Managing Interest Rate Risk
An interest rate swap is an over-the-counter (OTC) contract between two parties that agree to exchange cash flows on specified …
derivatives
Managing Risk Exposures
There are many ways in which investment managers and investors can use swaps, forwards, futures, and volatility derivatives. The typical …
Volatility Skew and Smile
In practice, if implied volatility is computed for actual traded options on a particular underlying (e.g. a stock) the option …
Option Greeks
Delta (Δ) is the change in an option’s price in response to a change in price of the underlying, all else equal. …
Covered Calls and Protective Puts
Covered Calls A covered call is a very common option strategy used by both individual and institutional investors. At option …
Synthetic Positions
Think of derivatives as building blocks that can be combined to create a specific payoff with the desired risk exposure. …
Option Basics
A Refresher on Options Terminology A call is a right to buy A put is a right to sell Each option contract will specify the underlying to which …