Mastering Financial Calculations: A step-by-step guide to the mathematics of financial market instruments (The Mastering Series)

A step-by-step guide to the mathematics of financial market instruments. If you work in today's financial markets, you need to master the maths. Mastering Financial Calculations explains financial mathematics and calculations in a clear and comprehensive way. Even if your mathematical background is limited, you'll learn what you need to know. Beginning with the fundamentals of financial market arithmetic, the book walks you through the concepts of discounting, net present value, effective yields, cash flow analysis, futures, zero coupon analysis, interest rate and currency swaps and much more. Making use of examples and practical exercises Mastering Financial Calculations explains challenging concepts and calculations all with exceptional clarity. Mastering Financial Calculations includes: \* \*The fundamentals of financial calculations \*Money market calculations \*Forward-forwards and FRAs \*Interest rate futures \*Bond market calculations \*Repos, buy, sell-backs and securities lending \*Zero-coupon rates and yield curves \*Foreign exchange calculations \*Interest rate and currency swaps \*Options-pricing, volatility and sensitivities \*Equities \*Gold and other commodities Cover Mastering Financial Calculations Disclaimer The author Contents Foreword Introduction Part 1: The Basics Financial arithmetic basics Some opening remarks on formulas Use of an HP calculator Simple and compound interest Nominal and effective rates Future value / present value; time value of money Discount factors Cashflow analysis, NPV, IRR and time-weighted rate of return Annuities Using an HP calculator for cashflow analysis Interpolation and extrapolation Exercises Statistics basics Averages – arithmetic & geometric means, weighted averages, median and mode Variance, standard deviation and volatility Correlation and covariance Histograms, probability density and the normal probability function Confidence levels and the normal probability table Exercises Part 2: Interest Rate Instruments The money market Overview Day/year conventions Money market instruments Money market calculations Discount instruments CDs paying more than one coupon Value dates Exercises Forward-forward interest rates and forward rate agreements (fras) Forward-forwards, fras and futures Applications of fras Exercises Interest rate futures Overview Exchange structure and margins Futures compared with fras Pricing and hedging fras with futures Trading with interest rate futures Exercises Bond market calculations Overview of capital market instruments Features and variations Introduction to bond pricing Different yield measures and price calculations A summary of the various approaches to price/ yield Duration, modified duration and convexity Bond futures Cash-and-carry arbitrage Exercises Repos, buy / sell-backs and securities lending Introduction Classic repo Margin calls General collateral (GC) and specials Other features Buy/sell-back Close-out and repricing Securities lending Comparison between the different transactions Uses of repo and securities lending Exercises Zero-coupon rates and yield curves Zero-coupon yields, par yields and bootstrapping Forward-forward yields Summary Longer-dated fras Exercises Part 3: Foreogn Exchange Foreign exchange Introduction Spot exchange rates Forward exchange rates Cross-rate forwards Short dates Calculation summary Value dates Forward-forwards Non-deliverable forwards (NDFs) Time options Long-dated forwards Arbitraging and creating FRAs Discounting future foreign exchange risk Exercises Part 4: Swaps and Options Interest rate and currency swaps Basic concepts and applications Overnight index swap (OIS) Pricing Valuing swaps Hedging an interest rate swap Amortising and forward-start swaps Currency swaps Exercises Options Overview The ideas behind option pricing Pricing models OTC options Exchange-traded options Value dates for FX options Trading with calls and puts More trading strategies Hedging with options Some “packaged” options The greek letters Some exotic options Credit derivatives, synthetic cdos and first-to-default baskets Exercises Part 5: Equities Equities Introduction Ratios Valuation Stock splits and rights issues Stock indices Single stock futures Stock index futures Exercises Part 6: Gold and Other Commodities Gold and other commodities Gold Gold borrowing, forwards, swaps and GOFO Other commodities Forward pricing and convenience yield Commodity futures and EFP (exchange for physical) FRAs, swaps and options Exercises Part 7: Hints and Answers to Exercises Hints and answers to exercises Introduction Hints on exercises Answers to exercises Appendix 1 Using an HP calculator Appendix 2 A summary of market day / year conventions and government bond markets Appendix 3 A summary of calculation procedures Appendix 4 Glossary Appendix 5 ISO (SWIFT) currency codes Select Bibliography Index Mastering Financial Calculations starts by introducing the fundamentals of financial market arithmetic, including the core concepts of discounting, net present value, effective yields, and cash flow analysis. Next, walk step-by-step through the essential calculations and financial techniques behind money markets and futures, zero-coupon analysis, interest rate and currency swaps, bonds, foreign exchange, options, and more. Making use of many worked examples and practical exercises, the book explains challenging concepts such as forward pricing, duration analysis, swap valuation, and option pricing - all with exceptional clarity. Whether you are a trader, fund manager, corporate treasurer, programmer, accountant, risk manager, or market student, you'll gain the ability to manipulate and apply these techniques with speed and confidence. The full text downloaded to your computer With eBooks you can: search for key concepts, words and phrases make highlights and notes as you study share your notes with friends eBooks are downloaded to your computer and accessible either offline through the Bookshelf (available as a free download), available online and also via the iPad and Android apps. Upon purchase, you'll gain instant access to this eBook. Time limit The eBooks products do not have an expiry date. You will continue to access your digital ebook products whilst you have your Bookshelf installed. Success in today's sophisticated financial markets depends on a firm understanding of key financial concepts and mathematical techniques. Mastering Financial Calculations explains them in a clear, comprehensive way — so even if your mathematical background is limited, you'll thoroughly grasp what you need to know. Mastering Financial Calculations starts by introducing the fundamentals of financial market arithmetic, including the core concepts of discounting, net present value, effective yields, and cash flow analysis. Next, walk step-by-step through the essential calculations and financial techniques behind money markets and futures, zero-coupon analysis, interest rate and currency swaps, bonds, foreign exchange, options, and more. Making use of many worked examples and practical exercises, the book explains challenging concepts such as forward pricing, duration analysis, swap valuation, and option pricing - all with exceptional clarity. Whether you are a trader, fund manager, corporate treasurer, programmer, accountant, risk manager, or market student, you'll gain the ability to manipulate and apply these techniques with speed and confidence.

Mastering Financial Calculations shows you how to understand and apply the financial arithmetic necessary to work with the full range of products in the capital markets, foreign exchange, money markets and derivatives.

Written for anyone working in financial institutions, studying the financial markets or working towards the ACI Dealing Certificate and Diploma exams, the book provides a solid grounding in the calculations behind financial instruments.

Thoroughly updated throughout with extra calculations and formulas, the third edition of this bestseller now includes:

• A chapter on equities which complements existing chapters on short and long-term interest rate instruments, foreign exchange and commodities
• An overview of credit derivatives and their basic structures
• A significantly expanded and updated glossary
• A new chapter on statistics
• Access to Microsoft Excel spreadsheets containing formulas and calculation methods which can be downloaded at www.Markets-International.com

Success in today's sophisticated financial markets depends on a firm understanding of key financial concepts and mathematical techniques. Mastering Financial Calculations explains them in a clear, comprehensive way -- so even if your mathematical background is limited, you'll thoroughly grasp what you need to know. This book starts by introducing the fundamentals of financial market arithmetic, including the core concepts of discounting, net present value, effective yields, and cash flow analysis. Next, walk step-by-step through the essential calculations and financial techniques behind money markets and futures, zero-coupon analysis, interest rate and currency swaps, bonds, foreign exchange, options, and more. Making use of many worked examples and practical exercises, the book explains challenging concepts such as forward pricing, duration analysis, swap valuation, and option pricing - all with exceptional clarity