Derivatives Essentials: An Introduction to Forwards, Futures, Options and Swaps: A Review

Derivatives Essentials: An Introduction to Forwards, Futures, Options and Swaps: A Review

Derivatives Essentials

The author presents some of the basic concepts related to interest rate swaps and records how several derivatives trace their evolution to them. Entry-level professionals, laymen, and students would find this work to be of great value in acquiring a fundamental knowledge of futures and options along with other derivatives.

Unlike an interest rate swap, the parties to a currency swap will exchange principal amounts at the beginning and end of the swap. The two specified principal amounts are set so as to be approximately equal to one another, given the exchange rate at the time the swap is initiated.

Fixed price can refer to a leg of a swap where the payments are based on a constant interest rate, or it can refer to a price that does not change. A swap is a derivative contract through which two parties exchange financial instruments, such as interest rates, commodities or foreign exchange.

Unlike most standardized options and futures contracts, swaps are not exchange-traded instruments. Instead, swaps are customized contracts that are traded in the over-the-counter (OTC) market between private parties. Firms and financial institutions dominate the swaps market, with few (if any) individuals ever participating. Because swaps occur on the OTC market, there is always the risk of a counterparty defaulting on the swap.

In a plain vanilla swap, the two cash flows are paid in the same currency. The specified payment dates are called settlement dates, and the times between are called settlement periods. Because swaps are customized contracts, interest payments may be made annually, quarterly, monthly, or at any other interval determined by the parties.

eBook Derivatives Essentials An Introduction To Forwards Futures Options And Swaps Wiley Finance available at oprewaxerbooks67.changeip.com with Format PdF, ePub, Audiobook & Magazine. Please Create a FREE ACCOUNT to read or download Derivatives Essentials An Introduction To Forwards Futures Options And Swaps Wiley Finance FOR FREE. The most common and simplest swap is a "plain vanilla" interest rate swap. In this swap, Party A agrees to pay Party B a predetermined, fixed rate of interest on a notional principal on specific dates for a specified period of time. Concurrently, Party B agrees to make payments based on a floating interest rate to Party A on that same notional principal on the same specified dates for the same specified time period.

A clear, practical guide to working effectively with derivative securities products Derivatives 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. Coverage includes forwards, futures, options, swaps, and related products and trading strategies, with practical examples that demonstrate each concept in action.

• However, despite their relative youth, swaps have exploded in popularity.
• For example, Company C, a U.S. firm, and Company D, a European firm, enter into a five-year currency swap for $50 million.
• He has published more than 30 academic articles and books, including publications in the Journal of Financial Intermediation, Journal of Banking and Finance, Journal of Empirical Finance, and the Journal of Financial Markets, among others.

In finance, a swap is a derivative contract in which one party exchanges or swaps the values or cash flows of one asset for another. This work covers a lot of groundwork on various derivatives contracts including forwards, futures, swaps and options along with critical concepts such as cost of carrying, settlement, valuation, and payoff among others.

It’s also a book that deserves a permanent place on a derivative trader's reference shelf. Very useful books not only for students and professionals but also people like me who deal with stock trading market. He demonstrates how these building blocks can be applied to different markets with a view to tackling several risk-related issues and trading problems.

All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data. Practical trading strategies and techniques are provided for different types of derivatives including forwards, futures, swaps, and options along with other related products. A swap is an agreement between two parties to exchange sequences of cash flows for a set period of time.

We have carefully compiled a list of derivatives books which could help enhance the understanding of fundamentals of derivatives as well as a number of trading and hedging techniques in existence. Students, as well as traders and finance professionals, would find these work on derivatives books of great utility and some of them might even be a good source of reference on the subject.

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 hold a Ph.D. in Finance, an MBA in Finance, and a BA in Psychology, all from York University. He has published more than 30 academic articles and books, including publications in the Journal of Financial Intermediation, Journal of Banking and Finance, Journal of Empirical Finance, and the Journal of Financial Markets, among others. Financial markets, derivative securities, and asset management are areas of expertise that Mr. Aron Gottesman that diligently and efficiently writes about. At present, Mr. Gottesman works as a Professor of Finance at Pace University.

Swaps are customized contracts traded in the over-the-counter (OTC) market privately, versus options and futures traded on a public exchange. Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate.

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. Derivatives Essentials is an accessible, yet detailed guide to derivative securities. Finally, at the end of the swap (usually also the date of the final interest payment), the parties re-exchange the original principal amounts. For example, Company C, a U.S. firm, and Company D, a European firm, enter into a five-year currency swap for $50 million. Let's assume the exchange rate at the time is $1.25 per euro (e.g. the dollar is worth 0.80 euro).

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.

He holds a Ph.D. in Finance, an MBA in Finance, and a BA in Psychology, from York University. Traders who want instant gratification in the form of specific setup recommendations will find Gottesman's book disappointing. But anyone who wants to understand what options are all about, especially in the context of other derivatives, and how the pieces fit together mathematically should read this book.