Mastering Derivatives Markets

Francesca Taylor has been a major player in the international derivatives markets for over 25 years and has recently relocated to Dubai, UAE.Francesca is also the founder and ex-CEO of Taylor Associates (International) Ltd, a financial training company based in London, which provides training and education to a range of financial and non-financial organisations.She has extensive experience in the derivatives clearing and OTC post trade space working with key market providers of infrastructure services, notably Capco, CLS, DTCC, Deriv/SERV, Markit and Omgeo, both in the UK and North America.She has worked with CME and Bloomberg in NYC and ICE in Chicago to create TV and web based tutorials in traded options and future markets.Francesca has a BSc (Hons) in geology from London University, an MBA from Imperial College and an AMCT from the Association of Corporate Treasurers.Francesca is the author of the bestselling Market Know How: Finance and Markets and Mastering Exchange and Currency Options, 2nd edition, also published by FT Prentice Hall.A range of expert practitioners have also contributed chapters outlining their thoughts and views on the finance markets in their specialist areas:Penny Davenport and Gavin Nolan, Markit"Benchmarking in the OTC derivatives markets"Bill Hodgson, The OTC Space"When worlds collide, central clearing and the OTC market"Emilie Mazzacurati, Point Carbon"Carbon derivatives and environmental products"Ray McKenzie, ICE"The impact of electronic trading on the FX market"Eric Salomons, DFSA"Regulations in the derivatives markets"

• Table of Contents 1. Background and development of the derivatives markets Market backgroundIntroductionKey featuresUses of derivativesRange of derivativesIncreasing use of the Central Counterparty Model (CCP)Risk and benchmarkingMarket volumesUsers and uses of derivativesStraight Through Processing (STP)2. Market fundamentals IntroductionHow banks generate incomeThree key assumptionsRole and use of LIBORDay countsFinancial mathsCalculating forward ratesMarking to marketYield curvesQuiz3. Risk — a Primer IntroductionFinacial risks: markets, credit, liquidityOperational riskMore esoteric risks4. Derviatives Fundamentals Range of derivativesWhat is a vanilla trade?SettlementTriggersLiquidity and credit riskUnderstanding the 'underlying'BenchmarksFair valueDealing with derivatives5. Basic option concepts IntroductionOption pricingOption mechanics6. Interest rate derivatives — single settlement instruments IntroductionSingle settlement interest rate derivativesFinancial futures contractsForward rate agreements (FRAs)Interest rate options (IROs)Quiz7. Interest rate derivatives IntroductionInterest rate caps and floorsInterest rate collarsInterest rate swapsQuiz8. Benchmarking in the OTC derivatives marketsPenny Davenport, Manging Director, Markit Document Exchange and Gavan Nolan, Vice President, Credit Research, Markit Group Financial benchmarking for derivativesLiquidity benchmarking for derivativesOperational risk measurements for derivativesConclusion9. Currency derivatives IntroductionOver the counter currency optionsCurrency options: reduced premium strategiesSimple exotic structuresCurrency swapsExchange-traded instrumentsQuiz10. The impact of electronic trading on the FX MarketRay McKenzie, Vice President, ICE The early yearsFX as part of a commodity portfolioFirst electronic dealing platformsElectronic market makingPhases I and IIPoint and click vs algo tradersThe impact of the credit crisis on banks' FX tradingPhase III11. Credit derivatives IntroductionWhat is credit risk?Styles of tradingThe first dealsRange of credit derivativesCredit default swaps12. Central clearing and the OTC marketBill Hodgson, Founder and CEO, The OTC Space Ltd The basicsTrade executionRisks and mitigationGetting trades into clearingThe business case and benefitsPredictions for market developmentTerminology13. Equity derivatives IntroductionBackgroundSingle stocks or equity indices?Stock index futuresStock index optionsSingle stock optionsEquity index swaps14. Commodity derivatives IntroductionExchange-traded energy derivativesExchange-traded futures contractsExchange-traded energy option contractsOTC or ‘off-exchange’ energy derivativesOTC option productsOTC oil swaps<