Derivatives Unlocked : A Practitioner’s Perspective (Hardcover)

Introduction.?What to Expect.?Definition.?The Derivatives Marketplace Structure.?Market Size.?Chapter?1.?The Toolbox: Risk-Free Rate and Discounting.?Introduction.?1.1 The Derivatives Risk-Free Rate.?1.2 Compounding and Present Value Calculation.?1.3 The Case of Discounting Bond Cash Flows.?1.4 Discount Factors.?1.5 Zero-Coupon Discounting.?Chapter?2.?The Toolbox: Duration and Convexity.?2.1 The Case of Fixed Rate Bonds.?2.2 From Fixed Rate Bonds to Discrete Cash Flows.?2.3 Convexity of Fixed Cash Flows.?2.4 The Case of the Austria Bond 2.1% due 2117.?Chapter?3.?The Toolbox: Interest Rate Swaps.?Introduction.?3.1 Fix to O/N Index Swap.?3.2 Forward-Starting Floating Rate Indices.?3.3 IRS as a Risk Transfer Tool.?3.4 Unwinding an Interest Rate Swap.?3.5 Terminating a Bond + Swap Financing.?3.6 RFR and IBOR Swap Curves.?Chapter?4.?Case Study: Bond Portfolio Duration Hedging.?4.1 The Bond Portfolio DV01.?4.2 Swaps PV01.?4.3 Calibrating the Fix Paying Swaps.?Chapter?5.?Case Study: Synthetic Fixed Rate Bond Financing.?5.1 Introduction.?5.2 Loan + Swap vs Bond Arbitrage.?5.3 Conclusions.?Chapter?6.?The Toolbox: Forward Prices.?Introduction.?6.1 The Case of Interest Rates.?6.2 A Foreign Exchange Example.?6.3 The Cost of Carry Replication.?6.4 Forward Prices Across Asset Classes.?6.5 Shape and Meaning of Forward Curves.?6.6 Combining Forwards Across Asset Classes.?Chapter?7.?The Toolbox : Credit Default Swaps.?7.1 The Credit Risk Premium.?7.2 Single-Name Credit Default Swaps.?7.3 CDS Indices. 7.4 Portfolio Credit Default Swaps.?Chapter?8.?The Toolbox : Credit and Other Mark-to-Market Induced Risks.?8.1 The Issue at Hand.?8.2 Assessing Potential Mark-to-Market Changes.?8.3 Boiling Down MtM Drivers.?8.4 Hedge Accounting Key Principles.?8.5 Management of Derivatives-induced Credit Risk.?8.6? Additional Considerations on MtM Risks.?Chapter?9.?Case Study: Cross-currency Swaps and Synthetic Euro Financing.?9.1 Introduction.?9.2 Proposed Solution.?9.3 Simplified Pricing Methodology.?9.4 Spreadsheet-based Pricing.?9.5 The Case of Liberty Global.?Chapter?10.?Case Study: Strategic Balance Sheet FX Hedging.?10.1 Introduction.?10.2 Nature of the Balance Sheet FX Risk.?10.3 Possible Solutions.?10.4 The Economics of X-ccy Swaps and Forwards.?10.5 Accounting Analysis.?10.6 The Hedging Cost Trade-off.?10.7 Execution Considerations.?10.8 The Ukraine Invasion.?Chapter?11.?Toolbox: Probability Distribution of Asset Returns.?Introduction.?11.1 Continuous Compounding.?11.2 The Example of the S&P 500 Daily Returns.?11.3 Normal Distributions: Summary Description and Attributes.?11.4 Using the Normality of Log Returns to Assess Risks.?Chapter?12.?Toolbox: Introduction to Options.?12.1 An Intuitive Approach to Option Pricing.?12.2 Principles of Options Contracts.?12.3 Standard Option Pay-Off Representations.?12.4 Using Models to Price Options.?12.5 The Greeks.?12.6 Delta Hedging.?12.7 Non-Standard Options.?12.8 At-The-Money-Forward Options. 12.9 Non-ATMF Option Pricing.?Chapter?13.?Case Study: Equity Stake Hedging and Financing.?13.1 Introduction.?13.2 Pricing of the Collar Strategy.?13.3 NewTech Share Exit Price Scenarios.?13.4 Execution Considerations. 13.5 Financing.?Chapter?14.?Case Study: Accelerated Stake Acquisition and Financing.?14.1 Initial Block of Shares.?14.2 Collar Structure.?14.3 Financing.?Chapter?15.?Case Study: Leveraged Employee Shareholding Plan.?14.1 Introduction.?15.2 Leveraged Investment in Shares.?15.3 Pricing of the ESF scheme.?15.4 TopCo Call Option’s Back-of-the-Envelope Pricing.?15.5 Execution Considerations.?15.6 The French Market for Leveraged Employee Plans.?Chapter?16.?Tool Box: Structured Notes.?16.1 Securitising Derivatives. 16.2 Capital Protected Notes.?16.3 Capital-at-Risk Structures.?Chapter?17.?Case Study: Synthetic Securitization and Credit-Linked Notes.?A Note on Banks Balance Sheets.?17.1? Basics on Regulatory Capital.?17.2 The Case of NewBank.?17.3 Synthetic Securitisation Key Principles.?17.4 SPV-based Funded Structure.?17.5 Credit Protection Agreement.?17.6 NewBank Regulatory Capital Benefits.?17.7 Risk and Reward: The View Point of the CLN Investor.?17.8 The Case of PGGM.?Chapter 18.?Case Study: Bank Collateral Exchange.?18.1 NewBank’s Funding Paradigm.?18.2 Transaction Structure.?18.3 Transaction Terms.?18.4 Pricing and Relative Value.?