Derivatives and financial innovations

Half Title
About the Authors
Title Page
Copyright
Dedication
Preface
Foreword
Contents
PART 1: FUTURES
	1. Introduction to Derivatives
		Derivatives in India
		Generic Derivative Products
		Summary
		Questions
	2. Trading Mechanism of Futures Contracts
		Maturity of Futures Contracts
		Contract Size and Contract Multiplier
		Tick Size
		Contract Specifications
		What Makes a Contract Successful
		Positions in Derivatives Market
		Open Interest and Volume
		Convergence of Cash and Futures Prices
		Settlement of Futures Contracts
		Initial and Variation Margins
		Additional Margins
		Final Settlement of Futures Contracts
		Appendix 2.1: Index Concepts
		Summary
		Questions
	3. Uses of Futures
		Risk Traded in Index Futures Market
		Other Risks in Financial Markets
		Role of Different Players in the Futures Market
		Risk Management using Futures (Hedging)
		Important Terms in Hedging
		Speculation in the Futures Market
		Arbitrage Opportunities in the Futures Market
		Summary
		Questions
	4. Futures Pricing
		Cash and Carry Model for Futures Pricing
		Cost of Transaction and Non-arbitrage Bound
		Extension of Cash and Carry Model to Assets, Generating Returns
		Assumptions in the Cash and Carry Model
		Convenience Yield
		Expectancy Model of Futures Pricing
		Summary
		Questions
PART 2: OPTIONS
	5. Basics of Options
		Option Contract
		Terminology used in Options Market
		Risk and Return Profile of Option Contracts
		Relationship between Strike Price of an Option and Market Price of the Underlying Asset
		Option Premium
		Relationship of Time Value with Time
		Comparison of Futures and Options Positions
		Risk Management in the Options Market
		Introduction of New Option Contracts
		Settlement of Option Contracts
		Exercise of Options
		Assignment of Options
		Appendix 5.1: Risk Management Using SPAN
		Summary
		Questions
	6. Synthetic Positions and their Management
		Synthetic Positions
		Purpose of Synthetic Positions
		Creation of Synthetic Positions
		Summary
		Questions
	7. Basics of Options Pricing and Option Greeks
		Basic Determinants of Options Pricing
		Binomial Model for Options Pricing
		Black–Scholes Model for Options Pricing
		Upper and Lower Bounds of Option Premium
		Option Greeks—Measuring Price Sensitivity of Options
		Option Positions vis-a-vis Underlying Positions
		Summary
		Questions
	8. Perspectives in Options Trading
		Perspectives of Futures and Options Traders
		Choice of Strike Price
		Analysis of Call Options
		Analysis of Put Options
		Summary
		Questions
	9. Option Spreads
		Vertical Spread Positions
		Horizontal/Calendar/Time Spreads
		Diagonal Spreads
		Vertical Ratio Spreads
		Summary
		Questions
	10. Other Option Trading Strategies
		Straddle
		Strangle
		Protective Put Buying
		Protective Call Buying
		Covered Call Writing
		Collar
		Covered Put Writing
		Reverse Collar
		Butterfly Spread
		Condor
		Strip
		Strap
		Summary
		Questions
	11. Summary of Trading Strategies on the Basis of Market Outlook
		Market Outlook
PART 3: FINANCIAL INNOVATIONS
	12. Introduction to Some Innovative Financial Products
		Some Innovative Financial Products across the Globe
		Some Innovative Financial Products in India
		Summary
	13. Understanding Convertibles
		Global Convertible Market: Salient Features
		Bond with Warrants
		Convertible Equity
		Buy Back of Shares in Kind
		Exchangeable
		Broad Dimension of Convertibles
		Summary
	14. Covered Warrants
		Warrants
		Covered Warrants
		Difference between Covered Warrants and Covered Calls
		Difference between Call Warrants as Sweeteners and Covered Warrants
		Put Warrants
		Summary
	15. Fresh Perspective on Existing Financial Products
		Fixed Deposits and Options
		Pre-payment Choice and Option
		Bank Guarantee and Option
		Underwriting and Option
		Right Issue and Option
		Buy Back of Shares and Option
		Equity and Option
		Collateralised Loans and Option
		Restructuring the Collateralised Loan Transaction
		Summary
	16. Interest Rate Products
		Genesis of Floaters
		Risk Management of Floating Rate Instruments
		Some Innovative Structures in the Debt Market
		Summary
	17. Securitisation
		Process of Securitisation
		Types of Securitisation
		What can be Securitised?
		Instruments in Securitisation
		Benefits of Securitisation
		Difference Between Collateralised Loans and Securitisation
		Summary
	18. Other Innovative Ideas
		Real Estate Funds
		Exchange Traded Funds (ETFs)
		Foreign Currency Denominated Bonds
		Foreign Bonds and Euro Bonds
		Dual Currency Bonds
		American Depository Receipts (ADRs) and Global Depository Receipts (GDRs)
		Indian Depository Receipts (IDRs)
		Options on Futures Contracts
		Options on Option Contracts
		Commodity Linked Securities
		Weather Derivatives
		Weather Insurance
		Summary
	19. Case Studies
		Case 1—Unleashing Values from Rights
		Case 2—Put Warrants Approach to Fixed Price Buy Back/Takeover Offers
		Case 3—Creative Use of Options in Designing Contracts
		Case 4—Collateralised Mortgage Obligations
		Case 5—Protection of Bondholders through Put Option
		Case 6—Buy Back of Shares for Other than the Cash
		Case 7—Buy Back of Shares for Treasury Purpose
		Case 8—The Barings Episode: Learning for the Market
		Conclusion
Glossary
Index
Authors’ Profiles