Readings

Readings will be drawn in part from the following text(s).

Hull, John C., Options, Futures and other Derivatives, 6th edition, Prentice Hall 2006.

You should read Hull chapter 1-2 as initial background.  Additional readings are provided below.  Most are optional.

  1. Forward, futures and option contracts
    Hull, chap 1-3, 8, 9

  2. Interest rates and the term structure
    Hull, chap 4, "Interest Rates"
    "Notes on Duration", R. A. Jones (duration, figures)

  3. Interest rate derivatives
    Hull, chap 6, "Interest Rate Futures", 7, "Swaps", chap  26, " Interest rate derivatives: the standard market models"
              "Introduction to Asset Swaps", Dominic O'Kane, Lehman Brothers, Jan 2000 (OKane_2000_IntroAssetSwaps.pdf)

  4. Asset backed securities
    "Canadian CMBS: Market Developments and Growth", Stephan Schwartz, Deutsche Bank Research, Feb 2002 DBresearch_2002_CMBS_canadian.pdf)
    "Securitization 101", Sunil Gangwani, Deloitte and Touche,  July 1998 (Deloitte_1998_Securitization.pdf)
    "Alternative Student Loan ABS", Katie Reeves, Deutsche Bank Research, Nov 2003 (DBGMresearch_2003_StudentLoanABS.pdf)
    "Guide to Collateralized Mortgage Obligations", Alexander Crawford, Deutsche Bank Research, Oct 2003 (DBGMresearch_2003_CMO_intro.pdf)
    "Credit Card ABS: An update ...", Katie Reeves, Nov 2002 (DBGMresearch_2002_ABS_creditcard.pdf)
    "European Securitization: A Resource Guide", European Securitization Forum (ESF_ABS_intro.pdf)
    "Asset Backed Commercial Paper Explained", Deborah Seife, Fitch Ratings, Nov 2001 (Fitch_2001_ABCP_intro.pdf)
              "Guide to Pass-through and Collateralized Mortgage Securities", The Bond Market Association (BondMarketAssn_CMO_guide.pdf)

  5. Credit risk and credit derivatives
    Hull, chap 27, "Credit Derivatives"
              "Introduction to Default Swaps", Dominic O'Kane, Lehman Brothers, Jan 2000 (OKane_2000_IntroDefaultSwaps.pdf)
    "Credit Derivatives Explained: Markets, Products, ...", Dominic O'Kane, Lehman Brothers, Mar 2001 (OKane_2001_CreditDerivativesExplained.pdf)
    "Credit Spreads Explained", Dominic O'Kane and Saurav Sen, Lehman Brothers, Mar 2004 (OKane_2004_CreditSpreadsExplained.pdf)
    "Guide to Exotic Credit Derivatives", Dominic O'Kane et al, Lehman Brothers, 2003 (Lehman_2003_ExoticCreditDerivatives.pdf)

  6. Insurance and re-insurance markets
    "Fundamentals of Property Casualty Reinsurance", Reinsurance Assn of American, 2003 (Reinsurance%20fundamentals%20RAA.pdf)
    "Catastrophe Bonds: Opportunities for issuers and investors", Karen Weaver, Deutsche Bank Securities, May 2003 (DBSPresearch_2003_CatBonds.pdf)
    "Reinsurance", in Christopher Culp, The Art of Risk Management, John Wiley & Sons 2002 (Culp_2002_Chap16_Reinsurance.pdf)
    "The Basis Risk of Catastrophic-loss Index Securities", David Cummins et al, J. of Financial Economics, 2004 (CumminsLalondePhillips2004JFE.pdf)
              "Super Cats as Alternative Investments", Joseph Calandro, J. of Alternative Investments, Spring 2005 (Calandro2005JAI_SuperCats.pdf)

  7. Weather derivatives
    "Watching the weather report", Melanie Cao et al, Canadian Investment Review, Summer 2004 (Weather_2004_CaoLiWei.pdf)
    "Enron Corporation's Weather Derivatives", Mari Capestany, Robert Bruner, and Samuel Bodily, University of Virginia, (enron_case.pdf)
    "Equilibrium Valuation of Weather Derivatives", Melanie Cao and Jason Wei, University of Toronto, May 2000 (CaoWei00.pdf)
    "The Legal Characterization of Weather Derivatives", Paul Ali, J. of Alternative Investments, Fall 2004 (Ali2004JAI.pdf)
    "Introduction to Weather Derivative Pricing", Stephen Jewson, J. of Alternative Investments, Fall 2004 (Jewson2004JAI.pdf)
    "Weather Derivatives: An attractive additional asset class", J. of Alternative Investments, Fall 2004 (Lenep2004JAI.pdf)

  8. Market crash risk
    "Capital Guaranteed Fund Financial Catastrophe Insurance", Goldman Sachs (presentation), Oct 2001 (FinCatGS.tif)
    "The Market for Crash Risk", David Bates, University of Iowa, Sept 2001 (bates01.pdf)


  9. Hedge funds
    "Why Hedge Funds Make Sense", Michael Peskin et al, Morgan Stanley, Nov 2000 (MS_2000_WhyHedgeFunds.pdf)
    "Long Term Capital Management, LP", Andre Periold, Harvard Business School, Nov 1999 (Perold_1999_LTCM.pdf)
    "Hedge Funds -- Strategy and Portfolio Insights", Satish Anjilvel et al, Morgan Stanley, Dec 2001 (MS_2001_HedgeFunds_Insights.pdf)
    "Evaluating Hedge Fund Performance", Bhaswar Gupta et al, J of Alternative Investments, Winter 2003 (Gupta2003JAI.pdf)
    "DWP Volatility Arbitrage Fund Ltd", Fortune Asset Management (VolArbDWP.pdf)

  10. Financial regulation and capital requirements
    "Regulatory Capital", in Christopher Culp, The Art of Risk Management, John Wiley & Sons 2002 (Culp_2002_Chap8_RegulatoryCapital.pdf)
    "International Convergence of Capital Measurement and Standards", Basle Committee on Banking Supervision, July 1988 (BIS_1988_Accord.pdf)
    "Overview of the New Basel Capital Accord", Bank for International Settlements, April 2003 (BISaccord03draftoverview.pdf)

  11. Miscellaneous
    "EU Trade in CO_2 Emissions", Deutsche Bank Research, Dec 2003 (DBResearch_2003_CO2_trading.pdf)
    "Aircraft lease securitization", William Bowers, Pillsbury Winthrop LLP, Jan 1999 (AircraftEETC.html)
    Societe General Reverse Convertible Notes (SG_ReConv_GOOG_Term_Sheet.pdf, SG_Reverse_Covert_Notes.pdf
              Notes on mean-variance efficient portfolio choice (meanvar.pdf)

  12. Links to course-relevant other places