Financial Risk Management and Derivative Instruments
Michael Dempsey
- 258 páginas
- English
- ePUB (apto para móviles)
- Disponible en iOS y Android
Financial Risk Management and Derivative Instruments
Michael Dempsey
Información del libro
Financial Risk Management and Derivative Instruments offers an introduction to the riskiness of stock markets and the application of derivative instruments in managing exposure to such risk. Structured in two parts, the first part offers an introduction to stock market and bond market risk as encountered by investors seeking investment growth. The second part of the text introduces the financial derivative instruments that provide for either a reduced exposure (hedging) or an increased exposure (speculation) to market risk. The fundamental aspects of the futures and options derivative markets and the tools of the Black-Scholes model are examined.
The text sets the topics in their global context, referencing financial shocks such as Brexit and the Covid-19 pandemic. An accessible writing style is supported by pedagogical features such as key insights boxes, progressive illustrative examples and end-of-chapter tutorials. The book is supplemented by PowerPoint slides designed to assist presentation of the text material as well as providing a coherent summary of the lectures.
This textbook provides an ideal text for introductory courses to derivative instruments and financial risk management for either undergraduate, masters or MBA students.
Preguntas frecuentes
Información
PART B
Derivative instruments and financial engineering
5 Interest rate futures (forwards)
- Interest rate swaps exist to allow banks and other institutions to hedge their interest rate exposure, or, alternatively, to speculate on interest rate movements, without the need for burdensome capital upfront (as compared with, say, an investment in bonds aimed at timing interest rates).
- In a swap arrangement, the receiver (the party receiving a fixed-rate payment stream) profits if interest rates fall and loses if interest rates rise. Conversely, the payer (the party paying fixed) profits if rates rise and loses if rates fall.
- A bank or financial institution will seek to facilitate swap agreements with clients aimed at enhancing their borrowing positions while making a profit for itself.
- A forward rate agreement (FRA) is an “over the counter” agreement with a financial institution that allows a firm or institution to secure a future borrowing or lending interest rate on a notional amount. The agreement provides a benefit to the firm or institution in the case that subsequent interest rates would have been less favorable to the firm or institution.
- The existence of a regulated marketplace for the trading of “derivative” instruments whose value is dependent on subsequent interest rates allows for investors and firms to either hedge or speculate on future interest rate changes.