Ebook: Risk Management and Derivatives

Consortium, 1997-2003. — 1194 p.Throughout history, the weather has determined the fate of nations, businesses, and individuals. Nations have gone to war to take over lands with a better climate. Individuals have starved because their crops were made worthless by poor weather. Businesses faltered because the goods they produced were not in demand as a result of unexpected weather developments. Avoiding losses due to inclement weather was the dream of poets and the stuff of science fiction novels - until it became the work of financial engineers, the individuals who devise new financial instruments and strategies to enable firms and individuals to better pursue their financial goals. Over the last few years, financial products that can be used by individuals and firms to protect themselves against the financial consequences of inclement weather have been developed and marketed. While there will always be sunny and rainy days, businesses and individuals can now protect themselves against the financial consequences of unexpectedly bad weather through the use of financial instruments. The introduction of financial instruments that help firms and individuals to deal with weather risks is just one example of the incredible growth in the availability of financial instruments for managing risks. Never in the course of history have firms and individuals been able to mitigate the financial impact of risks as effectively through the use of financial instruments as they can now.Contents:
Introduction
Investors, Derivatives, and Risk Management
Creating value with risk management
An integrated approach to risk management
Forward and futures contracts
Risk measures and optimal hedges with forward and futures contracts
Hedging costs and the portfolio approach to hedging
Identifying and managing cash flow exposures
Measuring and managing interest rate risks
Options, downside risk, and nonlinear exposures
The binomial model and dynamic hedging strategies
The Black-Scholes model
Risk measurement and risk management with nonlinear payoffs
Options on bonds and interest rates
The demand and supply for derivative products
Swaps
Using Exotic Options
Credit risks and credit derivatives
Recent developments in the practice of risk management