TAILIEUCHUNG - Lecture Derivatives: An introduction: Chapter 17 - Robert A. Strong

Chapter 17 - Contemporary issues. The main contents of this chapter include all of the following: Introduction, long term capital management, value at risk, new product development, program trading, FAS 133. | © 2004 South-Western Publishing Chapter 17 Contemporary Issues Outline Introduction Long Term Capital Management Value at risk New product development Program trading FAS 133 Introduction Collapse of Long Term Capital Management Value at risk represents the industry’s efforts to meaningfully measure the risk of a derivatives product New products appear in response to new risks Program trading still popular in financial news services FAS 133 is a new accounting rule resulting in substantial risk management implications Long Term Capital Management Long Term Capital Management (LTCM) was a hedge fund founded by Wall Street traders Its rise and fall is already a case study at Harvard Business School John Meriwether was the driving force behind the fund, which he began promoting in 1993 Long Term Capital Management (cont’d) A hedge fund is a largely unregulated investment portfolio, usually with a substantial minimum investment Engages in esoteric investment activities unavailable to an individual or small institutional investor “Shroud of secrecy” with regard to trading strategy and specific activities Long Term Capital Management (cont’d) LTCM’s practices Believed that money management was a quantifiable science rather than an art Began to place bets in early 1998 that market volatility would decline back to its historical average level Long Term Capital Management (cont’d) LTCM’s practices (cont’d) Wrote options at an implied volatility of 19% and employed substantial leverage Eventually had a staggering $40 million riding on each volatility point change in equity volatility in the . and an equivalent amount in Europe Long Term Capital Management (cont’d) LTCM’s fall LTCM’s positions were so huge it was unable to move out of them “When a firm has to sell in a market without buyers, prices run to the extremes beyond the bell curve” Long Term Capital Management (cont’d) LTCM’s fall (cont’d) By mid-September 1998 equity .

• Tài chính doanh nghiệp
• The derivatives world
• Lecture Derivatives
• Contemporary issues
• Long term capital management
• Program trading
• Value at risk
• Types of derivatives
• Uses of derivatives
• Effective study of derivatives
• Categories of derivatives
• Learning management system
• Financial derivatives
• Lecture Financial derivatives
• Option greeks
• Delta neutrality
• Dynamic hedging
• Principal option pricing derivatives
• Stock options
• Options trade
• Option premium
• Call options
• Basic option strategies
• Protective put
• Synthetic options
• Short sale
• Option combinations
• Nonstandard spreads
• Combined call writing
• Margin considerations
• Option pricing
• Free lunches
• Call price
• Put price
• Interest rate
• Black scholes option pricing model
• Striking price
• Stock price
• The futures market
• Market mechanics
• Market participants
• Futures contracts
• Stock index futures
• Stock indexes
• Foreign exchange futures
• Foreign exchange risk
• Forward rates
• Foreign currency futures
• Interest rate futures
• Treasury bills
• Characteristics of eurodollars
• Portfolio management
• Bond risks
• Duration matching
• Swap price
• Currency swap
• Off market swap
• Option contracts
• Derivative assets
• Futures options
• Pricing futures options
• Implied volatility
• Financial engineering
• Risk management
• Gamma risk
• Managing market risk