Author’s acknowledgements
Publisher’s acknowledgements
Foreword
Contributors

 1. Background and development of the derivatives markets

• Introduction

• Definition and key features

• Uses of derivatives

• Range of derivatives

• Increasing use of the Central Counterparty Model (CCP)

• Risk and benchmarking

• Market volumes

• Users and uses of derivatives

• Straight Through Processing (STP)

2. Market fundamentals

• Introduction

• How banks generate income

• Three key assumptions

• Role and use of LIBOR

• Day counts

• Financial maths

• Calculating forward rates

• Marking to market

• Yield curves

Quiz

 3. Derivatives fundamentals

• Range of derivatives   

• What is a vanilla trade?

• Settlement

• Triggers

• Liquidity and credit risk

• Understanding the underlying

• Benchmarks

• Fair value

• Dealing with derivatives

 4. Basic option concepts

·        Introduction

·        Option pricing

·        Option mechanics

 5. Interest rate derivatives – single settlement instruments

·        Background and development

·        Single settlement interest rate derivatives

·        Financial futures contracts

·        Forward rate agreements (FRAs)

·        Interest rate options (IROs)

·        Premium determinants

Quiz

 6. Interest rate derivatives

·         Introduction

·         Interest rate caps and floors

·         Interest rate collars

·         Interest rate swaps

Quiz

7. Benchmarking in the OTC derivatives markets
Penny Davenport

·         Financial benchmarking for derivatives

·         Operational risk measurements for derivatives

·         Markit Annual Scorecard

·         Conclusion

 8. Credit derivatives

·         Introduction

·         What is credit risk?

·         Style of trading

·         Default data

·         The first deals

·         Range of credit derivatives

·         Credit default swaps

·         Total return swaps

 9. Beyond a vanilla CDS
Robert Reoch

·         Introduction

·         Credit indices

·         CDOs

·         Where next?

 10. Currency derivatives

·         Introduction

·         Over the counter currency options

·         Currency options: reduced premium strategies

·         Simple exotic structures

·         Currency swaps

·         Exchange-traded instruments

·         Conclusion

Quiz

 11. Equity derivatives

·         Introduction

·         Background

·         Single stocks or equity indices?

·         Stock index futures

·         Stock index options

·         Single stock options

·         Equity index swaps

 12. Using equity derivatives in investment products
Christopher C. Taylor

·         Equity investment

·         The development of the UK and European markets for equity-based retail products

·         Constructing a capital protected growth product with equity derivatives

·         Income paying capital-at-risk products

·         Calculation of income level

·         The risk to capital

·         The most common structural variations used in the equity derivative market

 13. Commodity derivatives

·         Introduction

·         Exchange-traded energy derivatives

·         Exchange-traded futures contracts

·         Exchange-traded energy option contracts

·         OTC or ‘off-exchange’ energy derivatives

·         OTC option products

·         OTC oil swaps

·         Overview of electricity market

 14. Using derivatives in hedge funds
Stuart C. Fiertz

·         Introduction

·         Mitigating risk

·         Increasing exposures

·         Capturing tax efficiencies

·         Manoeuvring anonymously

·         Accessing restricted markets

·         Trading non-deliverable assets

·         Shifting operational burdens

·         Executing with greater precision

·         Conclusion

 15. Derivatives and Technology
Chris Horsburgh 

·         Introduction and background

·         Hardware and software developments

·         Business drivers for change

·         Responses

·         Conclusion

 16. Derivatives and documentation

·         Introduction

·         Background to the International Swaps and Derivatives Association, Inc. (ISDA)

·         Products covered by the ISDA Agreement

·         ISDA heaven vs ISDA Hell

 17. STP for OTC derivatives
Bill Hodgson

·         What is STP?

·         Automation drivers and priorities

·         Message formats

·         Central clearing for OTC products

·         Innovation in trade capture and confirmation

·         Fundamental issues in processing OTC products

·         The future of STP for OTC contracts

·         The ‘backlog’

·         A central infrastructure for the OTC markets: Trade Information Warehouse

·         Conclusion

18. Risk and compliance for derivatives
Tony Blunden

·         Introduction

·         Governance

·         Risk management practice

·         Compliance practice

·         Conclusion

 19. First principles of accounting for derivatives
Deborah Morton-Dare

·         Introduction

·         Fundamental accounting concepts

·         Reporting requirements

·         Fair value and mark-to-market accounting

·         Accruals accounting and amortized cost

·         Fair value vs hedge accounting

·         Accounting treatment

·         International standards

·         Conclusion – an approach to accounting for a new derivatives transaction

Glossary

Index