Table of Content
 

 

 Introduction

  •  Forward Contracts versus Futures Contracts
  •  Type of Assets Underlying Futures Contracts
  •  Futures Exchanges
  •  Types of Assets Underlying Options Contracts
  •  Options Exchanges
  •  Hedgers, Speculators, and Arbitrageurs
  •  The Role of Futures and Options Markets
  •  Reasons for the Rapid Growth of Derivative Markets
  •  The Recent Indian Story in Derivatives
  •  Electronic Exchanges: The State-of-the-Art

 Fundamentals of Futures Markets

  •  Standardization of Futures Contracts
  •  Margins and Marking to Market: General Principles
  •  Spot-Futures Convergence at Expiration
  •  Trading: General Principles
  •  Value at Risk (VaR)
  •  VaR in the Context of Futures Trading in India
  •  Types of Members and the Margining System in India
  •  Types of Orders
  •  Liquidating a Futures Position
  •  Trading Volume versus Open Interest
  •  Conversion Factors When There are Multiple Deliverable Grades
  •  Single Stock Futures

 Pricing of Futures Contracts

  •  Notation
  •  Assumptions
  •  Forward Contract on a Security That Provides No Income
  •  Forward Contracts on Assets That Provide a Known Dividend Yield
  •  Forward Contracts on Commodities
  •  Investment Assets
  •  Consumption Assets
  •  Calendar Spreads and Arbitrage
  •  Net Carry
  •  'Backwardation' and 'Contango'
  •  Delivery Options
  •  Imperfect Markets
  •  Synthetic Securities
  •  Forward Price versus Futures Prices
  •  Stochastic Interest Rates
  •  Quasi- Arbitrage
  •  Risk and Futures Prices

 Hedging

  •  A Selling Hedge
  •  A Buying Hedge
  •  Lifting a Hedge Prior to the Expiration of the Futures Contract
  •  Basis Risk
  •  Selecting a Futures Contract
  •  A Rolling Hedge
  •  The Hedge Ratio
  •  Estimating the Hedge Ratio
  •  Tailing a Hedge
  •  Quantity Uncertainty
  •  Rationale for Hedging
  •  Hedging Processing Margins
  •  Developing Derivative Exchanges Key Issues

 Short -Term Interest Rate Futures

  •  Eurodollars
  •  T-bills
  •  Yields
  •  T-bill Futures
  •  The No-Arbitrage Pricing Condition
  •  Risk Management Using T-bill Futures
  •  Shortening T-bill Maturities
  •  Lengthening T-bill Maturities
  •  Risk Management Using Chained Hedge Ratios
  •  Introduction to Eurodollar Futures
  •  Calculating Profits and Losses on ED Futures
  •  Bundles and Packs
  •  Locking in a Borrowing Rate
  •  Cash and Carry Arbitrage
  •  Reverse Cash and Carry Arbitrage
  •  The No-Arbitrage Pricing Equation
  •  Hedging Rates for Periods Not Equal to  Days
  •  Creating a Fixed Rate Loan
  •  Strip versus Stack Hedges
  •  The TED Spread

 Long-Term Interest Rate Futures

  •  Fundamentals of Bond Valuation
  •  Duration
  •  The Cash Market
  •  The Futures Market
  •  Conversion Factors
  •  Calculating the Invoice Price for a T-bond
  •  The Cheapest to Deliver Bond
  •  Arbitrage or Risk Arbitrage?
  •  Seller's Options
  •  Hedging

 Foreign Exchange Futures

  •  Purchase and Sale
  •  The Spot Market
  •  Arbitrage
  •  The Forward Market
  •  Merchant Rates and Exchange Margins
  •  The No-Arbitrage Forward Price
  •  One Way Arbitrage
  •  The Relationship Between Interest Rate Parity and One-Way Arbitrage
  •  Options Forwards
  •  Modification of Forward Contracts
  •  Futures Markets
  •  Hedging an Export Transaction
  •  Hedging an Import Transaction
  •  Creating Synthetic Investments
  •  Borrowing Funds Abroad
  •  Creating Synthetic Futures Contracts
  •  Creating Synthetic Futures Contracts
  •  Creating Synthetic Short-Term Interest Rate Contracts
  •  Forward Covered Interest Arbitrage

 Stock Index Futures

  •  Price Weighted Indices
  •  Value Weighted Indices
  •  Equally Weighted Indices
  •  Forming Portfolios to Mimic an Index
  •  Portfolio Re-Balancing
  •  Re-balancing an Equally Weighted Portfolio
  •  Changing the Base Period Capitulation
  •  Pricing of Index Futures
  •  Cash and Carry Arbitrage
  •  Reverse Cash and Carry Arbitrage
  •  The No-Arbitrage Equation
  •  Index Arbitrage and Programme Trading
  •  Hedging with Index Futures
  •  Market Timing with Index Futures
  •  Using Index Futures to Change the Beta of a Portfolio
  •  Stock Picking
  •  Portfolio Insurance
  •  Index Futures and Stock Market Volatility
  •  Index Futures in India

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