Derivatives Essentials - An Introduction to Forwards, Futures, Options and Swaps

Informationen zum Autor ARON GOTTESMAN is professor of finance and the chair of the department of finance and economics at the Lubin School of Business at Pace University. He teaches courses on derivative securities, financial markets, and asset management, and presents corporate workshops on derivative securities to bulge bracket financial institutions. Klappentext A clear, practical guide to working effectively with derivative securities productsDerivatives Essentials is an accessible, yet detailed guide to derivative securities. With an emphasis on mechanisms over formulas, this book promotes a greater understanding of the topic in a straightforward manner, using plain-English explanations. Mathematics are included, but the focus is on comprehension and the issues that matter most to practitioners--including the rights and obligations, terms and conventions, opportunities and exposures, trading, motivation, sensitivities, pricing, and valuation of each product. Coverage includes forwards, futures, options, swaps, and related products and trading strategies, with practical examples that demonstrate each concept in action. The companion website provides Excel files that illustrate pricing, valuation, sensitivities, and strategies discussed in the book, and practice and assessment questions for each chapter allow you to reinforce your learning and gauge the depth of your understanding.Derivative securities are a complex topic with many "moving parts," but practitioners must possess a full working knowledge of these products to use them effectively. This book promotes a truly internalized understanding rather than rote memorization or strict quantitation, with clear explanations and true-to-life examples.* Understand the concepts behind derivative securities* Delve into the nature, pricing, and offset of sensitivities* Learn how different products are priced and valued* Examine trading strategies and practical examples for each productPricing and valuation is important, but understanding the fundamental nature of each product is critical--it gives you the power to wield them more effectively, and exploit their natural behaviors to achieve both short- and long-term market goals. Derivatives Essentials provides the clarity and practical perspective you need to master the effective use of derivative securities products. Zusammenfassung A clear, practical guide to working effectively with derivative securities products Derivatives Essentials is an accessible, yet detailed guide to derivative securities. Inhaltsverzeichnis Preface xiii Acknowledgements xvii About the Author xix Part One Introduction to Forwards, Futures, and Options Chapter 1 Forwards and Futures 3 1.1 Forward contract characteristics 3 1.2 Long forward payoff 6 1.3 Long forward P&L 8 1.4 Short forward payoff 9 1.5 Short forward P&L 10 1.6 Long forward P&L diagram 12 1.7 Short forward P&L diagram 13 1.8 Forwards are zero-sum games 15 1.9 Counterparty credit risk 17 1.10 Futures contracts 19 Chapter 2 Call Options 22 2.1 Call option characteristics 22 2.2 Long call payoff 25 2.3 Long call P&L 27 2.4 Short call payoff 29 2.5 Short call P&L 30 2.6 Long call P&L diagram 32 2.7 Short call P&L diagram 33 2.8 Call options are zero-sum games 35 2.9 Call option moneyness 37 2.10 Exercising a call option early 38 2.11 Comparison of call options and forwards/futures 40 Chapter 3 Put Options 44 3.1 Put option characteristics 44 3.2 Long put payoff 47 3.3 Long put P&L 49 3.4 Short put payoff 50 3.5 Short put P&L 52 3.6 Long put P&L diagram 53 3.7 Short put P&L diagram 55 3.8 Put options are zero-sum games 57 3.9 Put option moneyness 58...

List of contents

Preface xiii
 
Acknowledgements xvii
 
About the Author xix
 
PART ONE Introduction to Forwards, Futures, and Options
 
CHAPTER 1 Forwards and Futures 3
 
1.1 Forward contract characteristics 3
 
1.2 Long forward payoff 6
 
1.3 Long forward P&L 8
 
1.4 Short forward payoff 9
 
1.5 Short forward P&L 10
 
1.6 Long forward P&L diagram 12
 
1.7 Short forward P&L diagram 13
 
1.8 Forwards are zero-sum games 15
 
1.9 Counterparty credit risk 17
 
1.10 Futures contracts 19
 
CHAPTER 2 Call Options 22
 
2.1 Call option characteristics 22
 
2.2 Long call payoff 25
 
2.3 Long call P&L 27
 
2.4 Short call payoff 29
 
2.5 Short call P&L 30
 
2.6 Long call P&L diagram 32
 
2.7 Short call P&L diagram 33
 
2.8 Call options are zero-sum games 35
 
2.9 Call option moneyness 37
 
2.10 Exercising a call option early 38
 
2.11 Comparison of call options and forwards/futures 40
 
CHAPTER 3 Put Options 44
 
3.1 Put option characteristics 44
 
3.2 Long put payoff 47
 
3.3 Long put P&L 49
 
3.4 Short put payoff 50
 
3.5 Short put P&L 52
 
3.6 Long put P&L diagram 53
 
3.7 Short put P&L diagram 55
 
3.8 Put options are zero-sum games 57
 
3.9 Put option moneyness 58
 
3.10 Exercising a put option early 59
 
3.11 Comparison of put options, call options, and forwards/futures 60
 
PART TWO Pricing and Valuation
 
CHAPTER 4 Useful Quantitative Concepts 65
 
4.1 Compounding conventions 66
 
4.2 Calculating future value and present value 68
 
4.3 Identifying continuously compounded interest rates 71
 
4.4 Volatility and historical standard deviation 72
 
4.5 Interpretation of standard deviation 77
 
4.6 Annualized standard deviation 80
 
4.7 The standard normal cumulative distribution function 81
 
4.8 The z-score 83
 
CHAPTER 5 Introduction to Pricing and Valuation 86
 
5.1 The concepts of price and value of a forward contract 87
 
5.2 The concepts of price and value of an option 88
 
5.3 Comparison of price and value concepts for forwards and options 90
 
5.4 Forward value 91
 
5.5 Forward price 92
 
5.6 Option value: The Black-Scholes model 94
 
5.7 Calculating the Black-Scholes model 96
 
5.8 Black-Scholes model assumptions 98
 
5.9 Implied volatility 99
 
CHAPTER 6 Understanding Pricing and Valuation 105
 
6.1 Review of payoff, price, and value equations 106
 
6.2 Value as the present value of expected payoff 108
 
6.3 Risk-neutral valuation 109
 
6.4 Probability and expected value concepts 112
 
6.5 Understanding the Black-Scholes equation for call value 117
 
6.6 Understanding the Black-Scholes equation for put value 120
 
6.7 Understanding the equation for forward value 122
 
6.8 Understanding the equation for forward price 123
 
CHAPTER 7 The Binomial Option Pricing Model 126
 
7.1 Modeling discrete points in time 126
 
7.2 Introduction to the one-period binomial option pricing model 127
 
7.3 Option valuation, one-period binomial option pricing model 131
 
7.4 Two-period binomial option pricing model, European-style option 135
 
7.5 Two-period binomial model, American-style option 138
 
7.6 Multi-period binomial option pricing models 140
 
PART THREE The Greeks
 
CHAPTER 8 Introduction to the Greeks 145
 
8.1 Definit

Product details

• Authors: Sebastien Bossu, Sebastien Gottesman Bossu, a Gottesman, Aron Gottesman, Aron (Pace University) Gottesman, Aron Bossu Gottesman, Gottesman Aron
• Publisher: Wiley, John and Sons Ltd
• Languages: English
• Product format: Hardback
• Released: 02.09.2016
• EAN: 9781119163497
• ISBN: 978-1-119-16349-7
• No. of pages: 352
• Series: Wiley Finance Editions; Wiley Finance; Wiley Finance Editions
• Subjects: Social sciences, law, business > Business > Management; Finance & Investments, Finanz- u. Anlagewesen, Insurance & Risk Management, Versicherungswesen u. Risikomanagement, Derivat (Wertpapier)