Download Exchange-traded Derivatives by Erik Banks PDF

By Erik Banks

Exchange-Traded Derivatives offers an summary of the worldwide indexed futures and ideas markets, and the way person exchanges and items are adapting to a brand new working setting - an atmosphere characterised by way of quick, nearly non-stop, switch. This ebook serves as an excellent source at the twenty first century indexed by-product markets, items and tools.

Divided into 3 elements, Exchange-Traded Derivatives starts via offering an total realizing of and the forces that experience, and are, changing the working setting - stressing how exchanges have to swap to be able to deal with the demanding situations. the writer then offers a complete description of top proven exchanges, detailing their origins and constitution, diversity of goods and prone, strengths and 'weaknesses'. The publication concludes with a glance at rising marketplaces - these in constructing nations in addition to new "electronic" systems - which are more likely to bring up in significance over the arriving years.

Exchange-Traded Derivatives is a important reference for fund managers, company treasurers, company threat managers, CFOs and people looking a close advisor to the world's by-product exchanges and products.

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Exchange-traded Derivatives

Exchange-Traded Derivatives presents an summary of the worldwide indexed futures and innovations markets, and the way person exchanges and items are adapting to a brand new working setting - an atmosphere characterised by means of quick, nearly non-stop, swap. This e-book serves as an awesome source at the twenty first century indexed spinoff markets, items and tools.

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66)) r Net loss on intermarket spread: − $60 000 Under this scenario the spread widened from the original 29 cents to 35 cents, contrary to the speculator’s view, creating a loss. 6 Speculative calendar spread position in corn A speculator may wish to take advantage of perceived discrepancies in different parts of the maturity curve for a given commodity and can do so by establishing a calendar spread (sometimes known as a time spread). If futures in one part of the curve appear overly “cheap” relative to other contracts, a speculator can purchase the “cheap” contracts and sell the “expensive” contracts; if the strategy is correct, the speculator will gain as prices between the two calendar contracts converge.

The ineffective component is reflected in current income, the effective portion in “other current income” and then reclassified as income when forecast cash flows affect earnings. 13 Settlement periods are often set quarterly, semiannually, or annually. In essence, a swap is similar to a “bundle” of forward contracts. 5 Primary differences between exchange-traded and OTC derivatives Terms Trading forum Price transparency Liquidity Credit exposure Margins Settlement Regulation Exchange-traded OTC Standardized Central exchange (physical or electronic) Good Reasonable–strong Negligible Required Generally closed-out Full Customized OTC (telephonic or electronic) Poor Limited Significant unless collateralized Negotiated Generally held until maturity Partial to full Key features of OTC contracts include: r Customization: While exchange-traded derivatives feature standardized terms, OTC conr r r tracts can be “tailor-made” to the precise reference, size, maturity, and price requirements of the two parties.

10 illustrates the futures gains/loss from the speculative long futures position under the two scenarios. 5 Speculative intermarket spread position in crude oil Speculative positions can also be taken in other forms, including intermarket spreads. A spread position seeks to profit from any price convergence or divergence in the spread, or basis, between contracts in related markets. Spread differentials can be caused by a number of factors. For instance, lack of supply in one market might drive prices up, lack of demand in another market might force prices down, storage or transportation costs related to the two references might diverge as a result of labor actions or transport fuel prices, and so on.

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