14: Risk Reversal
Risk reversals involve either selling an OTM Put and Buying an OTM call or Buying an OTM Put and Selling an OTM call…
15: Butterfly
A long butterfly spread involves buying a call (i.e. a call fly) each at a lower strike and higher strike while selling 2 calls…
16: Digitals
Are a binary payoff strategy – i.e. payoff is either zero or the notional of the trade – conditional on the underlying’s price trading…
17: Regular and Reverse Barriers
These options officially fall in the realm of structured products as they can be understood as a combination of at least two different options…
1: Financing Products – Common references
We are about to navigate back and forth between cash and derivatives and their mix to discuss some popularly…
1: CDS Valuation and Pricing
credit default swap as the name suggests is a derivative contract that facilitates the swapping/exchange of credit risk…
2: CDS Hazard Rates and Default Probabilities
Let’s illustrate the computation of the credit default swap spread. Few things to remember…
3: CDS Swap of Two Floating Bonds
CDS cash flows work like fixed coupon interest rate swaps i.e. the payments made by the CDS buyer to the seller in practice…
4: CDS Bond Basis
In theory bonds can be delivered on CDS contracts in case of a default which should imply that credit spreads…
5: Risks on a CDS
Standard market convention is for the protection seller to pay par minus recovery value…
