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    Introduction To Derivatives and Risk Management

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    JyotiGhanchi
    This document provides an introduction to speculative markets, derivatives, and financial engineering. It defines speculative markets as markets that deal in derivative securities such as options, futures, and swaps. Derivatives are financial instruments that derive their value from underlying assets. Financial engineering is the design and implementation of innovative financial instruments and processes to provide customized solutions to problems in financial risk management, such as interest rate, currency, commodity, and security price risk. The document outlines the course will cover options markets, futures markets, and swaps and other exotic instruments.

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    Introduction To Derivatives and Risk Management

    Uploaded by

    JyotiGhanchi
    846 views9 pages
    This document provides an introduction to speculative markets, derivatives, and financial engineering. It defines speculative markets as markets that deal in derivative securities such as options, futures, and swaps. Derivatives are financial instruments that derive their value from underlying assets. Financial engineering is the design and implementation of innovative financial instruments and processes to provide customized solutions to problems in financial risk management, such as interest rate, currency, commodity, and security price risk. The document outlines the course will cover options markets, futures markets, and swaps and other exotic instruments.

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    Introduction to Derivatives

    Original Title

    Introduction to Derivatives and Risk Management (1)

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    This document provides an introduction to speculative markets, derivatives, and financial engineering. It defines speculative markets as markets that deal in derivative securities such as options, futures, and swaps. Derivatives are financial instruments that derive their value from underlying assets. Financial engineering is the design and implementation of innovative financial instruments and processes to provide customized solutions to problems in financial risk management, such as interest rate, currency, commodity, and security price risk. The document outlines the course will cover options markets, futures markets, and swaps and other exotic instruments.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    846 views9 pages

    Introduction To Derivatives and Risk Management

    Uploaded by

    JyotiGhanchi
    This document provides an introduction to speculative markets, derivatives, and financial engineering. It defines speculative markets as markets that deal in derivative securities such as options, futures, and swaps. Derivatives are financial instruments that derive their value from underlying assets. Financial engineering is the design and implementation of innovative financial instruments and processes to provide customized solutions to problems in financial risk management, such as interest rate, currency, commodity, and security price risk. The document outlines the course will cover options markets, futures markets, and swaps and other exotic instruments.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 9

    Introduction to

    Derivatives and Risk


    Management
    Speculative Markets

    Outline
    Meaning

    of Speculative Markets
    Meaning of Derivatives
    Meaning of Financial Engineering
    Types of Derivatives
    Role of Derivatives
    Sequence of this course

    Speculative Markets
    A

    market that deals in derivative securities


    such as options, futures, swaps, and variants
    of these products
    Why speculative markets?

    To deal with financial risk management

    What

    are derivatives?

    A financial instrument that derives its value from


    the underlying asset on which it is written

    Derivatives

    are the result of financial


    engineering
    What is financial engineering?

    Meaning of Financial
    Engineering

    The design, development, and the implementation of innovative


    financial instruments and processes, and the formulation of
    creative solutions to problems in finance
    Objective is to provide custom-designed solutions to problems
    that firms face in the area of financial risk management. Firms
    exposure to financial risk management include interest rate risk,
    currency risk, commodity price risk, security price risk, and so on.
    Financial engineering is the means to implement financial
    innovation

    What is financial innovation?


    Include not only the creation of new types of securities, but
    also the development of and evolution of new financial
    organizations
    Financial engineering embodies many of the skills, techniques,
    and processes that produce both new securities and new
    financial organizations.
    It is the application of advances in related technologies that
    permit the diagnosis, analysis, design, production, pricing, and
    customization of solutions to problems in finance

    Why Financial Innovation?

    Revolutionary changes in the international financial


    system

    Round the clock trading Tokyo-London-New York


    Financial futures, swaps, mortgage-backed securities,
    exchange traded options
    Junk bonds
    Shelf registration, electronic funds transfer and security
    trading, NOW accounts, asset-based financing, LBO, etc.

    Proliferation of organized trading markets in both


    equity and fixed-income derivative securities during
    the past two decades is unprecedented

    What does financial innovation do


    for the markets and participants?

    Meet demands for completing market with expanded for


    risk-sharing
    risk-pooling,
    hedging, and
    intertemporal or spatial transfer of resources that are not
    already available
    Lower transaction costs/increase liquidity
    Reduce agency costs caused by asymmetric information
    Price Discovery
    Greater Market Efficiency

    Course Sequence

    Option Markets

    Futures Markets

    Structure
    Principles
    Pricing
    Strategiesbasic and advanced
    Structure
    Principles
    Pricing
    Strategies

    Swaps and Other Exotic Instruments

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