CONTENTS

Preface

Assets, Derivatives and Markets

Basic concepts
Underlying assets
Classes of derivatives
Examples of derivatives
Markets

Forwards and Futures

Asset and Cash
Valuation and replication
Examples of forwards and futures
Hedging with futures
Swaps

Introduction to Options

Basic positions
Combined positions
Valuation
Replication

The Binomial Option Pricing Model

Single-period model
Multiperiod model
Hedging with options
Extensions
Options on bonds

The Black-Scholes Formula

Derivation
Hedging parameters
Extensions

Volatility

Realised volatility
Implied volatility

Dynamic Strategies

Dynamic asset allocation
Portfolio insurance
Simulation

Glossary
Bibliography
Index