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3 Financial Markets and Products (Financial Products (Forward and Futures,…
3 Financial Markets and Products
Financial Products
Introduction of Bond Markets
Interest Rates
Risk-Free Rate
Treasury Rate
LIBOR
Repo Rates
Compouding Frequencies
Compounding Interest
the simple interest is added in each year and then that money also earns interest
Sport and Forward Rate
Sport Rate
yield to maturity on a zero-coupon bond that matures in t-years
Forward Rate
corresponding to a future period
Major Theories of the Term Structure of Interest Rates
Expectations Theory
Market Segmentation Theory
Liquidity Preference Theory
Bond Valuation
Characteristics of Bonds
Coupon Rate
Face Value
Maturity
Yield to Maturity (YTM)
Bond Pricing
Bootstrapping Spot Rates
Risk Metrics
Interest Rate Risk
Macaulay Duration
Modified Duration
Convexity
Portfolio Duration and Convexity
Reinvestment Risk
Treasury
Treasury Bills
with a maturity of one year or less
Treasury Notes and Treasury Bonds
T-Notes
2 to 10 years
T-Bonds
more than 10 years
Clean Price and Dirty Price
Corporate Bond
Bond Indenture
Corporate Trustee
Main Type of Interest Payment Classifications
Straight-coupon
Zero-coupon bonds
Floating-rate bonds
Credit Risk
Credit Default Risk
Credit Spread Risk
Issuer Default Rate vs. Dollar Default Rate
Recovery Rate
High-Yield Bond
junk bonds
Bond Types
Mortgage Bonds
Collateral Trust Bonds
Equipment Trust Certificate
Debenture Bonds
Guaranteed Bonds
Corporate Bond Retirements
Call provision
Sinking-fund provisions
Maintenance and replacement funds
Tender offers
Forward and Futures
Forward vs. Futures Contracts
Payoffs
Different between Forward with Futures
Commodity Forward Contract
Commodity Terminnology
Storage Costs
Lease Rate
Convenience Yields
Crack Spread
spread trade involving simultaneously buying and selling contracts in crude oil and one or more derivative products
Financial Forward Contract
Forward Rate Agreement
Futures Contract
Specifications of Futures Contract
Asset
Contract Size
Delivery Arrangement
Delivery Month
Price Quotes
Price limits and position limits
Mechanics of the Delivery Process
Close out
Physical Delivery
Cash Settlement
Exchange for Physical
Role of Clearinghouse
Margin Requirement
Trading Order Types
Market Order
Limit Order
Stop Order/Stop-Loss Order
Stop-Limit Order
Market-if-Touch Order
Discretionary Order/Market-not-Held Order
Fill-or-Kill Order
Forward and Futures Prices
Assumptions of Pricing
No Arbitrage Principle
Principle of Pricing - Cost of Carry
Financial Forward/Futures
Commodity Forward/Futures
Interest Rate Parity
Foreign Exchange Risk
On-Balance-Sheet Hedging
Off-Balance-Sheet Hedging
Normal and Inverted Futures Market
Contango
Backwardation
Forward Price vs. Forward Value
Forward Price vs. Futures Prices
Interest Rate Futures
Hedging Strategies using Futures
Swaps
Options
MBS
Introduction of Derivatives Markets
Financial Derivatives
Classification of Financial Derivatives
Forward and Futures
Swap
Option
Trading Characteristics
Over-the-Counter
Exchange-Traded
Market Participants
Hedgers
Speculators
Arbitrageurs
Market maker
Financial Institutions
Central Counterparties
Banks
Insurance Companies
Mutual Funds and Hedge Funds