The Development Of Financial Derivatives Markets

Derivatives are everywhere in the modern world and it is important for everyone in banking, investment and finance to have a good understanding of the subject. Derivatives Demystified provides a step-by-step guide to the subject, enabling the reader to have a solid, working understanding of key derivative products. Adopting a highly accessible approach, the author explains derivative products in straightforward terms and without the complex mathematics that underlie the subject, focusing on practical applications, case studies and examples of how the products are used to solve real-world problems. Derivatives Demystified follows a sequence that is designed to show that, although there are many applications of derivatives, there are only a small number of basic building blocks, namely forwards and futures, swaps and options. The book shows how each building block is applied to different markets and to the solution of various risk management and trading problems. This new edition will be fully revised to reflect the many changes the derivatives markets have seen over the last three years. New material will include a comprehensive history of derivatives, leading up to their use and abuse in the current credit crisis. It will also feature new chapters on regulation and control of derivatives, commodity derivatives, credit derivatives and structured products and new derivative markets including inflation linked and insurance linked products. Derivatives Demystified is essential reading for everyone who operates in the financial markets or within the corporate environment who requires a good understanding of these important financial instruments.

This book examines the beneficial and adverse effects of derivatives trading from economic theory and the recent economic history.

Robert Whaley has more than twenty-five years of experience in the world of finance, and with this book he shares his hard-won knowledge in the field of derivatives with you. Divided into ten information-packed parts, Derivatives shows you how this financial tool can be used in practice to create risk management, valuation, and investment solutions that are appropriate for a variety of market situations.

Seminar paper from the year 2009 in the subject Economics - Monetary theory and policy, grade: A, City University London, language: English, abstract: This work is to discuss the role and power of derivatives in the global financial markets and their ability to reduce, diversify and enhance risks associated with international capital flows. During the last two decades derivatives, as fiscal instruments, experienced enormous growth and gained increasingly of importance. This is mainly due to their ability to allow the spreading of risks in cross border capital movements, making such investments more appealing and the diversification of portfolios more likely. Yet, derivative markets are controversial because they are not well known outside a small group of specialists. Most people look at them with suspicion and focus on their role as highly effective instruments for speculation. Given the leverage they provide fortunes can be made or lost in the wink of an eye. Although derivatives do not create anything it will be shown in the course of this study that the importance of derivatives lies in the fact that they can be used to reduce, diversify and control uncertainty and risks associated with various corporate activities, thus creating substantial benefits as well as complexities. Section one is going to define the most common derivative products before addressing their general purpose followed by exemplifying two principal risks aligned with the use of derivatives, namely credit- and market risk. Subsequently this works is going to discuss the positive as well as the negative effects derivatives may have on banks and investors. Sections five, six and seven will then illuminate systematic predicaments, address risks and eventually conclude after having considered the entanglement and market share of derivatives. Warren Buffett, Forbes-listed as the richest person in the world, has called credit derivatives financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal. Nominally they are insurances against defaults, but they encourage greater gambles and credit expansion, which are moral hazards whereas Alan Greenspan, on the other hand, observed that derivatives have come to play an exceptionally important role in our financial system and in our economy. These instruments allow users to unbundle risks and allocate them to the investors most willing and able to use them. It is this study’s object to illuminate the complexity of derivatives and exemplify both, their advantageous and unfavourable but yet undeniably powerful characteristics.

In The Social Life of Financial Derivatives Edward LiPuma theorizes the profound social dimensions of derivatives markets and the processes, rituals, and belief systems that drive them. In response to the 2008 financial crisis and drawing on his experience trading derivatives, LiPuma outlines how they function as complex devices that organize speculative capital as well as the ways derivative-driven capitalism not only produces the conditions for its own existence, but also penetrates the fabric of everyday life. Framing finance as a form of social life and highlighting the intrinsically social character of financial derivatives, LiPuma deepens our understanding of derivatives so that we may someday use them to serve the public well-being.

This book is designed for beginners who possess no previous knowledge or familiarity with derivatives. Written in an easy-to-read style, it guides readers through the challenging and complex world of forwards, futures, options, and swaps. The emphasis on Asian markets and contracts enables easier understanding. Financial derivative contracts from Malaysia and select contracts from Thailand, Singapore, and Hong Kong derivative markets are covered. For each derivative contract, their three common applications hedging, arbitrage, and speculating are shown with fully worked out examples. Extensive use of illustrations, graphics, and vignettes provide for easy comprehension of the underlying logic of derivatives.

This is a history of derivative contracts, their assignability and the regulation of derivatives markets from ancient Mesopotamia to the present day. It concludes with an analysis of future regulatory prospects and the implications of the historical data for derivatives trade and regulation.