Download Derivatives Model PDF

TitleDerivatives Model
TagsOption (Finance) Derivative (Finance) Futures Contract Swap (Finance) Commodity Markets
File Size510.4 KB
Total Pages46
Document Text Contents
Page 45

44

Financial Engineering (cont’d)

 ‘Financial Engineers’:

 – Select from a wide array of puts, calls futures,
and other derivatives

 – Know that derivatives are neutral products
(neither inherently risky nor safe)

.....’derivatives are something like electricity:
dangerous if mishandled, but bearing the
potential to do good’

Arthur Leavitt

Chairman, SEC - 1995

Page 46

45

Effective Study of Derivatives

 The study of derivatives involves a
vocabulary that essentially becomes a new
language
 – Implied volatility

 – Delta hedging

 – Short straddle

 – Near-the-money

 – Gamma neutrality

 – Etc.

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