Derivatives

The complete guide to derivatives, from experts working with CFA Institute
 
Derivatives is the definitive guide to derivatives and derivative markets. Written by experts working with CFA Institute, this book is an authoritative reference for students and investment professionals interested in the role of derivatives within comprehensive portfolio management. General discussion of the types of derivatives and their characteristics gives way to detailed examination of each market and its contracts, including forwards, futures, options, and swaps, followed by a look at credit derivative markets and their instruments. The companion workbook (sold separately) provides problems and solutions that align with the text and allows students to test their understanding while facilitating deeper internalization of the material.
 
Derivatives have become essential for effective financial risk management and for creating synthetic exposure to asset classes. This book builds a conceptual framework for grasping derivative fundamentals, with systematic coverage and thorough explanations. Readers will:
* Understand the different types of derivatives and their characteristics
* Delve into the various markets and their associated contracts
* Examine the role of derivatives in portfolio management
* Learn why derivatives are increasingly fundamental to risk management
 
CFA Institute is the world's premier association for investment professionals, and the governing body for CFA(r) Program, CIPM(r) Program, CFA Institute ESG Investing Certificate, and Investment Foundations(r) Program. Those seeking a deeper understanding of the markets, mechanisms, and use of derivatives will value the level of expertise CFA Institute brings to the discussion, providing a clear, comprehensive resource for students and professionals alike. Whether used alone or in conjunction with the companion workbook, Derivatives offers a complete course in derivatives and their use in investment management.

List of contents

Foreword
 
Preface
 
Acknowledgments
 
About the CFA Institute Investment Series
 

Chapter 1: Derivative Markets and Instruments
 
Learning Outcomes
* Derivatives: Introduction, Definitions, and Uses
* The Structure of Derivative Markets
* Types of Derivatives: Introduction, Forward Contracts
* Types of Derivatives: Futures
* Types of Derivatives: Swaps
* Contingent Claims: Options
* Contingent Claims: Credit Derivatives
* Types of Derivatives: Asset-Backed Securities and Hybrids
* Derivatives Underlyings
* The Purposes and Benefits of Derivatives
* Criticisms and Misuses of Derivatives
* Elementary Principles of Derivative Pricing
 

Chapter 2: Basics of Derivative Pricing and Valuation
 
Learning Outcomes
* Introduction
* Basic Derivative Concepts, Pricing the Underlying
* The Principle of Arbitrage
* Pricing and Valuation of Forward Contracts: Pricing vs. Valuation; Expiration; Initiation
* Pricing and Valuation of Forward Contracts: Between Initiation and Expiration; Forward Rate Agreements
* Pricing and Valuation of Futures Contracts
* Pricing and Valuation of Swap Contracts
* Pricing and Valuation of Options
* Lower Limits for Prices of European Options
* Put-Call Parity, Put-Call-Forward Parity 10.1. Put-Call-Forward Parity
* Binomial Valuation of Options
* American Option Pricing
 
Summary
Problems
 

Chapter 3: Pricing and Valuation of Forward Commitments
 
Learning Outcomes
* Introduction to Pricing and Valuation of Forward Commitments
* Carry Arbitrage
* Pricing Equity Forwards and Futures
* Pricing Fixed-Income Forward and Futures Contracts
* Pricing and Valuing Swap Contracts
* Pricing and Valuing Currency Swap Contracts
* Pricing and Valuing Equity Swap Contracts
 
Summary
Problems
 

Chapter 4: Valuation of Contingent Claims
 
Learning Outcomes
* Introduction and Principles of a No- Arbitrage Approach to Valuation
* Binomial Option Valuation Model
* One- Period Binomial Model
* Binomial Model: Two- Period (Call Options)
* Binomial Model: Two- Period (Put Options)
* Binomial Model: Two- Period (Role of Dividends & Comprehensive Example)
* Interest Rate Options & Multiperiod Model
* Black-Scholes-Merton (BSM) Option Valuation Model, Introduction and Assumptions of the BSM Model
* BSM Model: Components
* BSM Model: Carry Benefits and Applications
* Black Option Valuation Model and European Options on Futures
* Interest Rate Options
* Swaptions
* Option Greeks and Implied Volatility: Delta
* Gamma
* Theta
* Vega
* Rho
* Implied Volatility
 
Summary
Problems
 

Chapter 5: Credit Default Swaps
 
Learning Outcomes
* Introduction
* Basic Definitions and Concepts
* Important Features of CDS Markets and Instruments, Credit and Succession Events, and Settlement Proposals
* Basics of Valuation and Pricing
* Applications of CDS
* Valuation Differences and Basis Trading
 
Summary
Problems
 

Chapter 6: Introduction to Commodities and Commodity Derivatives
 
Learning Outcomes
* Introduction
* Commodity Sectors
* Life Cycle of Commodities
* Valuation of Commodities
* Commodities Futures Markets: Participants
* Commodity Spot and Futures Pricing
* Theories of Futures Returns
* Components of Futures Returns
* Contango, Backwardation, and the Roll Return
* Commodity Swaps
* Commodity Indexes
 
Summary
References
Problems
 

Chapter 7: Currency Management: An Introduction
 
Learning Outcomes
* Introduction
* Review of Foreign Exchange Concepts
* Currency Risk and Portfolio Risk and Return
* Strategic Decisions in Currency Management: Overview

About the author

CFA Institute is the global association of investment professionals that sets the standard for professional excellence and credentials. The organization is a champion for ethical behavior in investment markets and a respected source of knowledge in the global financial community. The end goal: to create an environment where investors' interests come first, markets function at their best, and economies grow. CFA Institute has more than 170,000 members in 160+ countries and territories, including 163,000 CFA®; charterholders, and 150+ member societies. For more information, visit www.cfainstitute.org.

Product details

• Authors: Cfa Institute
• Publisher: Wiley, John and Sons Ltd
• Languages: English
• Product format: Hardback
• Released: 07.03.2022
• EAN: 9781119850571
• ISBN: 978-1-119-85057-1
• No. of pages: 896
• Series: CFA Institute Investment Series; The CFA Institute Series
• Subjects: Non-fiction book > Politics, society, business > Money, bank, stock market; Social sciences, law, business > Business > Business administration; Finanzwesen, Finance & Investments, Finanz- u. Anlagewesen, Kapitalanlagen u. Wertpapiere, Investments & Securities, Derivat (Wertpapier)