Essays on the Relations Between Derivatives and Underlying Asset Or Commodity Markets PDF Download
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Languages : en
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Languages : en
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Author: Don M. Chance
Publisher: John Wiley & Sons
ISBN: 1118160649
Category : Business & Economics
Languages : en
Pages : 403
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Book Description
In the updated second edition of Don Chance’s well-received Essays in Derivatives, the author once again keeps derivatives simple enough for the beginner, but offers enough in-depth information to satisfy even the most experienced investor. This book provides up-to-date and detailed coverage of various financial products related to derivatives and contains completely new chapters covering subjects that include why derivatives are used, forward and futures pricing, operational risk, and best practices.
Author: Fatma S. Tepe
Publisher:
ISBN:
Category : Economics
Languages : en
Pages :
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This dissertation examines the interaction between macroeconomic aggregates and financial markets in two different essays. The expansion of derivatives markets has prompted interest in estimating options-implied measures to analyze market participants’ beliefs about future movements in the prices of these derivatives’ underlying assets and the probability these participants assign to unlikely events (see Datta et al., 2014). In this spirit, analyzing oil market is important for two main reasons. First, among all commodities, crude oil futures and derivatives are the most traded and liquid asset in the whole commodity market. Second, the informational content of oil derivatives can be indicative of shifts in global economic expectations which may be of interests to producers, investors and policy makers. Because the risk neutral density (RND, hereafter) consists of information from various option series that have a wide range of strike prices and maturities, we can conjecture more detailed effects of news announcements on market sentiment by investigating the changes in the RND. Chapter 1 links the crude oil market to macroeconomic risk by studying the RND around the U.S. macroeconomic news announcements. I use a non-parametric method to recover the RND and conduct regression analysis using daily data. The analysis provides several noteworthy results. First, I find that the RND is systematically affected by certain macroeconomic news announcements. Second, after controlling for the content of the news, my results indicate that good news tend to make the distribution less negatively skewed, whereas bad news have an opposite effect. However, I do not find any systematic pattern between the content (bad/good) of the news and the implied volatility or kurtosis. Hence, my results show that better/worse-than-expected news in macroeconomic announcements may both increase and decrease implied volatility and kurtosis of the option implied distribution. Finally my estimates obtained from nonlinear regressions display that the magnitude of the surprise may play into this effect; for example worse-than-expected news in Housing Starts announcement decrease the implied volatility and increase the implied kurtosis only when the size of surprise is not too large. How should a central bank conduct monetary policy in the presence of financial shocks? In Chapter 2, I use different nonlinear policy rules and address this question. Most empirical work on monetary policy relies on simple linear policy rules, however it is not clear whether such a rule can be an adequate representation of a process as complex as that of monetary policy. I first estimate Markov Switching Taylor rules with constant transition probabilities to allow for state-contingent policy making during 1987.3-2008.4. As a proxy for financial stress, I use the Adjusted National Financial Conditions Index constructed by the Chicago Fed. Then, I allow transition probabilities driving the monetary policy stance to vary over time and be a function of economic and financial indicators. The paper provides clear-cut evidence that, during the Greenspan-Bernanke tenure, the U.S. monetary policy can be characterized falling into two distinct regimes; a conventional regime where the Fed puts a greater emphasis on targeting inflation while stabilizing the economic outlook and a distressed regime where the Fed responds aggressively to output gaps and is less concerned with inflation. The distressed regime is closely correlated with times of financial imbalances. The empirical results show that nonlinear models outperform the simple linear specification in terms of model fit and the ability to track the actual interest rate. Also, the economic and financial indicators are found to be informative in dating the evolution of the state of the monetary policy stance. The results have implications for nonlinear rules to be a useful guideline for forecasting and policy analysis.
Author: Vivien Barth
Publisher: GRIN Verlag
ISBN: 3346096033
Category : Business & Economics
Languages : en
Pages :
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Book Description
Academic Paper from the year 2019 in the subject Economics - Finance, grade: 1,0, University of Portsmouth, course: International Banking and Financial Instruments, language: English, abstract: This essay aims at explaining futures and forward contracts, describing their origins and purpose of usage as well as regulatory requirements. Moreover, it discusses advantages and disadvantages. Futures and forward contracts are financial instruments. More specifically, they are derivatives. Derivatives are financial contracts that derive their value from an underlying asset (Hirsa & Neftci, 2014). The literature distinguishes between physical commodities, such as corn or precious metals, and financial instruments, for example bonds, stocks or currencies, as underlying assets (Gottesman, 2016). Futures and forwards are agreements to buy or sell the underlying at a precise time in the future for a specified price, strike price. Their difference is that futures are traded on an exchange, whereas forwards are traded in the over-the-counter (OTC) market, meaning off-exchange trading directly between two parties (Hull, 2016). Consequently, futures are standardized, whereas forwards can be privately negotiated.
Author: David Cherngchiun Yang
Publisher:
ISBN:
Category :
Languages : en
Pages :
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This dissertation consists of three independent essays on the relationship between leverage, derivatives (especially, option securities), and asset markets. Chapter 1, "Does the Tail Wag the Dog? How Options Affect Stock Price Dynamics," demonstrates empirically that the existence and trading of financial options affects the price movements of their underlying assets, due to the implicit leverage in options and the hedging behavior of options sellers. These empirical results contrast with classical asset pricing where options instead derive their value from their underlying assets. Chapter 2, "Disagreement and the Option Stock Volume Ratio," examines a variable known as the option stock volume ratio, which prior work has documented to be a negative predictor of stock returns in the cross section. I propose an alternate explanation based on the behavioral finance literature on belief disagreement between investors. I show how my disagreement model makes predictions in line with prior empirical findings and can also better explain other stylized facts, which I document. Chapter 3, "Bond Fire Sales and Government Interventions," analyzes how a government should intervene in response to a fire sale in the bond market. I contrast the policies of the government directly purchasing financial securities vs the government offering leverage to the private sector to purchase securities.
Author: Mathias Gerner
Publisher:
ISBN:
Category :
Languages : en
Pages : 115
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Book Description
Author: Dr Harrison Sachs
Publisher:
ISBN:
Category :
Languages : en
Pages : 100
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Book Description
This essay sheds light on the worst types of derivatives to invest in buying, explicates why you should not invest in buying derivatives, demystifies the problems with investing in buying derivatives, and expounds upon how to find a worthwhile derivative investment. Furthermore, how to generate extreme wealth online on social media platforms by profusely producing ample lucrative income generating assets is elucidated in this essay. Additionally, the utmost best income generating assets to create for generating extreme wealth online in the digital era are identified, how to become a highly successful influencer online on social media platforms is elucidated, and the plethora of assorted benefits of becoming a successful influencer online are revealed in this essay. Moreover, how to attain extreme fame leverage is demystified and how to earn substantial money online so that you afford to eminently enrich every aspect of your life is meticulously expounded upon in this essay. When cherry picking a derivative to invest in buying, it can be eminently overwhelming to ascertain which particular derivative investment is apt to yield the highest return on investment overtime from its capital gains. A derivative is a financial "contract between two or more parities. The derivative derives its price from fluctuations in the underlying asset. Underlying asset for derivatives encompass stocks, bonds, commodities, currencies, interest rates, and market indexes". Derivative are able to be exchange traded or can trade over-the-counter. Investors invest in buying derivatives for multiple purposes, such as for the purposes of "hedging a position, speculating on the directional movement of an underlying asset, or giving leverage to holdings". Investing in buying certain types of derivatives, such as options, for instance can help investors to mitigate against risks. "Options can indeed be eminently useful for the shrewd derivative investor "as a source of leverage and risk hedging. Investors should meticulously understand the implications associated with entering into an options position before buying or selling options. Investing in buying certain types of derivatives can even allow investors to enhance their returns. Investing in buying derivatives, such as a contract for difference, can allow investors to augment their returns. "A contract for difference is an agreement between a buyer and a seller that requires the seller to pay the buyer the spread between the current stock price and value at the time of the contract if that value rises. The contract for difference's purpose is to allow investors to speculate on price movement without having to own the underlying shares". The contract for difference is favorable to investors if the spread is positive "between the current stock price and value at the time of the contract". Novice investors typically abstain from investing in buying derivatives, especially because they are complex investments which are far more suitable for experienced investors to invest in buying. Attempting to meticulously understanding the ample complex facets of the derivatives market, even as an experienced investor, can unequivocally be a brobdingnagian undertaking which is by no means simple to undergo. Most investors are ill-prepared to become shrewd derivative investors and often underestimate the calamitous implications of making imprudent derivative investments. There are an exorbitant amount of disparate types of derivatives to choose from investing in buying which can render the prospect of becoming a derivative investor all the more overwhelming for the novice derivative investor. Some of the ample types of derivatives encompass "options, swaps, and futures/forward contracts". Some of the other types of derivatives include a contracts for difference, stock warrants, and single stock futures. Most investors are acutely unaware about all the disparate types of derivatives that are available to invest in buyi...
Author: Dr Harrison Sachs
Publisher:
ISBN:
Category :
Languages : en
Pages : 98
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Book Description
This essay sheds light on the best types of derivatives to invest in buying, explicates why you should invest in buying derivatives, demystifies the benefits of investing in buying derivatives, and expounds upon how to find a worthwhile derivative investment. Furthermore, how to generate extreme wealth online on social media platforms by profusely producing ample lucrative income generating assets is elucidated in this essay. Additionally, the utmost best income generating assets to create for generating extreme wealth online in the digital era are identified, how to become a highly successful influencer online on social media platforms is elucidated, and the plethora of assorted benefits of becoming a successful influencer online are revealed in this essay. Moreover, how to attain extreme fame leverage is demystified and how to earn substantial money online so that you afford to eminently enrich every aspect of your life is meticulously expounded upon in this essay. When cherry picking a derivative to invest in buying, it can be eminently overwhelming to ascertain which particular derivative investment is apt to yield the highest return on investment overtime from its capital gains. A derivative is a financial "contract between two or more parities. The derivative derives its price from fluctuations in the underlying asset. Underlying asset for derivatives encompass stocks, bonds, commodities, currencies, interest rates, and market indexes". Derivative are able to be exchange traded or can trade over-the-counter. Investors invest in buying derivatives for multiple purposes, such as for the purposes of "hedging a position, speculating on the directional movement of an underlying asset, or giving leverage to holdings". Investing in buying certain types of derivatives, such as options, for instance can help investors to mitigate against risks. "Options can indeed be eminently useful for the shrewd derivative investor "as a source of leverage and risk hedging. Investors should meticulously understand the implications associated with entering into an options position before buying or selling options. Investing in buying certain types of derivatives can even allow investors to enhance their returns. Investing in buying derivatives, such as a contract for difference, can allow investors to augment their returns. "A contract for difference is an agreement between a buyer and a seller that requires the seller to pay the buyer the spread between the current stock price and value at the time of the contract if that value rises. The contract for difference's purpose is to allow investors to speculate on price movement without having to own the underlying shares". The contract for difference is favorable to investors if the spread is positive "between the current stock price and value at the time of the contract". Novice investors typically abstain from investing in buying derivatives, especially because they are complex investments which are far more suitable for experienced investors to invest in buying. Attempting to meticulously understanding the ample complex facets of the derivatives market, even as an experienced investor, can unequivocally be a brobdingnagian undertaking which is by no means simple to undergo. Most investors are ill-prepared to become shrewd derivative investors and often underestimate the calamitous implications of making imprudent derivative investments. There are an exorbitant amount of disparate types of derivatives to choose from investing in buying which can render the prospect of becoming a derivative investor all the more overwhelming for the novice derivative investor. Some of the ample types of derivatives encompass "options, swaps, and futures/forward contracts". Some of the other types of derivatives include a contracts for difference, stock warrants, and single stock futures. Most investors are acutely unaware about all the disparate types of derivatives that are available to invest in buying.
Author: Siegfried Hecker
Publisher: Springer Science & Business Media
ISBN: 1461207770
Category : Science
Languages : en
Pages : 284
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Book Description
This collection represents a unique undertaking in scientific publishing to honor Nick Metropolis, the last survivor of the World War II Manhattan Project in Los Alamos. In this volume, some of the leading scientists and humanists of our time have contributed essays related to their respective disciplines, exploring various aspects of future developments in science and society, philosophy, national security, nuclear power, pure and applied mathematics, physics and biology, particle physics, computing, and information science.
Author: Neil C. Schofield
Publisher: John Wiley & Sons
ISBN: 1119995086
Category : Business & Economics
Languages : en
Pages : 369
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Book Description
In Commodity Derivatives: Markets and Applications, Neil Schofield provides a complete and accessible reference for anyone working in, or studying commodity markets and their associated derivatives. Dealing primarily with over the counter structures, the book provides extensive coverage of both hard and soft commodities, including gold, crude oil, electricity, plastics, emissions and agriculturals. Using structures unique to the individual market, each chapter includes an explanation of the commodity and an analysis of its physical market, discussion on the typical patterns of demand and supply and the main factors that will influence the price of the commodity, and the main products. Each chapter focuses on how the products could be used along the physical supply chain and seeks to identify the main market risks and how they can be hedged. The book then brings into perspective how the structuring banks hedge their own resultant exposure and examines the attraction of OTC investment structures for the wholesale market. Commodity Derivatives: Markets and Applications is essential reading for those wishing to learn about the main features of the commodity markets, the mechanics of derivatives, and how they are applied.
