Derivatives: A Manager's Guide to the World's Most Powerful Financial Instruments

Copyright......Page 3
CONTENTS......Page 6
WHY BOTHER WITH THIS BOOK?......Page 10
INTRODUCTION......Page 12
CHAPTER 1 What Are Derivatives?......Page 16
FUTURES CONTRACTS......Page 18
OPTIONS......Page 21
SWAPS......Page 25
HYBRID INSTRUMENTS......Page 31
FORWARD CONTRACTS......Page 34
WHAT DO YOU MEAN “COMMODITY ”?......Page 35
CHAPTER 2 Why Do They Exist?......Page 38
THE HEDGING INSTINCT......Page 39
HONORING THE \"SPECULATOR\"......Page 44
CHAPTER 3 Call in the Lawyers......Page 46
EXCHANGE-TRADED DERIVATIVES......Page 47
SWAP AGREEMENTS......Page 50
HYBRID INSTRUMENTS......Page 52
FORWARD CONTRACTS......Page 54
PLAYING THE “INSTITUTIONAL ” CARD......Page 56
VALUATION RISK......Page 58
TIMING RISK......Page 59
CREDIT RISK......Page 61
LEGAL RISK......Page 62
OPERATIONAL RISK......Page 63
ACCOUNTING RISK......Page 65
BOUNDARY RISK......Page 67
“FORREST GUMP ” RISK......Page 69
PRETTY-FACE RISK......Page 70
OVERHARVESTING RISK......Page 71
SIDE-OF-THE-ANGELS RISK......Page 72
LEGAL DOUBLE-TALK RISK......Page 73
RATINGS RISK......Page 74
CAREER RISK......Page 76
BACKGROUND......Page 77
PAYING THE PIPER: THE MASSIVE CFTC SETTLEMENT......Page 78
THE GLOBALIZATION PHENOMENON......Page 113
CULTURAL AND POLITICAL WILD CARDS......Page 115
COORDINATING REGULATORY POLICY......Page 118
LIVING THE NIGHTMARE......Page 120
CONSTRUCTING A GOOD PLAN......Page 121
CHAPTER 8 What the Pros Recommend......Page 128
CREDIT RISK......Page 129
LIQUIDITY RISK......Page 132
MARKET RISK......Page 133
EARNINGS RISK......Page 134
CHAPTER 9 Preparing for the Future......Page 136
THE RUMORED DEMISE OF OPEN OUTCRY TRADING......Page 137
DECONSTRUCTING THE TRADITIONAL EXCHANGE......Page 138
PREPARING FOR REGULATORY CHAOS......Page 145
CHAPTER 10 The Political Dimension......Page 147
THE AGENCY PLAYERS......Page 148
CONGRESS......Page 150
THE STATES......Page 152
THE MEDIA......Page 154
CONCLUSION......Page 155
APPENDIX A Report of the Board of Banking Supervision......Page 156
APPENDIX B  Report on Derivatives Losses Where Sales Abuses Were Alleged......Page 186
APPENDIX C Annex  Supervisory Information Framework for Derivatives and Trading......Page 192
INDEX......Page 220
ABOUT THE AUTHOR......Page 225