Risk Transfer and Firm Value - Chapter 6 Retelling
Book: Structured Finance and Insurance: The ART of Managing Capital and Risk Author: Christopher L. Culp Publisher: Wiley Finance, 2006 ISBN: 978-0-471-70631-1
Hedging
Stochastic Volatility Meets Mean-Variance Analysis
Wilmott does not like the market price of risk. He says so right at the start of Chapter 54, and his reasoning is solid. The market price of volatility risk is not directly observable. You can only back it out from option prices, and that only works if the people setting those prices are using the same model you are. If you refit the model a few days later and get a different answer, was the market wrong before? Or is it wrong now? You end up chasing your own tail.
Risk Management - Protecting Your Investments: Stock Market Cash Flow Chapter 7
The fourth and final pillar. If the first three pillars are about finding opportunities and taking positions, this one is about not losing your shirt.
Foreign Exchange Derivatives: Forwards, Futures, Options, and Currency Swaps
Book: Financial Markets and Institutions, 11th Edition Author: Jeff Madura Publisher: Cengage Learning, 2015 ISBN: 978-1-133-94788-2
Chapter 16 is where things get global. If you have ever traveled abroad and exchanged dollars for euros or pesos, you already know the basics of the foreign exchange market. But there is a whole world of derivative instruments built on top of currency exchange rates. And they move serious money. Foreign exchange derivatives account for about half of all daily forex transaction volume.
Financial Futures Markets: Hedging and Speculating With Futures Contracts
Book: Financial Markets and Institutions, 11th Edition Author: Jeff Madura Publisher: Cengage Learning, 2015 Series: Chapter 13 Review
Futures contracts are basically agreements to buy or sell something at a specific price on a specific date in the future. Chapter 13 focuses on financial futures, which cover Treasury bills, Treasury bonds, stock indexes, and individual stocks. Two types of people use them: hedgers who want to reduce risk, and speculators who want to bet on price movements.
Trading and Exchanges Chapter 8: Why People Actually Trade (Part 1)
Chapter 8 opens Part II of the book, and it asks one of those questions that sounds obvious until you actually try to answer it: why do people trade?
Why People Trade: The Real Motives Behind Market Activity (Chapter 8)
Here is a question that sounds simple but almost nobody answers honestly: why do you trade?
Not “to make money.” That is what everyone says. Harris dedicates Chapter 8 to pulling apart all the different reasons people actually show up to the market. And the taxonomy he builds is genuinely useful. Because if you do not understand why you trade, you are probably doing it wrong. And if you cannot figure out why the person on the other side of your trade is trading, you have no idea whether you are the smart money or the dumb money.