By Mohamed Bouzoubaa
The hot monetary quandary delivered to mild a number of the misunderstandings and misuses of unique derivatives. With industry individuals on either the purchase and sell-side having been came across to blame of no longer realizing the goods they have been facing, by no means ahead of has there been a better want for explanation and explanation.Exotic recommendations and Hybrids is a realistic consultant to structuring, pricing and hedging advanced unique concepts and hybrid derivatives that would serve readers in the course of the contemporary predicament, the line to restoration, the subsequent bull industry and past. Written through skilled practitioners, it specializes in the 3 major elements of a derivative’s existence: the structuring of a product, its pricing and its hedging.Divided into 4 elements, the publication covers a large number of constructions, encompassing some of the most recent and promising items from unique fairness derivatives and based notes to hybrid derivatives and dynamic concepts. in response to a practical atmosphere from the center of the enterprise, within a derivatives operation, the sensible and intuitive discussions of those facets make those unique techniques really accessible.Adoptions of actual trades are tested intimately, and all the a variety of examples are rigorously chosen in an effort to spotlight fascinating and important facets of the company. The advent of payoff constructions is followed by means of state of affairs research, diagrams and realistic pattern time period sheets. Readers how to spot the place the hazards misinform pave the best way for sound valuation and hedging of such items. There also are questions and accompanying discussions dispersed within the textual content, each one exploited to demonstrate a number of thoughts from the context within which they're set.The functions, the strengths and the constraints of assorted types are highlighted, in relevance to the goods and their dangers, instead of the version implementations. types are de-mystified in individually devoted sections, yet their implications are alluded to during the ebook in an intuitive and non-mathematical manner.By discussing unique strategies and hybrids in a pragmatic, non-mathematical and hugely intuitive surroundings, this ebook will blast during the false impression of unique derivatives, allowing practitioners to totally comprehend and properly constitution, fee and hedge theses items successfully, and stand powerful because the basically e-book in its category to make those “exotic” recommendations actually available.
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Extra resources for Exotic Options and Hybrids: A Guide to Structuring, Pricing and Trading
Sample text
When a futures contract trades above its fair value, a cash and carry arbitrage opportunity arises. The arbitrageur would immediately buy the asset at the spot price to hold it until the settlement date, and at the same time sell the future at the market’s futures price. At the delivery date, he would have made a profit equal to the difference between the market’s futures price and the theoretical fair value. Alternatively, a reverse cash and carry arbitrage opportunity occurs when the future is trading below its fair value.
Efforts were made to provide access and exposure to market configurations that previously presented entry barriers and were unattainable using standardized financial instruments. Structured products constitute a great solution to benefit from the dynamism of financial markets with risk/return profiles that can be tailored to any investor’s appetite in a cost-effective manner. One example is placing part of an investment in non-risky assets in order to deliver a level of protected capital, while the remaining is invested in options that offer upside opportunities with no downside.
Another advantage of ETFs is the tax efficiency of index funds, while still maintaining all the features of ordinary stocks, such as limit orders, short selling and options. For an investor, one disadvantage can be that in some cases, and depending on the nature of the ETF and the complexities involved in its management, relatively significant fees may be charged. Because ETFs can be traded like stocks, some investors buy ETF shares as a long-term investment for asset allocation purposes, while other investors trade ETF shares frequently to implement investment strategies.