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A short course of lectures
«Derivative Markets»

Redeemable preference sharesThe GreeksCurrency swaps Example of black-scholes option pricingFinancial intermediariesAssetExample oneEquity / share index futuresDebt marketOrganisational structure of forward marketsFunctions/uses of the forward foreign exchange marketOptions on specific money market instrumentsOptions on equity / share indicesOptions on specific equitiesCarbon credit derivativesBond warrants (retail options)Organisational structure of futures marketsLearning outcomesStandardised contract between two partiesOther derivativesCoupon swap: transforming an assetContextIndividual bond futuresEquity / share swaps Clearing houseCommodity swapsParticipants in the futures marketHedging with share index futuresShort-term interest rate futuresArbitrageursCredit derivatives The financial system in briefFinancial instrumentsOptions on derivatives: swapsCall option: buy (long call) at expiryPut option: buy (long put) at expiryIndividual equity / share futuresLearning outcomesForwards on derivativesMathematics of the repurchase agreement marketCallable and puttable bonds (bonds with embedded options)Organisational structure of swap marketSpot financial markets Outright forwards Expiry dateFutures definedPayoff profiles Variations on the themeForwards in the foreign exchange market FloorsRisk free rateLearning outcomesSpeculatorsHedging with futuresLearning outcomesFair value pricing of specific futuresOther futuresExotic optionsOptions on equity / share market instrumentsShare / equity marketIntrinsic value and time valueHedging with currency futuresStandardised qualityBasisUltimate lenders and borrowersThe modelOptions on derivatives: futuresVolatilityMarket pricePrice discoveryTime to expirationExample of credit default swapBibliographyForwards in the debt marketsExampleDescriptionOptions on specific bondsHedging basics and jargonVariations on the themeSecuritisationFreight (or shipping) derivativesRepos and the banking sectorDerivative markets: forwardsFutures market contractsBibliographyTime optionsStandardised quantitySimple currency swapBuyer and sellerPayoff with futures (risk profile)Learning outcomesExampleListed repurchase agreementsPrimary and secondary marketsCommodity futuresWeather derivativesOptions on foreign exchange (wholesale)Option specificationsCall option: sell (write) (short call) at expiryForward market: definitionCapsInterest rate swapsThe basics of options Forwards in the share / equity marketBibliographyAn exampleExample: OTC marketDerivative markets: swapsNew product developmentOrganisational structure of option marketsCoupon swap: transforming a liabilityHedgersRisk management by a futures exchangeFutures on other derivativesBibliographyCapital formationDerivative markets: optionsOutputEnergy derivativesOptions on debt market instrumentsLearning outcomesConvertible bondsExample twoEquity / share warrants (call options)Put option: sell (write) (short put) at expiryCash settlement versus physical settlementBibliographyMarket efficiencyForward rate agreements Listed swapsMotivation for interest rate swapsIntrinsic valueTypes of repurchase agreementsCompetitionSpot market: definitionForward marketsOptions on bond indicesOption valuation/pricingTime valuePricingDeliveryOption strategiesForeign exchange swapsSpot (current) price of underlying asset and exercise priceCoupon swap: comparative advantageHedging using the 3-month JIBAR futureOther modelsOptions on foreign exchange (retail: warrants)Open interestSecurities that underlie reposDelta hedgingOptions on commoditiesForeign exchange marketVariations on the themeFutures trading price versus spot pricePriceForward-forwardsBlack-Scholes modelBinomial modelAllocation of resourcesOptions on foreign exchange Interest ratesClosing remarksThe derivative marketsDefinitionForward interest rate contracts TerminologyEquity / share warrants (retail options)Public welfareDefinitionCaps and floors Pricing of futures (fair value versus trading price)Spread tradingComparative advantage currency swapBasis tradingTypes of futures contractsMotivation for reposForwards in the commodities marketStrangleDerivative markets: futuresRepurchase agreements Margining and marking to marketDividendsDefinitionsMarket liquidityEconomic significance of futures marketsInvestorsExample of equity / share swapInstitutions involved in the repo marketBond warrants (call options)An exampleBibliographyStraddleCurrency futures
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