Mastering Derivatives Markets

Description
Table of Contents

"The first port of call for anyone looking to truly understand derivatives markets, appreciate the role they play within the global financial system and develop the technical knowledge to trade."
Matthew Thompson, Chief Strategy & Business Development Officer, Dubai Mercantile Exchange

"An essential read for anyone serious about understanding the impact of derivatives and technology on the global financial market."
Kevin Thorogood, Global Head, Investment Banking/Energy Trading, Thunderhead Ltd

"We have used Francesca for training on derivatives in the past. She demonstrates a passion for these markets and for learning. In a fast changing world, the combination of technical learning and practical experience that Francesca applies is helpful in keeping abreast of market developments."
Rachael Hoey, Director, Business Development, CLS

YOUR ESSENTIAL COMPANION TO THE DERIVATIVES MARKETS

Mastering Derivatives Markets provides full up-to-the-minute explanations — with worked examples and screen shots — covering the basics of options, swaps and futures across the key asset classes: rates, currency, equity, commodity and credit.

This book is relevant to anyone working within the financial markets, from the new entrant to the seasoned trader looking for updates, and to non-trading personnel working in IT, legal, compliance, risk, credit and operations.

Please note that the 'look inside' feature is currently displaying the content of Mastering Derivatives Markets Third Edition, this will be updated soon.

Mastering Derivatives Markets Fourth Edition has been completely revised and features new chapters on:

The most up to date thinking in the market
OTC clearing
Regulation
Benchmarking
Electronic futures trading in the FX market
New insights into the commodities markets
Carbon trading and environmental products

Table of Contents

1. Background and development of the derivatives markets

Market background
Introduction
Key features
Uses of derivatives
Range of derivatives
Increasing use of the Central Counterparty Model (CCP)
Risk and benchmarking
Market volumes
Users and uses of derivatives
Straight Through Processing (STP)

2. Market fundamentals

Introduction
How banks generate income
Three key assumptions
Role and use of LIBOR
Day counts
Financial maths
Calculating forward rates
Marking to market
Yield curves
Quiz

3. Risk — a Primer

Introduction
Finacial risks: markets, credit, liquidity
Operational risk
More esoteric risks

4. Derviatives Fundamentals

Range of derivatives
What is a vanilla trade?
Settlement
Triggers
Liquidity and credit risk
Understanding the 'underlying'
Benchmarks
Fair value
Dealing with derivatives

5. Basic option concepts

Introduction
Option pricing
Option mechanics

6. Interest rate derivatives — single settlement instruments

Introduction
Single settlement interest rate derivatives
Financial futures contracts
Forward rate agreements (FRAs)
Interest rate options (IROs)
Quiz

7. Interest rate derivatives

Introduction
Interest rate caps and floors
Interest rate collars
Interest rate swaps
Quiz

8. Benchmarking in the OTC derivatives markets
Penny Davenport, Manging Director, Markit Document Exchange and Gavan Nolan, Vice President, Credit Research, Markit Group

Financial benchmarking for derivatives
Liquidity benchmarking for derivatives
Operational risk measurements for derivatives
Conclusion

9. Currency derivatives

Introduction
Over the counter currency options
Currency options: reduced premium strategies
Simple exotic structures
Currency swaps
Exchange-traded instruments
Quiz

10. The impact of electronic trading on the FX Market
Ray McKenzie, Vice President, ICE

The early years
FX as part of a commodity portfolio
First electronic dealing platforms
Electronic market making
Phases I and II
Point and click vs algo traders
The impact of the credit crisis on banks' FX trading
Phase III

11. Credit derivatives

Introduction
What is credit risk?
Styles of trading
The first deals
Range of credit derivatives
Credit default swaps

12. Central clearing and the OTC market
Bill Hodgson, Founder and CEO, The OTC Space Ltd

The basics
Trade execution
Risks and mitigation
Getting trades into clearing
The business case and benefits
Predictions for market development
Terminology

13. Equity derivatives

Introduction
Background
Single stocks or equity indices?
Stock index futures
Stock index options
Single stock options
Equity index swaps

14. Commodity derivatives

Introduction
Exchange-traded energy derivatives
Exchange-traded futures contracts
Exchange-traded energy option contracts
OTC or ‘off-exchange’ energy derivatives
OTC option products
OTC oil swaps