPLE LINEAR REGRESSION OLS REGRESSION THROUGH ORIGIN MULTIPLE LINEAR REGRESSION REFERENCES AND SUGGESTED READINGS Appendix C: Statistical Tables Appendix D: Glossary of Derivatives-Related Terms About the CD-ROM INTRODUCTION SYSTEM REQUIREMENTS USING THE CD WITH WINDOWS WHAT’S ON THE CD CUSTOMER CARE Index Пустая страница