Final Review. Topics Reasons for Risk ManagementReasons for Risk Management OptionsOptions FuturesFutures SwapsSwaps Interest Rate DerivativesInterest.

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Presentation transcript:

Final Review

Topics Reasons for Risk ManagementReasons for Risk Management OptionsOptions FuturesFutures SwapsSwaps Interest Rate DerivativesInterest Rate Derivatives Structured FinanceStructured Finance

Reasons for Risk Management Match Supply of Internally-generated funds with Demand for funds for Capital Expenditures Match Employee’s incentives with Investors Match Information Advantage with Transaction Ability & Cost of Transaction

Options Valuation and UsageValuation and Usage –Black-Scholes & Model Applications DividendsDividends Implied Volatility & SmilesImplied Volatility & Smiles –Greeks: Delta, Gamma, Theta, Rho, Vega Calculation and Meaning –Delta Hedge Construction (Calls and Puts) –Delta Adjustment

Futures Basic PositionsBasic Positions Basic ValuationBasic Valuation Arbitrage Pricing (Cash & Carry, Reverse C&C)Arbitrage Pricing (Cash & Carry, Reverse C&C) ApplicationsApplications –T-Bill Hedge –Hedging a Floating Payment –Portfolio Hedge –Program Trading

Swaps Swap Cash FlowsSwap Cash Flows Swap ConstructionSwap Construction Swap RevaluationSwap Revaluation

Interest Rate Derivatives SwapsSwaps FRAsFRAs Caps/Floors/CollarsCaps/Floors/Collars

NexGen Issues – SIVs, Structuring, DefinitionsIssues – SIVs, Structuring, Definitions Cash FlowsCash Flows Return MechanicsReturn Mechanics