Introduction to Derivatives and Risk Management

Slides:



Advertisements
Similar presentations
©2009, The McGraw-Hill Companies, All Rights Reserved Chapter One Introduction.
Advertisements

Introduction to Derivatives and Risk Management Corporate Finance Dr. A. DeMaskey.
1 Outline Definition Types of derivatives Participants in the derivatives world Uses of derivatives.
First Day of Class! FIN 441 Prof. Rogers Spring 2012.
© 2004 South-Western Publishing 1 Derivatives: An Introduction by Robert A. Strong University of Maine Prepared by Oliver Schnusenberg The University of.
Currency Exchange Rates, Hedging, and Arbitrage Jennie Morse BA 543 Evening Section.
Getting Into and Out of Futures Contracts BA 543 Xinwei WU 05/18/2011.
Introduction. Direction of Study Investments Derivative Securities Options, Futures, Swaps, Synthetics Corporate Financial Strategies Corporate Challenges.
Financial Intermediaries Indirect Finance –An Institution stands between lender and borrower. Direct Finance –Borrowers and lenders deal directly with.
Chapter 1. Introduction financial assets financial markets derivatives markets financial assets financial markets derivatives markets.
Investments: Course Introduction 01/05/ Review: Basic Concepts of Finance Time Value of Money Risk and Return.
© 2002 South-Western Publishing 1 Chapter 1 Introduction.
Money Functions of money –Medium of exchange –Unit of account –Store of value Flavors of money –Commodity money –Banknotes … backed by gold or silver reserves.
Introduction. Direction of Study Investments Derivative Securities Options, Futures, Swaps Corporate Financial Strategies Corporate Challenges Derivative.
Business Organization and Financial markets Some basic concepts Financial management: Lecture 2.
Chapter 13 Financial Derivatives. © 2004 Pearson Addison-Wesley. All rights reserved 13-2 Hedging Hedge: engage in a financial transaction that reduces.
What Risks and Why Manage Them?. Why Risk Management? Higher Risk due to: Inflation/DisInflation Volatility of FX Rates Volatility of Interest Rates.
D. M. ChanceAn Introduction to Derivatives and Risk Management, 6th ed.Ch. 1: 1 Chapter 1: Introduction The speed of money is faster than it’s ever been.
What is a Stock Exchange? Is traditionally a place where stocks (shares), bonds, and other financial instruments and derivatives (of the stocks) are traded.
Opportunities in Quantitative Finance in the Department of Mathematics.
Economics 330 Money and Banking Lecture 18 Prof. Menzie Chinn TAs: Chikako Baba, Deokwoo Nam.
FINANCE IN A CANADIAN SETTING Sixth Canadian Edition
Michal Bodlák. Definition  An investment bank is a financial institution that assists: individuals, corporations and governments companies involved in.
Foreign Exchange Risk Dr Kishor Bhanushali
Instruments of Financial Markets at Studienzentrum Genrzensee Switzerland. August 30-September 17, 2004 Course attended by: Muhammad Arif Senior Joint.
The International Financial System
Chapter 1 Introduction to Derivatives. Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 1-2 What Is a Derivative? Definition  An agreement.
Copyright © 2007 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill /Irwin Chapter One Introduction.
Chapter 1 Introduction to Derivatives. Copyright © 2006 Pearson Addison-Wesley. All rights reserved. 1-2 What Is a Derivative? Definition  An agreement.
Derivatives in Brazil. Aug/02 Derivatives in Brazil Uses of Derivatives in Brazil  Who uses, Why and How  Limiting factors on using derivatives in Brazil.
Global Banking and Finance Module
Chapter One Introduction.
Copyright © 2002 Pearson Education, Inc. Slide 16-1 Organization of International Banks International banks provide services to those engaged in international.
®1999 South-Western College Publishing 1 Chapter 25 Financial Engineering.
McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 3 Financial Instruments, Financial Markets, and Financial.
Introduction to Futures & Options As Derivative Instruments Derivative instruments are financial instruments whose value is derived from the value of an.
13-1 Hedging Hedge: engage in a financial transaction that reduces or eliminates risk Basic hedging principle: Hedging risk involves engaging in a financial.
CHAPTER 1 AN OVERVIEW OF FINANCIAL MARKETS. FINANCIAL SYSTEM FINANCIAL MARKETS FINANCIAL INSTITUTIONS &INDIVIDUALS FINANCIAL INSTRUMENTS (SECURITIES)
3-1 CHAPTER 3 FUNDAMENTALS OF FINANCIAL MARKETS. 3-2 Examples of Capital Market Claims l Corporate Stock l Bonds l Mortgages.
© 2004 Pearson Addison-Wesley. All rights reserved 13-1 Hedging Hedge: engage in a financial transaction that reduces or eliminates risk Basic hedging.
Transaction Exposure Risk due to lags in payments Hedging strategies October 27, 20151Transaction Exposure.
INTRODUCTION A process of implementing and managing financial control systems, collecting financial data, analyzing financial reports, and making sound.
Financial Markets & Institutions
WORKING CAPITAL FINANCE. Financing Current Assets- Policies Short term Current Assets financed by only short term financial sources(period < 1year) like.
CEP Job Research Junior Derivatives Trader. Job Nature responsible for the execution of hedges for the banks’ portfolio create monitor and maintain hedge.
Asset Pricing 9 Credits, Fall 2014 Stefano Herzel.
Lecture 1.  Welcome  Syllabus  Homework policy   Taking notes.
1 Chapter 5 Secondary Market Making. 2 A.Secondary Market Making – Dealer/Broker Activity 1. Give financial claims greater liquidity  Investors  Issuers.
INTRODUCTION TO DERIVATIVES Introduction Definition of Derivative Types of Derivatives Derivatives Markets Uses of Derivatives Advantages and Disadvantages.
Chapter 1 Investments - Background and Issues McGraw-Hill/Irwin © 2004 The McGraw-Hill Companies, Inc., All Rights Reserved. Investments & Financial.
Copyright © 2007 Pearson Addison-Wesley. All rights reserved. Chapter 8 Foreign Currency Derivatives.
Introduction The Nature of Derivatives A derivative is an instrument whose value depends on the values of other more basic underlying variables. Or A.
Financial Markets. Types of Assets Tangible Assets Value is based on physical properties Examples include buildings, land, machinery Intangible Assets.
Chapter 3 Accounting for Foreign Currency Friday, June 24,
Contact us: Call: Mail: Visit:
SAP TRM ONLINE TRAINING Contact us: Call: Online | classroom| Corporate Training | certifications | placements| support CONTACT US: MAGNIFIC TRAINING INDIA.
GOOD MORNING.
OTC Derivatives: Trading, Reporting & Regulations
Derivative Markets and Instruments
International Finance: An Introduction
FINANCIAL DERIVATIVES/SNSCT/MBA
Overview of Market Participants and Financial Innovation
Introduction to Financial Risk Management
Currency Forwards.
Derivative Markets.
Introduction to Futures & Options As Derivative Instruments
Introduction of Derivative Market
SAP TRM ONLINE TRAINING
Introduction to Derivatives
An Overview of the Financial System
Presentation transcript:

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 Strategies—basic and advanced Futures Markets Strategies Swaps and Other Exotic Instruments

Feedback: Privacy Policy Feedback
Do Not Sell My Personal Information
About project: SlidePlayer Terms of Service

© 2024 SlidePlayer.com Inc. All rights reserved.