Structured Derivatives: Certificates

Size: px
Start display at page:

Download "Structured Derivatives: Certificates"

Transcription

1 Structured Derivatives: Certificates Müge Türkkan Erste Securities İstanbul Derivatives, Product Development

2 Plan Brief information about derivatives Brief information about structured derivatives Regulatory authorities Main features of Turbo Ceritificates Main risks about certificates 2

3 Brief information about derivatives Derivatives are: Securities whose price is derived from one or more underlying assets. Their values are determined by the fluctuations in the underlying asset. -Most common derivatives traded: -Forwards -Futures -Options -Swap 3

4 Structured Derivatives Structured Derivatives are: designed to facilitate highly customized risk return objectives by combining a traditional security with a derivative. Structured products are replacing the usual payment features of a traditional securitiy with the non traditional payoffs derived from the perfomance of underlying assets. 4

5 Structured Derivatives Derivatives Exchange Traded in Turkey: Futures contracts (TurkDex) Options (2013 TurkDex &ISE) Structured Derivatives Exchange Traded in Turkey: Certificates (ISE) Warrants (ISE) 5

6 Structured Derivatives Certificates Certificates : Leveraged structured derivatives. Structurally accomplished by the combinations of: Bonds Options Issuer,Maturity, no additional obligations for the investors Strike,Intrinsic Value, Time Value, Leverage 6

7 Regulatory Authorities Capital Markets Board CMB Circular Serial:3 No37 on trading of Covered Warrants Istanbul Stock Exchange Policies about quoting rules of certificates (ISE Mandat No:400) Brokers Association of Turkey (TSPAKB) Risk Notification Form of Warrants and Similar derivatives 7

8 Main features of Turbo Certificates Certificates Certificates are securitised derivatives accomplishing payoffs due to the predetermined conditions of the incremental price movements of an underlying asset. Certificates are giving right but no obligations for its investors. Most common categories of certificates: Turbo Certificates Index Certificates Bonus Certificates Discount Certificates 8

9 Main features of Turbo Certificates Turbo Certificate Pricing Components Turbo Sertifika Fiyatı Oluşturan Turbo Certificate Bileşkenler Pricing Underlying Asset Dayanak Varlık Fiyatı Strike Exchange rate Currency rate Kullanım Fiyatı Dönüşüm Oranı Kur Oranı Cost of Carry Finansman Maliyeti Intrinsic Value Intrinsic Value of Turbo Long Certificates=((Underlying Asset - Strike) Intrinsic Value of Turbo Short Certificates=((Strike Underlying Asset) Turbo Certificates Pricing Formula = (Intrinsic Value X Currency rate X Exchange rate) + Cost of Carry Volatility has an indirect effect on the price of certificates 9

10 Main features of Turbo Certificates An example of Turbo Certificate Pricing Example: The Spot price of the underlying price of a WTI futures contract is 90.21USD on at 14:41 Strike:78.32 USD Exchange rate:0.1 USD/TRY currency rate: The theoretical price of the certificate with code EWTAA can be calculated as follows: =(90,21-78,32)X0.1X =2,134TL NYMEX WTI en yakın Vadeli İşlem Sözleşmesi (Foreks CL1) Uluslarası Serbest Döviz Piyasası USD/TRY (Reuters TRY=) IMKB Sertifika Pazarı (Reuters TRY=) The offer price of certificate is 2.17 TL. Therefore the cost of carry in this price is calculated to be 0.02TL excluding the minimum spread of 0.01TL. 10

11 share price Main features of Turbo Certificates Example 2: Turbo Long Garanti Certificate S(t)=6TL Underlying Asset investor issuer 4TL Credit 2.03TLInvestment Garanti Bank share Turbo Long Garanti Certificate Spot(t)=6 Strike:4TL Barrier:4.5TL Exchange Rate:1:1 Cost of Carry:0.02TL Certificate(t)=2.03TL Buy certificate for 2.03TL Garanti L Cert.(T) Bid Ask Market Maker 2.0 2,03 Buy share for 6TL Spot(t)=6TL 2TL 4TL 11

12 share price share price Main features of Turbo Certificates Example 2: Turbo Long Garanti Certificate S(t+1)=7TL Underlying Asset investor issuer 3TL Payment Garanti Bank share Sold certificate(t+1): 0.97TL Profit (%50) Bought certificate(t+1): 0.03TL Profit Garanti L.cert.(t+1) Bid Ask Market Maker 3.0 3,04 Spot(t+1)=7TL Strike:4TL Barrier:4.5TL Exchange Rate:1:1 Cost of Carry:0.03TL Certificate(t)=3.04TL S(t)=6TL 2TL 4TL constant credit amount, leveraged capital gain constant credit amount S(t+1)=7TL 3TL 4TL 12

13 share price share price Main features of Turbo Certificates Example 2: Turbo Long Garanti Certificate S(t+1)=7TL Garanti L Cert.(T) Bid Ask Market Maker 2.0 2,03 Garanti L.cert.(t+1) Bid Ask Market Maker 3.0 3,04 Delta=0.97/1=0.97 apprx. 1 Omega=0.48/0.17=2.82 apprx TL (48%) increase in certificate price Leverage:6/2.03=2.95 apprx 3 Omega=Leverage X Delta S(t+1)=7TL Spot(t+1)=7TL Strike:4TL Barrier:4.5TL Exchange Rate:1:1 Cost of Carry:0.03TL Certificate(t)=3.04TL S(t)=6TL 2TL 4TL constant credit amount, leveraged capital gain constant credit amount 3TL 4TL 13

14 share price share price Main features of Turbo Certificates Example 3: Turbo Long Garanti Certificate Strike=5TL Garanti L Cert.(T) Bid Ask Market Maker 1.0 1,02 Garanti L.cert.(t+1) Bid Ask Market Maker 2.0 2,03 Delta=0.96/1=0.96 apprx. 1 Omega=0.96/0.17=5.65 apprx TL (96%) increase in certificate price Leverage:6/1.02=5.88 apprx 6 Omega=Leverage X Delta S(t+1)=7TL Spot(t+1)=7TL Strike:5TL Barrier:5.5TL Exchange Rate:1:1 Cost of Carry:0.03TL Certificate(t)=3.04TL S(t)=6TL 1TL 5TL constant credit amount, leveraged capital gain constant credit amount 2TL 5TL 14

15 Main risks about Turbo Certificates Example 2: Turbo Long Garanti Certificate S(t+2)=4.5TL Knock out risk Garanti L Cert.(t) Bid Ask Market Maker 2.0 2,03 Garanti L.cert.(t+2) Bid Ask Market Maker Delta=1.53/1.5 apprx. 1 Omega=0.75/0.25 apprx 3 Spot(t+2)=4.5TL Strike:4TL Barrier:4.5TL Exchange Rate:1:1 Certificates are expired Quotes are delisted Leverage:6/2.03 apprx 3 Omega=Leverage X Delta 0.5TL Payment 1.53 TL Loss (-%76) Sold share: 4.5TL 1.5 Loss (-%25) In a case of knock out the investor can lose all the investment amount!! 15

16 Main risks about Turbo Certificates Example 3: Turbo Long Garanti Certificate S(t+2)=5.5TL Knock out: Leverage risk Garanti L Cert.(t) Bid Ask Market Maker 1.0 1,02 Garanti L.cert.(t+2) Bid Ask Market Maker Delta=0.52/0.5 apprx. 1 Omega=0.50/0.08 apprx 6.3 Spot(t+2)=5.5TL Strike:5TL Barrier:5.5TL Exchange Rate:1:1 Certificates are expired Quotes are delisted Leverage:6/1.020=5.9 apprx 6 Omega=Leverage X Delta 0.5TL Payment 0.52 TL Loss (-%50) Sold share: 5.5TL 0.5 Loss (-%8) In a case of knock out the investor can lose all the investment amount!! As the barrier gets closer to the spot price, the certificate becomes cheaper but more risky!! 16

17 Main risks about Turbo Certificates Currency risk Turbo Uzun WTI Sertifikası Döviz kuru simulasyonu Senaryo Petrol F. (USD) Dayanak Varlık F.değişim% Kullanım fiyatı Dönüşüm Oranı USD/TL Kurdaki değişim% Sertifika Teorik fiyat (TL) Sertifikadan elde edilen kar/zarar% Dayanak Varlığa Yatırımdan elde edilen kar/zarar% T günü % - USD/TL Petrol % % % 5% USD/TL Petrol % % % -27% USD/TL Petrol % % % 36% USD/TL Petrol % % % -5% USD/TL Petrol % % % -33% USD/TL Petrol % % % 23% USD/TL Petrol % % -30% USD/TL Petrol % % 30% Turbo Kısa WTI Sertifikası Döviz kuru simulasyonu Senaryo Petrol F. (USD) Dayanak Varlık F.değişim% Kullanım fiyatı Dönüşüm Oranı USD/TL Kurdaki değişim% Sertifika Teorik fiyat Teorik fiyattaki değişim% Dayanak Varlığa Yatırımdan elde edilen kar/zarar% T günü % - USD/TL Petrol % % % -5% USD/TL Petrol % % % 27% USD/TL Petrol % % % -36% USD/TL Petrol % % % 5% USD/TL Petrol % % % 33% USD/TL Petrol % % % -23% USD/TL Petrol % % 30% USD/TL Petrol % % -30% 17

18 Main risks about certificates Issuer risk S&P: Long term inv. : A Short term inv. : A -1 MOODY S: Long term inv. : A3 Short term inv. : P-2 18

19 Sertifikalara ilişkin iletişim adresleri Erste Menkul Değerler A.Ş. (212)

20 Yapılandırılmış Finansal Ürünler: Sertifikalar Teşekkürler!

Complex Products. Non-Complex Products. General risks of trading

Complex Products. Non-Complex Products. General risks of trading We offer a wide range of investments, each with their own risks and rewards. The following information provides you with a general description of the nature and risks of the investments that you can trade

More information

Risks involved with futures trading

Risks involved with futures trading Appendix 1: Risks involved with futures trading Before executing any futures transaction, the client should obtain information on the risks involved. Note in particular the risks summarized in the following

More information

Content. 15 An Example of FX Option Trade. 3 About 4 Fast, Transparent, Liquid ve Secure Investment Environment. 16 An Example of FX Option Trade

Content. 15 An Example of FX Option Trade. 3 About 4 Fast, Transparent, Liquid ve Secure Investment Environment. 16 An Example of FX Option Trade FX DERIVATIVES Content 3 About 4 Fast, Transparent, Liquid ve Secure Investment Environment 5 When Trading a FX Contract, One Buys/ Sells the Amount of Contract Size 6 In, Contract Expiry Months Are Standard

More information

Answers to Concepts in Review

Answers to Concepts in Review Answers to Concepts in Review 1. Puts and calls are negotiable options issued in bearer form that allow the holder to sell (put) or buy (call) a stipulated amount of a specific security/financial asset,

More information

Non-Complex Products. Complex Products. General risks of trading

Non-Complex Products. Complex Products. General risks of trading We offer a wide range of investments, each with their own risks and rewards. The following information provides you with a general description of the nature and risks of the investments that you can trade

More information

Contracts for Difference (CFDs)

Contracts for Difference (CFDs) Contract for Difference (CFDs) and FCA Disclosure Requirements What are Contract for Difference (CFDs) CFDs (also known as Synthetic Equity Swaps (SES)) are Over the Counter (OTC) transactions which allow

More information

SG TURBOS GEARED EXPOSURE TO AN UNDERLYING WITH A KNOCK-OUT FEATURE

SG TURBOS GEARED EXPOSURE TO AN UNDERLYING WITH A KNOCK-OUT FEATURE SG TURBOS GEARED EXPOSURE TO AN UNDERLYING WITH A KNOCK-OUT FEATURE Turbos are products suitable for UK sophisticated retail and professional investors who have a good understanding of the underlying market

More information

FX Options NASDAQ OMX

FX Options NASDAQ OMX FX Options OPTIONS DISCLOSURE For the sake of simplicity, the examples that follow do not take into consideration commissions and other transaction fees, tax considerations, or margin requirements, which

More information

TURKISH FINANCIAL MARKETS IN PRACTISE

TURKISH FINANCIAL MARKETS IN PRACTISE TURKISH FINANCIAL MARKETS IN PRACTISE SECOND MEETING OF TURKISH-RUSSIAN WORKING GROUP ON BANKING AND FINANCIAL COOPERATION September 2011 EMEL GÜNEŞ HEAD OF TREASURY, DENIZBANK TURKISH FINANCIAL SECTOR:

More information

RISK DISCLOSURE STATEMENT PRODUCT INFORMATION

RISK DISCLOSURE STATEMENT PRODUCT INFORMATION This statement sets out the risks in trading certain products between Newedge Group ( NEWEDGE ) and the client (the Client ). The Client should note that other risks will apply when trading in emerging

More information

CFDs YOUR STARTER KIT

CFDs YOUR STARTER KIT CFDs YOUR STARTER KIT Risk Warning: Forex and CFDs are leveraged products and you may lose your initial deposit as well as substantial amounts of your investment. Trading leveraged products carries a high

More information

COVERED WARRANTS HOW TO TRADE. www.sglistedproducts.co.uk NOVEMBER 2014 LISTED PRODUCTS

COVERED WARRANTS HOW TO TRADE. www.sglistedproducts.co.uk NOVEMBER 2014 LISTED PRODUCTS NOVEMBER 2014 LISTED PRODUCTS COVERED WARRANTS HOW TO TRADE Covered warrants are products suitable for professional clients and sophisticated retail clients in the UK who have a good understanding of the

More information

Risk Explanation for Exchange-Traded Derivatives

Risk Explanation for Exchange-Traded Derivatives Risk Explanation for Exchange-Traded Derivatives The below risk explanation is provided pursuant to Hong Kong regulatory requirements relating to trading in exchange-traded derivatives by those of our

More information

General Forex Glossary

General Forex Glossary General Forex Glossary A ADR American Depository Receipt Arbitrage The simultaneous buying and selling of a security at two different prices in two different markets, with the aim of creating profits without

More information

AN INTRODUCTION TO FIXED RISK TRADING

AN INTRODUCTION TO FIXED RISK TRADING LISTED PRODUCTS FIXED RISK AN INTRODUCTION TO FIXED RISK TRADING Covered Warrants, turbos & super10s RISK WaRNINg CONTENTS Covered Warrants, Turbos and Super10s are Securitised Derivatives* suitable for

More information

INDEPENDENT. OBJECTIVE. RELIABLE. Options Basics & Essentials: The Beginners Guide to Trading Gold & Silver Options

INDEPENDENT. OBJECTIVE. RELIABLE. Options Basics & Essentials: The Beginners Guide to Trading Gold & Silver Options INDEPENDENT. OBJECTIVE. RELIABLE. 1 About the ebook Creator Drew Rathgeber is a senior broker at Daniels Trading. He has been heavily involved in numerous facets of the silver & gold community for over

More information

Mechanics of Options Markets

Mechanics of Options Markets Mechanics of Options Markets Liuren Wu Zicklin School of Business, Baruch College Options Markets (Hull chapter: 8) Liuren Wu (Baruch) Options Markets Mechanics Options Markets 1 / 22 Outline 1 Definition

More information

REPUBLIC OF TURKEY Capital Markets Board of Turkey

REPUBLIC OF TURKEY Capital Markets Board of Turkey REPUBLIC OF TURKEY Capital Markets Board of Turkey Number : 32992422-220.02-1333 8897 26/08/2013 Subject : Derivative Instruments Risk Notification Form THE ASSOCIATION OF CAPITAL MARKET INTERMEDIARY INSTITUTIONS

More information

Introduction. pic. Top warrant markets include Germany, Switzerland, Italy, Australia, Hong Kong and the United Kingdom.

Introduction. pic. Top warrant markets include Germany, Switzerland, Italy, Australia, Hong Kong and the United Kingdom. Corporate Warrants and Investment Banking pic Contents Introduction 2 What is a warrant? 3 Benefits at a glance 4 Pricing and valuation 9 What are the risks? 12 Barrier warrants 15 Turbos 18 Warrants versus

More information

Derivative Products Features and Risk Disclosures

Derivative Products Features and Risk Disclosures Derivative Products Features and Risk Disclosures Table of Content Warrants... 3 Callable Bull/Bear Contracts (CBBC)... 5 Exchange Traded Fund (ETF)... 7 Listed equity linked instruments (ELI/ELN)... 9

More information

ABN AMRO TURBOS. Leveraged active investing. English

ABN AMRO TURBOS. Leveraged active investing. English ABN AMRO TURBOS Leveraged active investing English The ABN AMRO Turbo. A Turbo investment. The ABN AMRO Bank N.V. ( ABN AMRO ) Turbo certificate ( Turbo ) is a derivative investment product that tracks

More information

Introduction to Options

Introduction to Options Introduction to Options By: Peter Findley and Sreesha Vaman Investment Analysis Group What Is An Option? One contract is the right to buy or sell 100 shares The price of the option depends on the price

More information

Sermaye Piyasalarının Ekonomideki Yeri ve Borsa İstanbul. Dr. M. İbrahim Turhan Borsa İstanbul Başkanı 15 Mart 2013

Sermaye Piyasalarının Ekonomideki Yeri ve Borsa İstanbul. Dr. M. İbrahim Turhan Borsa İstanbul Başkanı 15 Mart 2013 Sermaye Piyasalarının Ekonomideki Yeri ve Borsa İstanbul Dr. M. İbrahim Turhan Borsa İstanbul Başkanı 15 Mart 2013 Turkish Financial System Capital Markets have promising potential for development Breakdown

More information

1.2 Structured notes

1.2 Structured notes 1.2 Structured notes Structured notes are financial products that appear to be fixed income instruments, but contain embedded options and do not necessarily reflect the risk of the issuing credit. Used

More information

FX Derivatives Terminology. Education Module: 5. Dated July 2002. FX Derivatives Terminology

FX Derivatives Terminology. Education Module: 5. Dated July 2002. FX Derivatives Terminology Education Module: 5 Dated July 2002 Foreign Exchange Options Option Markets and Terminology A American Options American Options are options that are exercisable for early value at any time during the term

More information

The purpose of this ebook is to introduce newcomers to the forex marketplace and CMTRADING. Remember that trading in forex is inherently risky, and

The purpose of this ebook is to introduce newcomers to the forex marketplace and CMTRADING. Remember that trading in forex is inherently risky, and The purpose of this ebook is to introduce newcomers to the forex marketplace and CMTRADING. Remember that trading in forex is inherently risky, and you can lose money as well as make money. Manage your

More information

Risk Warning Notice. Introduction

Risk Warning Notice. Introduction First Equity Limited Salisbury House London Wall London EC2M 5QQ Tel 020 7374 2212 Fax 020 7374 2336 www.firstequity.ltd.uk Risk Warning Notice Introduction You should not invest in any investment product

More information

Risks of Investments explained

Risks of Investments explained Risks of Investments explained Member of the London Stock Exchange .Introduction Killik & Co is committed to developing a clear and shared understanding of risk with its clients. The categories of risk

More information

The mechanics of the warrants market

The mechanics of the warrants market Course #: Title Course 01a The mechanics of the warrants market Topic 1: What are warrants?... 3 The ASX Warrants market... 3 Topic 2: Warrant features... 4 Underlying... 4 Exercise price (final payment)...

More information

Option Theory Basics

Option Theory Basics Option Basics What is an Option? Option Theory Basics An option is a traded security that is a derivative product. By derivative product we mean that it is a product whose value is based upon, or derived

More information

Content. About VIOP. Borsa İstanbul : Fast, transparent, liquid and secure investment environment

Content. About VIOP. Borsa İstanbul : Fast, transparent, liquid and secure investment environment GOLD FUTURES Content 3 4 6 About VIOP Borsa İstanbul : Fast, transparent, liquid and secure investment environment Contract Size Amount of Gold Is Traded Through a Gold Futures Contract 7 Contract Months

More information

Definition. Market. Volatility levels allocated by the Issuer. Volatility Levels allocated by JSE

Definition. Market. Volatility levels allocated by the Issuer. Volatility Levels allocated by JSE Warrants Definition A warrant is a geared financial instrument which gives the warrant holder the right but not the obligation to buy, sell or participate in the performance of the underlying security,

More information

OPTIONS EDUCATION GLOBAL

OPTIONS EDUCATION GLOBAL OPTIONS EDUCATION GLOBAL TABLE OF CONTENTS Introduction What are FX Options? Trading 101 ITM, ATM and OTM Options Trading Strategies Glossary Contact Information 3 5 6 8 9 10 16 HIGH RISK WARNING: Before

More information

Derivative Users Traders of derivatives can be categorized as hedgers, speculators, or arbitrageurs.

Derivative Users Traders of derivatives can be categorized as hedgers, speculators, or arbitrageurs. OPTIONS THEORY Introduction The Financial Manager must be knowledgeable about derivatives in order to manage the price risk inherent in financial transactions. Price risk refers to the possibility of loss

More information

General Risk Disclosure

General Risk Disclosure General Risk Disclosure Colmex Pro Ltd (hereinafter called the Company ) is an Investment Firm regulated by the Cyprus Securities and Exchange Commission (license number 123/10). This notice is provided

More information

DERIVATIVE INSTRUMENTS RISK STATEMENT FORM (applicable to transactions at Turkish Derivatives Exchange)

DERIVATIVE INSTRUMENTS RISK STATEMENT FORM (applicable to transactions at Turkish Derivatives Exchange) DERIVATIVE INSTRUMENTS RISK STATEMENT FORM (applicable to transactions at Turkish Derivatives Exchange) Important Explanation: While you may generate revenues as a result of the purchase-sale transactions

More information

understanding options

understanding options Investment Planning understanding options Get acquainted with this versatile investment tool. Understanding Options This brochure discusses the basic concepts of options: what they are, common investment

More information

optionsxpress Australia Pty Limited Exchange Traded Options

optionsxpress Australia Pty Limited Exchange Traded Options Part 1 Incorporating Part 2 - Schedule of Fees and Costs Issued by: ABN: 11 085 258 822 Australian Financial Services Licence No. 246743 Address: Unit 5, 4 Skyline Place Frenchs Forest NSW 2086 Phone:

More information

Investment Fundamentals Forum 21 January 2013

Investment Fundamentals Forum 21 January 2013 Investment Fundamentals Forum 21 January 2013 Understanding and Trading Equity & Related Products in Singapore Th ng Beng Hooi, CFA 1 Speaker Biography Th ng Beng Hooi, CFA 2 Disclaimer Please note that

More information

Before you accept the Terms and Conditions and engage in our Services, it is important that you read these Risk Warnings.

Before you accept the Terms and Conditions and engage in our Services, it is important that you read these Risk Warnings. Important information Investment Risk Warnings Before you accept the Terms and Conditions and engage in our Services, it is important that you read these Risk Warnings. Definitions used in these Risk Warnings

More information

Underlier Filters Category Data Field Description

Underlier Filters Category Data Field Description Price//Capitalization Market Capitalization The market price of an entire company, calculated by multiplying the number of shares outstanding by the price per share. Market Capitalization is not applicable

More information

Lecture 12. Options Strategies

Lecture 12. Options Strategies Lecture 12. Options Strategies Introduction to Options Strategies Options, Futures, Derivatives 10/15/07 back to start 1 Solutions Problem 6:23: Assume that a bank can borrow or lend money at the same

More information

Section 1 Important Information... 2. Section 2 Regulatory Guide 227... 2. Section 3 Features... 3. Section 4 How to Trade... 8

Section 1 Important Information... 2. Section 2 Regulatory Guide 227... 2. Section 3 Features... 3. Section 4 How to Trade... 8 CONTENTS Section 1 Important Information... 2 Section 2 Regulatory Guide 227... 2 Section 3 Features... 3 Section 4 How to Trade... 8 Section 5 Significant Risks... 32 Section 6 Costs, Fees & Charges...

More information

RISKS DISCLOSURE STATEMENT

RISKS DISCLOSURE STATEMENT RISKS DISCLOSURE STATEMENT You should note that there are significant risks inherent in investing in certain financial instruments and in certain markets. Investment in derivatives, futures, options and

More information

COAL MARKET FREQUENTLY ASKED QUESTIONS

COAL MARKET FREQUENTLY ASKED QUESTIONS COAL MARKET FREQUENTLY ASKED QUESTIONS Over the course of the past decade, numerous issues have arisen in the U.S. coal trading arena. Bankruptcies, standardized trading contracts, and liquidity are a

More information

PRECISION TOOLS FOR PROFESSIONAL INVESTORS. Listed structured products

PRECISION TOOLS FOR PROFESSIONAL INVESTORS. Listed structured products PRECISION TOOLS FOR PROFESSIONAL INVESTORS Listed structured products Contents 2 Introduction 4 Trackers 6 Accelerated Trackers 8 Reverse Trackers 1 Bonus Trackers 12 Discount Trackers 14 Capital Protected

More information

Investment Finance 421-002 Prototype Midterm I

Investment Finance 421-002 Prototype Midterm I Investment Finance 421-002 Prototype Midterm I The correct answer is highlighted by a *. Also, a concise reasoning is provided in Italics. 1. are an indirect way U. S. investor can invest in foreign companies.

More information

Security Bank Treasury FX and Rates Hedging Division Gearing Up for External Competitiveness November 19, 2014. Treasury FXRH

Security Bank Treasury FX and Rates Hedging Division Gearing Up for External Competitiveness November 19, 2014. Treasury FXRH Security Bank Treasury FX and Rates Hedging Division Gearing Up for External Competitiveness November 19, 2014 HEDGING, DERIVATIVES AND SPECULATION HEDGING Making an investment to reduce the risk of adverse

More information

Introduction to Equity Derivatives on Nasdaq Dubai NOT TO BE DISTRIUTED TO THIRD PARTIES WITHOUT NASDAQ DUBAI S WRITTEN CONSENT

Introduction to Equity Derivatives on Nasdaq Dubai NOT TO BE DISTRIUTED TO THIRD PARTIES WITHOUT NASDAQ DUBAI S WRITTEN CONSENT Introduction to Equity Derivatives on Nasdaq Dubai NOT TO BE DISTRIUTED TO THIRD PARTIES WITHOUT NASDAQ DUBAI S WRITTEN CONSENT CONTENTS An Exchange with Credentials (Page 3) Introduction to Derivatives»

More information

Terminology of Convertable Bonds

Terminology of Convertable Bonds Bellerive 241 P.o. Box CH-8034 Zurich info@fam.ch www.fam.ch T +41 44 284 24 24 Terminology of Convertable Bonds Fisch Asset Management Terminology of Convertible Bonds Seite 2 28 ACCRUED INTEREST 7 ADJUSTABLE-RATE

More information

An Option In the security market, an option gives the holder the right to buy or sell a stock (or index of stocks) at a specified price ( strike

An Option In the security market, an option gives the holder the right to buy or sell a stock (or index of stocks) at a specified price ( strike Reading: Chapter 17 An Option In the security market, an option gives the holder the right to buy or sell a stock (or index of stocks) at a specified price ( strike price) within a specified time period.

More information

Session IX: Lecturer: Dr. Jose Olmo. Module: Economics of Financial Markets. MSc. Financial Economics

Session IX: Lecturer: Dr. Jose Olmo. Module: Economics of Financial Markets. MSc. Financial Economics Session IX: Stock Options: Properties, Mechanics and Valuation Lecturer: Dr. Jose Olmo Module: Economics of Financial Markets MSc. Financial Economics Department of Economics, City University, London Stock

More information

Exchange Traded Options Product Disclosure Statement and Application Form

Exchange Traded Options Product Disclosure Statement and Application Form CommSec Adviser Services Phone 1800 252 351 Fax 1300 668 788 Locked Bag 3005 Australia Square NSW 1215 www.commsecadviserservices.com.au advisertrading@cba.com.au Exchange Traded Options Date of Issue:

More information

Short and Leverage ETPs MAKE MORE OF COMMODITIES

Short and Leverage ETPs MAKE MORE OF COMMODITIES May 2015 LISTED PRODUCTS Short and Leverage ETPs MAKE MORE OF COMMODITIES THIS COMMUNICATION IS DIRECTED AT SOPHISTICATED RETAIL CLIENTS IN THE UK Contents 3 KEY TERMS YOU WILL COME ACROSS IN THIS BROCHURE

More information

Trading with Gearing

Trading with Gearing Trading with Gearing Societe Generale Exchange Traded Products JUNE 2011 Alexandre CHESSÉ Exchange Traded Products 0800 328 1199 www.sglistedproducts.com 2 Securitised Derivatives risk warning The products

More information

How to Collect a 162% Cash on Cash Return

How to Collect a 162% Cash on Cash Return How to Collect a 162% Cash on Cash Return Today we are going to explore one of the most profitable, low-risk income strategies I ve come across in my 27 years of trading. This income strategy produced

More information

DERIVATIVES Presented by Sade Odunaiya Partner, Risk Management Alliance Consulting DERIVATIVES Introduction Forward Rate Agreements FRA Swaps Futures Options Summary INTRODUCTION Financial Market Participants

More information

Frequently asked questions. Hong Kong listed warrant and CBBC market

Frequently asked questions. Hong Kong listed warrant and CBBC market (Last updated: 8 April 2016) Frequently asked questions Hong Kong listed warrant and CBBC market Introduction These FAQs are intended to give you a better understanding of derivative warrants ( warrants

More information

The First Islamic ETF: Turkey s Experience

The First Islamic ETF: Turkey s Experience OIC Member States Stock Exchanges Forum 5th Meeting with Capital Market Linkages & Technology Seminar Istanbul, September 17 th -18 th, 2011 The First Islamic ETF: Turkey s Experience Issuer: BMD Securities

More information

1 Introduction. 1.5 Margin and Variable Margin Feature

1 Introduction. 1.5 Margin and Variable Margin Feature Risk Disclosure Spread Betting and CFDs are high risk investments. Your capital is at risk. Spread Betting and CFDs are not suitable for all investors and you should ensure that you understand the risks

More information

Market Overview Fal 2015

Market Overview Fal 2015 Market Overview Fall 2015 Agenda Equities o What is a stock/etf? o Why do companies issue stock? o Debt vs Equity o Different types of stocks o How stocks trade Derivatives o Futures/Forwards o Options

More information

How Securities Are Traded. Chapter 3

How Securities Are Traded. Chapter 3 How Securities Are Traded Chapter 3 Primary vs. Secondary Security Sales Primary new issue issuer receives the proceeds from the sale first-time issue: IPO = issuer sells stock for the first time seasoned

More information

INTRODUCTION TO OPTIONS MARKETS QUESTIONS

INTRODUCTION TO OPTIONS MARKETS QUESTIONS INTRODUCTION TO OPTIONS MARKETS QUESTIONS 1. What is the difference between a put option and a call option? 2. What is the difference between an American option and a European option? 3. Why does an option

More information

Options, Futures, and Other Derivatives 7 th Edition, Copyright John C. Hull 2008 2

Options, Futures, and Other Derivatives 7 th Edition, Copyright John C. Hull 2008 2 Mechanics of Options Markets Chapter 8 Options, Futures, and Other Derivatives, 7th Edition, Copyright John C. Hull 2008 1 Review of Option Types A call is an option to buy A put is an option to sell A

More information

EXCHANGE TRADED OPTIONS PRODUCT DISCLOSURE STATEMENT INTERACTIVE BROKERS LLC ARBN 091 191 141 AFSL 245 574

EXCHANGE TRADED OPTIONS PRODUCT DISCLOSURE STATEMENT INTERACTIVE BROKERS LLC ARBN 091 191 141 AFSL 245 574 EXCHANGE TRADED OPTIONS PRODUCT DISCLOSURE STATEMENT INTERACTIVE BROKERS LLC ARBN 091 191 141 AFSL 245 574 Date of Issue: 12 February 2014 INDEX 1. GENERAL INTRODUCTION 4 1.1 Important Information 4 1.2

More information

INFORMATION CIRCULAR: ALPS ETF TRUST

INFORMATION CIRCULAR: ALPS ETF TRUST INFORMATION CIRCULAR: ALPS ETF TRUST TO: FROM: Head Traders, Technical Contacts, Compliance Officers, Heads of ETF Trading, Structured Products Traders Nasdaq / BX / PHLX Listing Qualifications Department

More information

Exchange Traded Funds

Exchange Traded Funds LPL FINANCIAL RESEARCH Exchange Traded Funds February 16, 2012 What They Are, What Sets Them Apart, and What to Consider When Choosing Them Overview 1. What is an ETF? 2. What Sets Them Apart? 3. How Are

More information

Investment Education Series

Investment Education Series Investment Education Series Types of Investment Funds Introduction Investment fund basically refers to a pool of funds, but our focus in this edition of GTBAM education series is to highlight the features,

More information

Lecture 4: Derivatives

Lecture 4: Derivatives Lecture 4: Derivatives School of Mathematics Introduction to Financial Mathematics, 2015 Lecture 4 1 Financial Derivatives 2 uropean Call and Put Options 3 Payoff Diagrams, Short Selling and Profit Derivatives

More information

w w w.c a t l e y l a k e m a n.c o m 0 2 0 7 0 4 3 0 1 0 0

w w w.c a t l e y l a k e m a n.c o m 0 2 0 7 0 4 3 0 1 0 0 A ADR-Style: for a derivative on an underlying denominated in one currency, where the derivative is denominated in a different currency, payments are exchanged using a floating foreign-exchange rate. The

More information

Introduction to Options. Derivatives

Introduction to Options. Derivatives Introduction to Options Econ 422: Investment, Capital & Finance University of Washington Summer 2010 August 18, 2010 Derivatives A derivative is a security whose payoff or value depends on (is derived

More information

Summary of Interview Questions. 1. Does it matter if a company uses forwards, futures or other derivatives when hedging FX risk?

Summary of Interview Questions. 1. Does it matter if a company uses forwards, futures or other derivatives when hedging FX risk? Summary of Interview Questions 1. Does it matter if a company uses forwards, futures or other derivatives when hedging FX risk? 2. Give me an example of how a company can use derivative instruments to

More information

RISK DISCLOSURE STATEMENT

RISK DISCLOSURE STATEMENT RISK DISCLOSURE STATEMENT You should note that there are significant risks inherent in investing in certain financial instruments and in certain markets. Investment in derivatives, futures, options and

More information

Options. Moty Katzman. September 19, 2014

Options. Moty Katzman. September 19, 2014 Options Moty Katzman September 19, 2014 What are options? Options are contracts conferring certain rights regarding the buying or selling of assets. A European call option gives the owner the right to

More information

6. Foreign Currency Options

6. Foreign Currency Options 6. Foreign Currency Options So far, we have studied contracts whose payoffs are contingent on the spot rate (foreign currency forward and foreign currency futures). he payoffs from these instruments are

More information

PRODUCT DISCLOSURE STATEMENT FOR THE ISSUE OF ASX CFDs BY MORRISON SECURITIES PTY LIMITED

PRODUCT DISCLOSURE STATEMENT FOR THE ISSUE OF ASX CFDs BY MORRISON SECURITIES PTY LIMITED PRODUCT DISCLOSURE STATEMENT FOR THE ISSUE OF ASX CFDs BY MORRISON SECURITIES PTY LIMITED PART 1 This document is part of a Product Disclosure Statement and is Part 1. The other document which makes up

More information

PRODUCT DISCLOSURE STATEMENT FOR MARGIN FX & CONTRACTS FOR DIFFERENCE

PRODUCT DISCLOSURE STATEMENT FOR MARGIN FX & CONTRACTS FOR DIFFERENCE PRODUCT DISCLOSURE STATEMENT FOR MARGIN FX & CONTRACTS FOR DIFFERENCE This document provides important information about Margined Foreign Exchange and Contracts for Difference contracts to help you decide

More information

Contents. ETF Reference Guide Page 2 The Stock Exchange of Mauritius

Contents. ETF Reference Guide Page 2 The Stock Exchange of Mauritius ETF Reference Guide Contents 1. Background 04 2. Introduction to Exchange Traded Funds 05 What are Exchange Traded Funds Why invest in Exchange Traded Funds as an alternative to other similar investments?

More information

} } Global Markets. Currency options. Currency options. Introduction. Options contracts. Types of options contracts

} } Global Markets. Currency options. Currency options. Introduction. Options contracts. Types of options contracts Global Markets Currency options Currency options Introduction Currency options have gained acceptance as invaluable tools in managing foreign exchange risk. They are extensively used and bring a much wider

More information

NEW TO FOREX? FOREIGN EXCHANGE RATE SYSTEMS There are basically two types of exchange rate systems:

NEW TO FOREX? FOREIGN EXCHANGE RATE SYSTEMS There are basically two types of exchange rate systems: NEW TO FOREX? WHAT IS FOREIGN EXCHANGE Foreign Exchange (FX or Forex) is one of the largest and most liquid financial markets in the world. According to the authoritative Triennial Central Bank Survey

More information

Index Options Beginners Tutorial

Index Options Beginners Tutorial Index Options Beginners Tutorial 1 BUY A PUT TO TAKE ADVANTAGE OF A RISE A diversified portfolio of EUR 100,000 can be hedged by buying put options on the Eurostoxx50 Index. To avoid paying too high a

More information

Exotic options [April 4]

Exotic options [April 4] Exotic options [April 4] We ve looked at European and American Calls and Puts European options with general payoff functions From a theoretical point of view. This could be carried further, to more Exotic

More information

Description of business processes. ISO 20022 Securities dashboard - Description of business processes

Description of business processes. ISO 20022 Securities dashboard - Description of business processes of business processes ISO 20022 Securities dashboard - of business processes Securities of Business Processes Issuer Pre-Investment Decision This covers the information from the issuer to Edgar, etc. which

More information

Reference Manual Currency Options

Reference Manual Currency Options Reference Manual Currency Options TMX Group Equities Toronto Stock Exchange TSX Venture Exchange TMX Select Equicom Derivatives Montréal Exchange CDCC Montréal Climate Exchange Fixed Income Shorcan Energy

More information

Reading: Chapter 19. 7. Swaps

Reading: Chapter 19. 7. Swaps Reading: Chapter 19 Chap. 19. Commodities and Financial Futures 1. The mechanics of investing in futures 2. Leverage 3. Hedging 4. The selection of commodity futures contracts 5. The pricing of futures

More information

Trading Shares in Your Stock Plan Account

Trading Shares in Your Stock Plan Account Trading Shares in Your Stock Plan Account Follow the steps below to place a trade to sell your company shares.* Before you place your trade We recommend that you establish instructions with Fidelity for

More information

Launch Announcement for Warrants to be issued by

Launch Announcement for Warrants to be issued by This announcement appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the Warrants described below. Hong Kong Exchanges and Clearing

More information

THE POWER OF FOREX OPTIONS

THE POWER OF FOREX OPTIONS THE POWER OF FOREX OPTIONS TOPICS COVERED Option basics Call options Put Options Why trade options? Covered call Covered put Hedging your position using options How to repair a trading position THE POWER

More information

Use this brochure to gain expertise about ETFs that you can communicate to your clients.

Use this brochure to gain expertise about ETFs that you can communicate to your clients. How ETFs work Your clients may have questions about exchange-traded funds (ETFs), such as how they differ from mutual funds, how they re traded and even how they re created. Use this brochure to gain expertise

More information

XIV. Additional risk information on forward transactions in CFDs

XIV. Additional risk information on forward transactions in CFDs XIV. Additional risk information on forward transactions in CFDs The following information is given in addition to the general risks associated with forward transactions. Please read the following information

More information

Non-Collateralised Structured Products Launch Announcement for Callable Bull/Bear Contracts over Index. Issuer: CREDIT SUISSE AG

Non-Collateralised Structured Products Launch Announcement for Callable Bull/Bear Contracts over Index. Issuer: CREDIT SUISSE AG This announcement appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the CBBCs described below. Hong Kong Exchanges and Clearing

More information

ASX CFD market fundamentals

ASX CFD market fundamentals Course #: Title Course 1 ASX CFD market fundamentals Topic 1: The ASX CFD Market... 3 What are CFDs?... 3 The popularity of ASX CFDs has arisen from two main features:... 3 ASX CFDs offer additional features

More information

BEAR: A person who believes that the price of a particular security or the market as a whole will go lower.

BEAR: A person who believes that the price of a particular security or the market as a whole will go lower. Trading Terms ARBITRAGE: The simultaneous purchase and sale of identical or equivalent financial instruments in order to benefit from a discrepancy in their price relationship. More generally, it refers

More information

FOREX Markets & Trading Currencies

FOREX Markets & Trading Currencies FOREX Markets & Trading Currencies Updates Tonight: FOREX & Demonstra1on of thinkorswim pla9orm Next Week: Stock & Op*ons Trading 101 on March 3 rd Execu1ve Board Applica1ons out now Apply for COO & CMO

More information

Launch Announcement for Callable Bull/Bear Contracts ("CBBCs") to be issued by

Launch Announcement for Callable Bull/Bear Contracts (CBBCs) to be issued by This announcement appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe for the CBBCs described below. Hong Kong Exchanges and Clearing

More information

Fundamentals of Futures and Options (a summary)

Fundamentals of Futures and Options (a summary) Fundamentals of Futures and Options (a summary) Roger G. Clarke, Harindra de Silva, CFA, and Steven Thorley, CFA Published 2013 by the Research Foundation of CFA Institute Summary prepared by Roger G.

More information

For example, someone paid $3.67 per share (or $367 plus fees total) for the right to buy 100 shares of IBM for $180 on or before November 18, 2011

For example, someone paid $3.67 per share (or $367 plus fees total) for the right to buy 100 shares of IBM for $180 on or before November 18, 2011 Chapter 7 - Put and Call Options written for Economics 104 Financial Economics by Prof Gary R. Evans First edition 1995, this edition September 24, 2011 Gary R. Evans This is an effort to explain puts

More information

J. Gaspar: Adapted from Jeff Madura, International Financial Management

J. Gaspar: Adapted from Jeff Madura, International Financial Management Chapter5 Currency Derivatives J. Gaspar: Adapted from Jeff Madura, International Financial Management 5. 1 Currency Derivatives Currency derivatives are financial instruments whose prices are determined

More information

Chapter 5: Foreign Currency Options. Definitions

Chapter 5: Foreign Currency Options. Definitions Chapter 5: Foreign Currency Options Overview 1. Definitions 2. Markets for Options 3. Speculation with Options 4. Option Pricing and Valuation (as time permits.) Suggested Problems & Exercises: All 1 de

More information

Risk Disclosure Statement

Risk Disclosure Statement Risk Disclosure Statement The risk of loss in trading commodity futures contracts can be substantial. You should, therefore, carefully consider whether such trading is suitable for you in light of your

More information