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Tables of Contents for The Business of Hedging
Chapter/Section Title
Page #
Page Count
Preface
xi
PART ONE Foundations of Hedging Financial Risk
1
22
The Background to Hedging
2
5
Why Hedging is Your Business
2
1
Identifying Risks in an Enterprise
2
2
Managing Risk and Hedging Risk
4
1
Conclusion
5
2
The fundamentals
7
16
The Nature of a Financial Hedge
7
3
Essential Elements of a Financial Hedge
10
1
The Need to Measure Risk
10
1
Volatility as a Measure of Risk
10
3
Measuring the Value at Risk (VAR)
13
3
Hedgeable Risk
16
1
The Three Risks of the Apocalypse
17
1
The Price of Money
17
2
Commodity Price Risk
19
1
Systemic Risk
20
3
PART TWO The Tools of Financial Hedging
23
98
The Derivatives
24
9
Know Your Tools
24
1
The Fundamentals of Derivatives
25
1
Over-The-Counter Derivatives (OTCs)
26
2
Exchange-Traded Derivatives
28
5
Financial Swaps
33
18
Background
33
1
The Subject Matter of a Financial Swap
33
1
The Basic Structure of Swaps
34
4
The Risk in Interest Rate Swaps
38
1
Types of Interest Rate Swaps
39
2
Basic Currency Swaps
41
3
Cross-Currency Coupon Swap
44
1
The Cross-Currency Basic Swap
45
1
Complex Currency Swap Types
45
2
Commodity Swaps
47
2
Equity Index Swaps
49
1
Master Agreements and the ISDA
49
1
Flexibility of Swaps
50
1
Financial Options
51
28
Background
51
1
The Universal Priciples of Options
51
5
Option Pricing
56
2
Time Value of an Option
58
3
The Greeks
61
2
Exercising an Option
63
2
Profit and Loss at Option Expiration
65
5
Option Multiple Exercise Constructs - Caps and Floors
70
6
The Risk of the Parties of Options
76
3
Commodity Futures
79
28
Background
79
1
Some Basic Features of Futures Contracts
80
2
The Three Innovations of the Futures Contract
82
1
The Minimum Standard Terms and Conditions
83
3
Contract Negotiability or On-Sellability
86
3
The Elimination of Credit Risk
89
4
Pricing the Futures
93
7
The Basis
100
7
Option on Futures
107
8
Background
107
1
Option Standardization
107
3
Option Classification
110
1
Selling Options on Futures
111
4
Derivatives Risk
115
6
Basic Risk
116
2
Credit Risk
118
1
Legal Risk
119
1
Operational Risk
120
1
PART THREE The Business of Hedging
121
68
Laying the Groundwork
122
11
Background
122
1
Analyzing the Risk
122
4
Selecting the Right Hedging Tool
126
1
Meeting the Risk Criteria
127
1
Meeting Your Business Criteria
128
5
Hedging the Price of Money
133
38
Background
133
1
Analyzing Money Price Risk - Additional Factors
134
1
Using Swaps
135
5
The Zero-Sum Objection
140
5
Using OTC Options
145
2
The Strike Rate and the Option Premium
147
6
Using Futures
153
1
Interest Rate Futures
153
6
Currency Futures
159
4
Using Options on Futures
163
8
Hedging and Commodity and Systemic Risks
171
18
Background
171
1
Hedging Commodities
171
12
Hedging Systemic Risk
183
3
Hedging Creatively
186
2
Conclusion
188
1
Index
189