Derivatives Workbook

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Apply practical derivatives knowledge to truly test your understanding

Derivatives Workbook offers practical instruction for students and professionals seeking additional guidance on working with derivatives instruments. Created by CFA Institute as a companion to the comprehensive Derivatives text, this book helps you practice using what you've learned through problems that mimic real-world scenarios. Working with different derivatives instruments helps you gauge how well you understand the instruments' characteristics, both shared and unique; this intimate knowledge is essential to effective portfolio management, and this book provides an expertly-designed, low-stakes environment ideal for self-assessment.

Derivatives—financial instruments that derive their value from the value of some underlying asset—have become increasingly important for effective risk management, and fundamental for creating synthetic exposures to asset classes. Whether you're a student aspiring to a career in finance, or a professional seeking a stronger skill set, this workbook is an invaluable tool for simulating the use of derivatives in everyday practice.

Work more effectively with different types of derivative instruments

Master the valuation of forward, future, options, and swap contracts

Utilize options for risk management and portfolio optimization

Explore the practical aspects of working within the derivatives markets

As in other security markets, arbitrage and market efficiency play a critical role in derivative pricing. The experts at CFA Institute recognize the need for realistic, practical derivatives training that translates well into real-world practice; this workbook fills the gap with a wealth of practice problems that have value to both aspiring and practicing investment professionals. Derivatives Workbook provides authoritative training and comprehensive practical instruction on derivative instruments, their markets, and valuation.

Автор

Wendy L. Pirie

#Бизнес-книги #Зарубежная литература #Ценные бумаги / инвестиции #Финансы

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Интервал

CFA Institute is the premier association for investment professionals around the world, with over 142,000 members in 159 countries. Since 1963 the organization has developed and administered the renowned Chartered Financial Analyst¯ Program. With a rich history of leading the investment profession, CFA Institute has set the highest standards in ethics, education, and professional excellence within the global investment community, and is the foremost authority on investment profession conduct and practice. Each book in the CFA Institute Investment Series is geared toward industry practitioners along with graduate-level finance students and covers the most important topics in the industry. The authors of these cutting-edge books are themselves industry professionals and academics and bring their wealth of knowledge and expertise to this series.

DERIVATIVES

WORKBOOK

Wendy L. Pirie, CFA

Cover image: © AvDe/Shutterstock

Cover design: Wiley

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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ISBN 9781119381839 (Paperback)

ISBN 9781119381907 (ePDF)

ISBN 9781119381785 (ePub)

PART I

LEARNING OBJECTIVES, SUMMARY OVERVIEW, AND PROBLEMS

CHAPTER 1

DERIVATIVE MARKETS AND INSTRUMENTS

LEARNING OUTCOMES

After completing this chapter, you will be able to do the following:

● define a derivative and distinguish between exchange-traded and over-the-counter derivatives;

● contrast forward commitments with contingent claims;

● define forward contracts, futures contracts, options (calls and puts), swaps, and credit derivatives and compare their basic characteristics;

● describe purposes of, and controversies related to, derivative markets;

● explain arbitrage and the role it plays in determining prices and promoting market efficiency.

SUMMARY OVERVIEW

This first reading on derivatives introduces you to the basic characteristics of derivatives, including the following points:

● A derivative is a financial instrument that derives its performance from the performance of an underlying asset.

● The underlying asset, called the underlying, trades in the cash or spot markets and its price is called the cash or spot price.

● Derivatives consist of two general classes: forward commitments and contingent claims.

● Derivatives can be created as standardized instruments on derivatives exchanges or as customized instruments in the over-the-counter market.

● Exchange-traded derivatives are standardized, highly regulated, and transparent transactions that are guaranteed against default through the clearinghouse of the derivatives exchange.

● Over-the-counter derivatives are customized, flexible, and more private and less regulated than exchange-traded derivatives, but are subject to a greater risk of default.

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