Options, Futures and Other Derivatives: Global Edition

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The required technical tools will be explained carefully, allowing students to learn the language and to be able to converse with derivatives professionals. Once the tools are in place, those same tools can then be applied to any derivative. Special emphasis will be put on those derivatives that shape the modern world. There are many types of derivative contracts including options, swaps, and futures or forward contracts. Full version of the ebook (optional) Interactive Chapter Opener Video Video case studies for each chapter book Trading VIX Derivatives: Trading and Hedging Strategies Using VIX Futures, Options, and Exchange-Traded Notes Some corporate bonds may have derivatives embedded in them. These derivatives will give the bond issuers and holders the right to repay them or redeem them early/ convert them to shares respectively.

Hedging is the use of derivatives like futures and options to reduce or eliminate financial exposure. Before delving further into hedging, it is imperative to understand the following points: The risk manager can hedge against the foreign exchange risk by buying the call option with a strike price of USD 1.1120. If in six months the exchange rate is more than USD 1.1120, the risk manager will exercise the option, getting the 10 million euros using the exchange rate of USD 1.1120. Investors trade in contracts that have been identified in the exchange. Traditionally trading was done using the outcry system (Investors met at the exchange floor and used signals to indicate their proposed trades.) Currently, trading is done electronically through a computer. Advantages of OTC Markets over Exchanges A linear derivative is one whose value is directly related to the market price of the underlying variable. What does that mean? Note that future contract offers similar payoffs as forward contracts. However, futures contracts trade on exchanges; that is, the underlying asset and possible maturity date are clearly stated in the contract.Futures contracts require a significant capital commitment. The obligation to sell or buy at a given price makes futures riskier by their nature. Examples of Options and Futures Options o Credit risk and credit derivatives with the key products and key issues being introduced early in the book Get full access to Options, Futures, and Other Derivatives, Ninth Edition and 60K+ other titles, with a free 10-day trial of O'Reilly.

Non-linear derivatives require an upfront premium to be paid by both parties involved in the contract. An option contract involves two parties: the party with a long position and a short position in the option. For graduate courses in business, economics, financial mathematics, and financial engineering; for advanced undergraduate courses with students who have good quantitative skills; and for practitioners involved in derivatives markets The second half of the course applies those techniques to more advanced topics: exotic derivatives, volatility modelling (including stochastic volatility, local volatility and volatility derivatives such as variance swaps) and interest-rate derivatives.Which of the following characteristics is a defining feature of non-linear derivatives (such as a European call option) in comparison to linear derivatives (such as a forward contract)?