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| Foreword | |
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| Introduction | |
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| The Basics | |
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| Financial Arithmetic Basics | |
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| Some opening remarks on formulas | |
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| Use of an HP calculator | |
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| Simple and compound interest | |
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| Nominal and effective rates | |
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| Future value / present value; time value of money | |
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| Discount factors | |
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| Cashflow analysis, NPV, IRR and time-weighted rate of returns | |
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| Annuities | |
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| Using an HP calculator for cashflow analysis | |
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| Interpolation and extrapolation | |
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| Exercises | |
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| Statistics Basics | |
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| Averages - arithmetic and geometric means, weighted averages, median and mode | |
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| Variance, standard deviation and volatility | |
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| Correlation and covariance | |
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| Histograms, probability density and the normal probability function | |
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| Confidence levels and the normal probability table | |
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| Exercises | |
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| Interest Rate Instruments | |
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| The Money Market | |
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| Overview | |
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| Day/year conventions | |
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| Money market instruments | |
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| Money market calculations | |
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| Discount instruments | |
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| CDs paying more than one coupon | |
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| Value dates | |
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| Exercises | |
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| Forward-Forward Interest Rates and Forward Rate Agreements (FRAs) | |
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| Forward-forwards, FRAs and futures | |
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| Applications of FRAs | |
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| Exercises | |
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| Interest Rate Futures | |
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| Overview | |
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| Exchange structure and margins | |
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| Futures compared with FRAs | |
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| Pricing and hedging FRAs with futures | |
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| Trading with interest rate futures | |
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| Exercises | |
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| Bond Market Calculations | |
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| Overview of capital market instruments | |
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| Features and variations | |
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| Introduction to bond pricing | |
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| Different yield measures and price calculations | |
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| A summary of the various approaches to price / yield | |
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| Duration, modified duration and convexity | |
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| Bond futures | |
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| Cash-and-carry arbitrage | |
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| Exercises | |
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| Repos, Buy/Sell-backs and Securities Lending | |
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| Introduction | |
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| Classic repo | |
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| Margin calls | |
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| General collateral (GC) and specials | |
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| Other features | |
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| Buy/Sell-back | |
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| Close-out and repricing | |
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| Securities lending | |
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| Comparison between the different transactions | |
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| Uses of repo and securities lending | |
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| Exercises | |
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| Zero-coupon Rates and Yield Curves | |
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| Zero-coupon yields, par yields and bootstrapping | |
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| Forward-forward yields | |
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| Summary | |
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| Longer-dated FRAs | |
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| Exercises | |
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| Foreign Exchange | |
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| Foreign Exchange | |
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| Introduction | |
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| Spot exchange rates | |
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| Forward exchange rates | |
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| Cross-rate forwards | |
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| Short dates | |
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| Calculation summary | |
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| Value dates | |
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| Forward-forwards | |
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| Non-deliverable forwards (NDFs) | |
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| Time options | |
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| Long-dated forwards | |
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| Arbitraging and creating FRAs | |
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| Discounting future foreign exchange risk | |
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| Exercises | |
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| Swaps and Options | |
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| Interest Rate and Currency Swaps | |
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| Basic concepts and applications | |
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| Overnight index swap (OIS) | |
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| Pricing | |
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| Valuing swaps | |
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| Hedging an interest rate swap | |
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| Amortising and forward-start swaps | |
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| Currency swaps | |
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| Exercises | |
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| Options | |
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| Overview | |
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| The ideas behind option pricing | |
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| Pricing models | |
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| OTC options vs. exchange-traded options | |
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| Value dates for FX options | |
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| Trading with calls and puts | |
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| More trading strategies | |
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| Hedging with options | |
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| Some "packaged" options | |
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| The Greek letters | |
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| Some exotic options | |
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| Credit derivatives, synthetic CDOs and first-to-default baskets | |
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| Exercises | |
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| Equities | |
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| Equities | |
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| Introduction | |
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| Ratios | |
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| Valuation | |
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| Stock splits and rights issues | |
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| Stock indices | |
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| Single stock futures | |
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| Stock index futures | |
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| Exercises | |
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| Gold and Other Commodities | |
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| Gold and Other Commodities | |
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| Gold | |
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| Gold borrowing, forwards, swaps and GOFO | |
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| Other commodities | |
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| Forward pricing and convenience yield | |
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| Commodity futures and EFP (Exchange For Physical) | |
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| FRAs, swaps and options | |
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| Exercises | |
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| Hints and Answers to Exercises | |
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| Hints and Answers to Exercises | |
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| Hints on exercises | |
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| Answers to exercises | |
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| Using an HP calculator | |
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| A summary of market day/year conventions and government bond markets | |
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| A summary of calculation procedures | |
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| Glossary | |
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| ISO (SWIFT) currency codes | |
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| Select Bibliography | |
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| Index | |