5

16

 

John Wiley & Sons, Inc. (Visit publisher website)

2007

English

 

 

 

Basic

 

 

Market risk, derivatives (general), modeling derivatives, forward contracts, long vs. short, valuing forwards, interest rate parity, futures contracts, leverage, valuing futures, swap contracts

 

*** Excerpt from book *** This chapter provides an overview of derivative instruments. Derivatives are financial contracts traded in private over-the-counter (OTC) markets, or on organized exchanges. As the term implies, derivatives derive their value from some underlying index, typically the price of an asset. Depending on the type of relationship, they can be broadly classified into two categories: linear and nonlinear instruments. (...) This chapter describes the general characteristics as well as the pricing of linear derivatives. Pricing is the first step toward risk measurement. The second step consists of combining the valuation formula with the distribution of underlying risk factors to derive the distribution of contract values. This will be done later, in the market risk section. Section 5.1 provides an overview of the size of the derivatives markets. Section 5.2 then presents the valuation and pricing of forwards. Sections 5.3 and 5.4 introduce futures and swap contracts, respectively.

 

Introduction to Derivatives
5.1 Overview of Derivatives Markets
5.2 Forward Contracts
5.2.1 Definition
5.2.2 Valuing Forward Contracts
5.2.3 Valuing an Off-Market Forward Contract
5.2.4 Valuing Forward Contracts with
Income Payments
5.3 Futures Contracts
5.3.1 Definitions of Futures
5.3.2 Valuing Futures Contracts
5.4 Swap Contracts
5.5 Important Formulas
5.6 Answers to Chapter Examples

 

If you are interested in purchasing the book, please click here.

 

Risk professionals looking to earn the Financial Risk Management (FRM®) certification, corporate training programs, professors, and graduate students all rely on the Financial Risk Manager Handbook for the most comprehensive and up-to-date information on financial risk management.

Filled with in-depth insight and practical advice, the Financial Risk Manager Handbook is the core text for risk management training programs worldwide. Presented in a clear and consistent fashion, this completely updated Fourth Edition is one of the best ways to prepare for the Financial Risk Manager (FRM) exam.

Financial Risk Manager Handbook, Fourth Edition supports candidates studying for the Global Association of Risk Professional’s (GARP) annual FRM exam and prepares you to assess and control risk in today’s rapidly changing financial world. Authored by renowned risk management expert Philippe Jorion—with the full support of GARP—this definitive guide summarizes the core body of knowledge for financial risk managers, covering such topics as:

• Quantitative methods
• Capital markets
• Credit, operational, market, and integrated risk management
• Investment management and hedge fund risk
• Relevant regulatory, legal, and accounting issues essential to risk professionals