What is the yield curve?
What is the yield curve, and what can its shape tell us about the economy? In this video, Dr Hong Bo explains how each graph is used to plot the …
Course: Risk Management in the Global Economy
How Do You Calculate VaR?
As we have seen in the previous step, VaR is a quantified measure of risk which is widely used in risk management practice. It’s therefore important to understand how to …
What is Value at Risk (VaR)?
If you invest in risky assets you need to monitor the level of risk you are exposed to. But how do you know if the level of risk associated with …
What Causes Financial Crises?
According to writers Allen, Babus, and Carletti in their 2009 study, financial crises occur following either bank runs or a sudden severe drop of asset prices in capital markets, both …
Week 3: Closing thoughts
In this short video, Dr Hong Bo summarises some of the key topics discussed in Week 3. She outlines how investors use futures, options and forward contracts and explains their …
How to read payoff diagrams for options contracts
Payoff diagrams for options are more complicated than those of a futures contract. In this video, Dr Hong Bo expains how the payoff structure of an options contract does not …
What is the Black Scholes Option Pricing Model?
Having looked at the features of options contracts, we can now move on to calculate the value of call options. The Black-Scholes Model In the early 1970’s, Myron Scholes, Robert …
What is an options contract?
What is an options contract? Options mean alternatives or flexibility. In financial terms, an options contract is another type of financial derivative. Similar to a futures contract, an options contract …
What is Cost-of-Carry in Futures?
Under normal conditions, the futures price is higher than the spot (or cash) price. This is because the futures price generally incorporates costs that the seller would incur for buying …
How to read payoff diagrams for futures contracts
We have already learnt that investors can use the futures market either to hedge or to speculate. But what does the payoff structure look like? In this video, Dr Hong …
The differences between a forward and a futures contract
The logic of using a futures contract is very similar to using a forward contract. Both concern transactions of an underlying asset (either commodities or financial securities) that are going …
How to Invest in the Futures Market
The futures market refers to the market in which futures contracts are traded. Futures contracts concern transactions of underlying assets (either commodities or financial securities) that are going to take …
What is a forward contract?
What is a forward contract? A forward contract is signed between party A and party B face to face (or ‘over the counter’) about a future transaction of an asset. …
How do banks use financial derivatives?
In this article, you will be learning about the simplest and most common derivatives – forwards, futures and options – and how they can be used to manage risk. Here, …
What are derivatives?
What are derivatives? Derivatives are financial contracts that relate to future transactions of an underlying asset (either a tangible, durable commodity or a financial asset). Put simply, derivatives derive or …
