Abstract
The objective of this chapter is to provide the reader with an overview of the main concepts and terminology of the ‘cash’ equity market that is directly relevant to the equity derivatives market. Although the products covered in this chapter will reappear throughout the text, certain variants (e.g. dividend and variance swaps) will be described in the chapters where they feature most prominently.
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Notes
- 1.
For readers looking for more detail one suggested reference is Chisholm, A (2009) ‘An introduction to capital markets’ John Wiley and Sons.
- 2.
See for example: ‘Is it meaningful to talk about the ownership of companies’ on www.johnkay.com
- 3.
Equity ratios will be analysed in greater depth in Chap. 3.
- 4.
This example is based on ‘Understanding rights issues’ Lee and Taylor (2009), Barclays Capital Research.
- 5.
- 6.
A letter of credit is a third party documentary guarantee.
- 7.
‘Blow your clearing house down’ Risk Magazine October 2011.
- 8.
See Sect. 4.3.
- 9.
Negative prices for commodities have been empirically observed in markets such as natural gas and electricity. This is largely due to oversupply and the producers decide it is economically more viable to pay people to take it off their hands!
- 10.
An excellent standalone reference for exotic options is ‘Exotic options trading’ by Frans De Weert John Wiley and Sons Ltd (2008).
Bibliography
Combescot, P. (2013) Recent changes in equity financing Presentation to the Society of Actuaries
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Schofield, N.C. (2017). Equity Derivatives: The Fundamentals. In: Equity Derivatives. Palgrave Macmillan, London. https://doi.org/10.1057/978-0-230-39107-9_1
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DOI: https://doi.org/10.1057/978-0-230-39107-9_1
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Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-0-230-39106-2
Online ISBN: 978-0-230-39107-9
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