Derivatives: The Key Principles

Hardcover | May 2, 2009

byJohn-Peter Castagnino

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This book is a practical guide to derivatives, setting out a straightforward and easily understood explanation of the basic concepts, the different types of derivative product, who uses derivatives, and why and how derivatives are used. The book explains both more established products (suchas futures, options, and swaps) and more innovative products (such as CPPI structures and those derivative contracts used as financing tools). The expansion of the derivative market to cover different underlying assets (such as freight, power trading, emissions trading, and hedge funds) isexplored. The author provides guidance as to the legal and regulatory treatment of derivatives. The book looks at the key documents that are used in both the exchange-based and over-the-counter (OTC) markets and explores the important materials published by ISDA .The book also discusses other related topicsincluding the accounting and tax treatments of derivatives. The book considers the background to current legal trends, including the developing strand of English case law on claims for the misselling of derivative products and the retail offer of derivatives, which has recently been the subject of considerable debate within the financial services industry. The third edition includes a new discussion of the retail offer of derivatives, and discusses a greater number of derivative products (including CPPI structures, derivatives used as financing tools, power trading, emissions trading, multi-asset derivatives, fund-linked derivatives, derivatives basedon "computed data", and the different wrappers" in which derivative exposures are made available). It provides greatly expanded discussion of the ISDA documents used in the over-the-counter (OTC) market and looks in more detail at the duty of care (selling and misselling, including the recent decision in the "Springwell" litigation).

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This book is a practical guide to derivatives, setting out a straightforward and easily understood explanation of the basic concepts, the different types of derivative product, who uses derivatives, and why and how derivatives are used. The book explains both more established products (suchas futures, options, and swaps) and more inn...

John-Peter Castagnino is in-house counsel at Citi.
Format:HardcoverDimensions:430 pages, 9.69 × 6.73 × 0.01 inPublished:May 2, 2009Publisher:Oxford University PressLanguage:English

The following ISBNs are associated with this title:

ISBN - 10:0199556369

ISBN - 13:9780199556366

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Table of Contents

1. An overview2. The two principle market structures2.1. The participants in the markets2.2. The on-exchange market2.3. Derivatives exchanges2.4. The OTC Market3. Key Concepts3.1. 'Long' and 'short'3.2. The bid and offer spread3.3. Tick3.4. Margin3.5. Example of tick and margin4. Products4.1. Forward contract4.2. Futures contract4.3. Option contract4.4. Warrant4.5. Forward Rate Agreement (FRA)4.6. Swap4.7. Cap, floor and collar contracts4.8. Credit derivatives and synthetic CDOs4.9. Fund derivatives4.10. Multi-asset derivatives4.11. The securitisation of derivatives cash flows4.12. Repurchase and revers repurchase agreements4.13. Financial engineering5. Legal and regulatory5.1. Legislation and regulation5.2. The general prohibition5.3. Regulated activities5.4. Legal market structures5.5. EU legislation6. Risk and the on-exchange market6.1. Recognised Investment Exchanges6.2. Companies Act 19896.3. Give-up Agreements and Clearing Agreements7. Risk and the OTC market7.1. OTC documentation generally7.2. ISDA7.3. The ISDA 2002 Master Agreement and Schedule7.4. ISDA credit support7.5. ISDA Confirmation7.6. ISDA Definitions7.7. TBMA/ISMA Global Master Repurchase Agreement7.8. Advantages and disadvantages8. Legal Issues8.1. Unregulated forwards and regulated futures8.2. The swap analysed as a contract8.3. Derivatives contracts derived as other contracts8.4. Credit derivatives documentation8.5. The doctrine of ultra vires8.6. The duty of care8.7. The construction of terms of a derivatives contract9. End-users9.1. The investment management industry9.2. Hedge funds9.3. Corporate treasuries9.4. Prime brokerage10. Capital10.1. Sources of regulation10.2. Banks10.3. Investment businesses10.4. The capital Accord10.5. Basel II10.6. Credit rating11. Accounting and Tax11.1. Financial reporting11.2. The taxation of transactions: hedging or trading11.3. The taxation of transactions: income or capital gains11.4. The taxation of transactions: witholding tax11.5. The substance of transactions11.6. Records and reporting11.7. 'Accounting-driven' transactions12. Defining the risk map