8/2/2019 Derivative Products TOC

1/3

DERIVATIVEPRODUCTS

ByJawwadAhmedFarid

8/2/2019 Derivative Products TOC

2/3

D E R I V A T I V E P R O D U C T S

Pleasedonotphotocopyordistributewithoutpermission.AllrightsreservedAlchemySoftwarePvtLimited.

http://FourQuants.com

Page3of27

CONTENTS

DERIVATIVEPRODUCTS................................................................................................................................5

1. REVIEW.............................................................................................................................................5

Asecondlookatderivativecontracts.......................................................................................................5

StandardTemplateforEvaluatingDerivatives..........................................................................................62. VANILLAPRODUCTS.............................................................................................................................7

Options......................................................................................................................................................7

3. PRICINGBASICS..................................................................................................................................10

OptionPrice..............................................................................................................................................10

AssetPrice.....................................................................................................................................10

ExercisePrice................................................................................................................................10

InterestRates................................................................................................................................10

VolatilityoftheAssetPrice...........................................................................................................10

Timetoexpiration.........................................................................................................................10

CashDistributions.........................................................................................................................10

Europeanoptionprice..............................................................................................................................11

4. GREEKSANDBINOMIALTREES...............................................................................................................11

Americanoptionprice...............................................................................................................................13

5. OPTIONSONSHARES,STOCKS,CURRENCIESANDEQUITIES...........................................................................15

StockOptions............................................................................................................................................15

ForeignCurrencyOptions.........................................................................................................................15

IndexOptions............................................................................................................................................15

FuturesOptions.........................................................................................................................................15

Warrants...................................................................................................................................................15EmployeeStockOptions...........................................................................................................................16

Convertibles..............................................................................................................................................16

6. OPTIONSONRATES.............................................................................................................................16

BondOptions............................................................................................................................................16

EmbeddedBondOptions..............................................................................................................16

InterestRateCaps/Floors/Collars...........................................................................................................17

EuropeanSwapOptions............................................................................................................................17

7. EXOTICOPTIONS.................................................................................................................................18

Bermudaoption........................................................................................................................................18

Quantooption...........................................................................................................................................18

Compositeoption......................................................................................................................................18

DigitalorBinaryorAllornothingoptions.............................................................................................18

Barrieroptions..........................................................................................................................................18

Asianoptions.............................................................................................................................................19

AverageStrikeOptions..............................................................................................................................19

Lookbackoptions.....................................................................................................................................19

Compoundoptions....................................................................................................................................19

Chooser(Asyoulikeit)options................................................................................................................19

Exchangeoptions......................................................................................................................................19Forwardstartoptions...............................................................................................................................19

8/2/2019 Derivative Products TOC

3/3

D E R I V A T I V E P R O D U C T S

Pleasedonotphotocopyordistributewithoutpermission.AllrightsreservedAlchemySoftwarePvtLimited.

http://FourQuants.com

Page4of27

Basketoptions...........................................................................................................................................20

Shoutoptions............................................................................................................................................20

8. FORWARDCONTRACTS.........................................................................................................................20

ForwardPrice............................................................................................................................................21

Forwardpriceofasecuritywithnoincome:................................................................................21

Forwardpriceofasecuritywithknowncashincome:.................................................................21

Forwardpriceofasecuritywithknowndividendyield:...............................................................21

SyntheticForwardContract......................................................................................................................21

ForwardRateAgreement..........................................................................................................................22

9. FUTURES...........................................................................................................................................22

Futuresprice.............................................................................................................................................22

StockIndexfutures...................................................................................................................................23

Futurescontractsoncurrencies................................................................................................................23

Futurescontractsoncommodities...........................................................................................................23

InterestRateFutures................................................................................................................................23TreasuryBondFutures..................................................................................................................23

TreasuryNoteFutures..................................................................................................................23

5-yearTreasuryNoteFutures.......................................................................................................24

TreasuryBillFutures.....................................................................................................................24

EurodollarFutures........................................................................................................................24

10. SWAPS............................................................................................................................................24

InterestRateSwap....................................................................................................................................24

CurrencySwap..........................................................................................................................................25

Fixedforfixedcurrencyswap.......................................................................................................25

Floatingforfloatingcurrencyswap..............................................................................................25

Cross-currencyinterestrateswap................................................................................................25

VariationstoPlainVanillaSwaps..............................................................................................................25

Step-upSwaps..............................................................................................................................25

AmortizingSwaps.........................................................................................................................25

BasisRateSwap............................................................................................................................25

ForwardorDeferredSwaps..........................................................................................................25

CompoundingSwaps....................................................................................................................25

LIBOR-in-ArrearsSwap.................................................................................................................26

ConstantMaturitySwap...............................................................................................................26ConstantMaturityTreasurySwap................................................................................................26

DifferentialSwaporQuanto.........................................................................................................26

VarianceorVolatilitySwap...........................................................................................................26

EquitySwap..................................................................................................................................26

CommoditySwap..........................................................................................................................26

AssetSwap....................................................................................................................................26

AccrualSwap.................................................................................................................................26

CancelableSwap...........................................................................................................................26

ExtendableSwap...........................................................................................................................26

DISCLAIMER..............................................................................................................................................27