exotic derivatives pdf

0000003453 00000 n 100 0 obj I�T�i�yE�>Y�3)e+iפ�b�z=��ڭ���sS@7�P�ܭ�^�5���W�#\-� E������v�����Z���9���[o$��W�>��ڛ/�F�_�Xڽ�dKE_m� y���{s��u�7�'o�>dut�����C�_r� (Profit and Loss Profile) endobj INTRODUCTION 1.2 Financial Derivatives 1.2.1 Forwards contract A forward contract is an agreement which allows the holder of the contract to buy or sell a certain asset at or by a certain day at a certain price. endobj (Probabilities of Gain and Loss) 56 0 obj • Exotic as opposed to vanilla refers to the fact that the payoff is not standard, as is the case for a regular call option. << endobj Path Dependent Optimal Transport and Model Calibration on Exotic Derivatives Ivan Guo 1,2and Gregoire Loeper 1School of Mathematical Sciences, Clayton Campus, Monash University, VIC, 3800, Australia 2Centre for Quantitative Finance and Investment Strategies , Monash Any opinions, news, research, analyses, prices, other information, or links to third-party sites are provided as general market commentary and do not constitute investment advice. (How This Product Works) << /S /GoTo /D (subsection.2.5) >> Algorithmic Exposure and CVA for exotic derivatives Alexandre Antonov, Serguei Issakov, Serguei Mechkov Numerix∗ April 12, 2012 Abstract We develop the algorithmic approach for Counterparty exposure calculation and automate << /S /GoTo /D (subsection.4.3) >> 105 0 obj << /S /GoTo /D (subsection.3.4) >> 13 0 obj endobj << /S /GoTo /D (subsection.1.6) >> Exotic options are the classes of option contracts with structures and features that are different from plain-vanilla options (e.g., American or European options). –Might be attractive for regulatory endobj << /S /GoTo /D (subsection.2.2) >> 0000006172 00000 n 81 0 obj 76 0 obj endobj 0000000731 00000 n endobj Q���e�[��zS��8�O4��t��b9�5�k=t-����@���l�=vUG�&�$#�^�gاQ�?�%ʚqT媽�������5Vd�K#�`VaD��45��br04ulj;�Ɉ�_0X���B�;c5����^��Oy�� �D�D��\!��F�D�b��6��G��Jdjz��?�ǚ}�m�dpF:�+��@6S��Ԥ���D���$P��j~*��p�X���1F�5��@���~�%A�D7��_�"�d&,���g~na ����ӕ���*��2k[s �`.�p��Àg�}S��h=rk�$��Ye-�� |��*B��=���fB���°�D�dEC/��%kܓ� �N����Q2���ryC�v)�'X�׉j@O�V� Es�;v[�!�!�a9$��W Exotic energy derivatives are complex to price and hedge for advanced commodity price models. 41 0 obj 104 0 obj 109 0 obj 112 0 obj trailer << /Size 405 /Info 368 0 R /Root 387 0 R /Prev 1300272 /ID[<7b02de74d9a104ace34aa1438ce5cb66>] >> startxref 0 %%EOF 387 0 obj << /Type /Catalog /Pages 367 0 R /Metadata 372 0 R /FICL:Enfocus 369 0 R >> endobj 403 0 obj << /S 3200 /Filter /FlateDecode /Length 404 0 R >> stream (Probabilities of Gains and Losses) (Risk Associated with the Structure) endobj << /S /GoTo /D (subsection.1.1) >> (AUTOCALLABLE) /Filter /FlateDecode Furthermore, spread derivatives depend not only on the volatility but also on the correlation between various spot/futures contracts which may be challenging to model and calibrate to 122 0 obj U���hQ*�?�P!�h�R << /S /GoTo /D [118 0 R /Fit] >> endobj 9 0 obj << /S /GoTo /D (subsection.4.6) >> (Example of a KIKO) 72 0 obj 0000006069 00000 n 5 0 obj 0000004278 00000 n 12 0 obj << /S /GoTo /D (subsection.3.2) >> Exotic Derivatives Meaning: In financial derivatives terminology, the term Exotic Derivatives usually refers to more complex, unusual and specific derivative contracts that depend on the value of some underlying asset or defined set of assets. << /S /GoTo /D (subsection.2.1) >> endobj endobj xڅU�n7}�W,�D��^���I�H�@E$y�%�&�K*$7����!��(��s9�93C��bի����?�x��M� More recently, the growth in the usage of credit derivatives by hedge funds 61 0 obj � �T� *h+� Ultimately, it is up to the individual to decide whether or not the trade of exotic derivatives is a suitable endeavour given capital constraints and risk tolerance. endobj 49 0 obj endobj Morgan, London May 3, 2019 Possible reasons: –To meet special hedging needs. 84 0 obj 16 0 obj j(�12;6Z5�J ����V3űQF�YN The exotic derivatives traders were however still unsatis ed. (Profit and Loss Profile) 60 0 obj endobj (How This Product Works) Get Free Fx Options And Structured Products Textbook and unlimited access to our library by created an account. exotic derivatives can rarely be marked-to-market based on publicly available prices at which they can be bought and sold, they usually have to be marked based on some hedging strategy which involves combinations of dynamic hedging using forwards and European-exercise options. Note the use of the term electronic trading, not brokering, platform because it is a dealing platform and does not function as a neutral broker. 0000003669 00000 n (Probabilities of Gain and Loss) endobj 96 0 obj Demystifying Exotic Derivatives: What You Need to Know Rutter Associates June 2, 2016 Abstract \Exotic" or \complex" derivatives are distinguished from their \plain vanilla" cousins only by the amount of reverse engineering required << /S /GoTo /D (subsection.4.5) >> << /S /GoTo /D (subsection.3.1) >> << /S /GoTo /D (section.4) >> 32 0 obj endobj << /S /GoTo /D (subsection.2.3) >> 0000002967 00000 n 88 0 obj endobj 0000004867 00000 n JD7�8��� ���$����Clxniq~!�JUM(�i�n0�WE�%��Htvzj�X�W��B6��+��Z�dy¨\H�d�s�K@��-����륀?ISf��ň �*��P�8�^;u�j�R��S �,�5F@P9̆N�^���a7QX!9�I~��i�X��_�|P2@7�Lm�����BƗ��f��R�>�7��c:Q� KA�eq ��T�\&;�ԧgf�b��X�5a,��X,E*�h~�0���g�3��]ˁ���[���&�+ << /S /GoTo /D (subsection.1.4) >> An exotic option is characterized by having a payoff that is contingent on the path of the underlying asset up to expiry. 4 0 obj endobj ����������eM�v�7��c�>�oC�k ~oT�����#T֭@L!�L���3��j@ �;���?��[F6�i���5emF�ކ��>�,�=���B�5� 89 0 obj (Example of a TARN) 93 0 obj << /S /GoTo /D (subsection.1.3) >> 64 0 obj {�3/��֥!��'�V.=]�|��w8qdy��.|��pNL��8|��G?r`���wܹx�m�������x" endobj endobj �W�������`8'�5�xk> (FORWARD ACCUMULATOR) 52 0 obj 0000058983 00000 n 80 0 obj >> B�3;�ٱc�W�9{�w���^�Bn�9��!�9��Q��Gԍ�P��eG��������=i�e���W?ص�����~���'Dݤ�k��.�ڙ�v�@����=6������#w�x��x���QןЅ�mu��H�u�}_���x���ׁo��hD����Ck���ޭ4V��_��.g��~�8��1q,�y�Eȵw����_|R:y���? endobj Notes Module: I Lecture:8 www.equitymaster.com Page 1 of 2 Option Trading Strategies and Exotic Derivatives Option Trading Strategies Covered Call: A covered call involves buying the underlying stock and selling an OTM call. 0000057860 00000 n 0000003207 00000 n JWBK097-FM JWBK097-DeWeert February 6, 2008 21:17 Char Count= 0 vi Contents 5Skew 27 5.1 Reasons for Higher Realised Volatility in Falling Markets 27 5.2 Skew Through Time: ‘The Term Structure of Skew’ 28 5.3 Skew and 40 0 obj (Conclusion) << /S /GoTo /D (subsection.1.5) >> J.P.Morgan Deep Hedging Machine‐driven trading of derivatives under market frictions Swissquote Conference 2018 on Machine Learning in Finance Geneva, thNov 9 2018 Dr.Hans Buehler J. P. Morgan Joint work with Lucas Gonon endobj /Length 906 Exotic Derivatives Losses in Emerging Markets: Questions of Suitability, Concerns for Stability Prepared by Randall Dodd Authorized for distribution by _____ July 2009 Abstract This paper explores a pattern of exotic 4 The Lehman Brothers Guide to Exotic Credit Derivatives the insurance share of credit derivatives usage has increased to 14% from 9% the previous year. endobj << /S /GoTo /D (subsection.3.6) >> The OTC derivative market is the largest market for derivatives, and is largely unregulated with respect to disclosure of information between the parties, since the OTC market is made up of banks and other highly sophisticated parties, such as hedge funds . サルでも分かるMalliavin解析 [PDF 256KB] 漸近展開の概要 [PDF 112KB] Black-Scholesモデルにおけるリスク中立測度の概念 [PDF 80KB] Pricing Theories of Exotic Derivatives [PDF 128KB] MINAMI Akihiko@お … endobj endobj endobj << /S /GoTo /D (subsection.4.4) >> Products such as swaps, forward rate agreements, exotic options – and other exotic derivatives – are almost always traded in this way. The reader of the book will certainly appreciate the alternation between technical explanations and real world %���� H��WklW�w��8b;v�:i��I`gw���g_�w�����3��I�X?kpC�mZݶI�R� 24 0 obj endobj derivatives dealer sets up their own proprietary electronic trading platform. endobj << /S /GoTo /D (section.1) >> endobj << /S /GoTo /D (subsection.2.6) >> endobj 28 0 obj An exotic derivative, in finance, is a derivative which is more complex than commonly traded "vanilla" products. Exotic Derivatives vs. 0000000830 00000 n (Risk Associated with the Structure) The Bermudan swaption is an option, which at each date in a %PDF-1.4 %���� endobj 0000060236 00000 n endobj << /S /GoTo /D (subsection.1.2) >> 57 0 obj �9�q��n�����ʪ����/�"� W^���b��7�#�2�K5^�.��XN��ŀ��D���ݑ�$L�����n�9)��8��ϓ���l�O��1�2���D�G�� y&�qI�����J�IyΣ*�R��*)�4P���w��.�Q6��'�؞lK�����{V3��{���Q��܊��� ���ʡTp�u/����E����2[y��0&z�Y/��.n`�6�&`�3/���^:����g�d�. endobj 36 0 obj 53 0 obj Barrier options belong to a group of financial derivatives called exotic options. endobj Definition of derivatives Definition and use of derivatives • A derivative can be defined as a financial instrument whose value depends on (or derives from) the value of … (Recommended Risk Monitoring and Management) 44 0 obj In contrast, of the underlying << /S /GoTo /D (subsection.3.5) >> 29 0 obj << /S /GoTo /D (section.2) >> endobj << /S /GoTo /D (section.5) >> endobj endobj 45 0 obj �qAg��0"Q�l!��%%n ��r�†�y This complexity usually relates to determination of payoff;[1] see option style. (Profit and Loss Profile) endobj 33 0 obj 2 CHAPTER 1. Plain Vanilla Derivatives Plain vanilla derivatives represent the most basic version of financial derivatives, including futures contracts, forwards, swaps, and over-the-counter (OTC) instruments used in fairly liquid markets. endobj (How This Product Works) 8 0 obj Exotic options are different from regular options in their expiration dates, exercise prices, payoffs, and underlying as 0000004062 00000 n 85 0 obj ] see option style option is characterized by having a payoff that is contingent on the of... Another underlying asset up to expiry this complexity usually relates to determination of payoff ; [ ]... Derivatives have appeared since the middle of 1990s an option, which at each date a. 1989 Heath, Jarrow and Morton ( HJM ) presented a di erent view on interest rate derivatives is Bermudan. A derivatives dealer sets up their own proprietary electronic trading platform exotic interest rate.! 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