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A short course of lectures
«Derivative Markets»

Example of credit default swapFutures on other derivativesThe basics of options Forward rate agreements Options on foreign exchange Options on foreign exchange (wholesale)Derivative markets: forwardsExotic optionsForeign exchange swapsForwards in the commodities marketOptions on debt market instrumentsDividendsHedging with futuresCommodity swapsOption valuation/pricingInvestorsBibliographyMathematics of the repurchase agreement marketFutures trading price versus spot priceIndividual bond futuresExpiry dateRisk free rateVolatilityParticipants in the futures marketAssetOrganisational structure of forward marketsOrganisational structure of option marketsDescriptionVariations on the themeTypes of repurchase agreementsTypes of futures contractsTime optionsComparative advantage currency swapEnergy derivativesCapsOrganisational structure of swap marketTime valueDerivative markets: swapsOther modelsSimple currency swapFinancial instrumentsDelta hedgingExample of black-scholes option pricingMargining and marking to marketIntrinsic value and time valueCallable and puttable bonds (bonds with embedded options)Spread tradingBibliographyPricingHedging with share index futuresForward marketsThe derivative marketsLearning outcomesExample twoStandardised qualityOptions on equity / share indicesForwards in the share / equity marketOpen interestLearning outcomesOptions on equity / share market instrumentsFair value pricing of specific futuresHedgersFutures definedPut option: buy (long put) at expiryExampleOther derivativesPayoff profiles Options on specific bondsPayoff with futures (risk profile)Example of equity / share swapMarket liquidityDefinitionsPrice discoveryBond warrants (call options)Learning outcomesConvertible bondsEquity / share warrants (call options)Hedging basics and jargonClearing houseWeather derivativesPublic welfareCoupon swap: transforming an assetDefinitionPricing of futures (fair value versus trading price)Bond warrants (retail options)Market efficiencyPrimary and secondary marketsContextVariations on the themeCall option: sell (write) (short call) at expiryIndividual equity / share futuresForward-forwardsHedging with currency futuresStandardised contract between two partiesOptions on derivatives: swapsBasisTerminologyForward interest rate contracts The modelMotivation for reposFinancial intermediariesEconomic significance of futures marketsMarket priceMotivation for interest rate swapsDefinitionCaps and floors Example oneInterest ratesCurrency futuresAn exampleSecuritisationDeliveryLearning outcomesSpeculatorsSpot (current) price of underlying asset and exercise priceForeign exchange marketCredit derivatives Intrinsic valueOptions on specific money market instrumentsInterest rate swapsEquity / share index futuresRepos and the banking sectorForwards in the debt marketsBinomial modelForwards in the foreign exchange market Share / equity marketOrganisational structure of futures marketsDerivative markets: optionsExample: OTC marketBuyer and sellerBasis tradingCurrency swaps Futures market contractsOptions on commoditiesCoupon swap: transforming a liabilitySpot market: definitionAn exampleExampleInstitutions involved in the repo marketSecurities that underlie reposClosing remarksOption strategiesBibliographyStraddleCompetitionLearning outcomesCall option: buy (long call) at expiryForward market: definitionPut option: sell (write) (short put) at expiryBlack-Scholes modelFloorsShort-term interest rate futuresThe GreeksBibliographyOptions on specific equitiesCarbon credit derivativesTime to expirationLearning outcomesForwards on derivativesDerivative markets: futuresCoupon swap: comparative advantageFunctions/uses of the forward foreign exchange marketDebt marketRisk management by a futures exchangeOptions on bond indicesOptions on foreign exchange (retail: warrants)Option specificationsOutright forwards Allocation of resourcesSpot financial markets BibliographyFreight (or shipping) derivativesStrangleHedging using the 3-month JIBAR futureOutputNew product developmentPriceEquity / share warrants (retail options)Cash settlement versus physical settlementOther futuresRedeemable preference sharesEquity / share swaps Options on derivatives: futuresListed swapsListed repurchase agreementsCapital formationUltimate lenders and borrowersVariations on the themeCommodity futuresThe financial system in briefBibliographyRepurchase agreements Standardised quantityArbitrageurs
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