Details
- Comprehensive, clear and accessible guide to the complex subject of derivatives
- Provides a centre-ground between pure economics and pure law
- Top down approach provides a practical explanation of derivatives from both perspectives; derivatives as a cash flow and derivatives as a contract
New to this edition
- Discussion of a greater number of derivative products (including CPPI structures, derivatives used as financing tools, power trading, emissions trading, multi-asset derivatives, fund-linked derivatives, derivatives based on "computed data", and the different "wrappers" in which derivative exposures are made available).
- Greatly expanded discussion of the ISDA documents used in the over-the-counter (OTC) market.
- Extended discussion of the duty of care (selling and misselling, including the recent decision in the "Springwell" litigation).
- Includes coverage of derivatives in the retail market for the first time.
- Updated material on legislative and regulatory developments, including the inception of MiFiD, capital adequacy and the tax treatment of derivatives.
- Updated material on capital adequacy regulation and the tax treatment of derivatives
This book is a practical guide to derivatives, setting out a straightforward and easily understood explanation of the basic concepts, the different types of derivative product, who uses derivatives, and why and how derivatives are used. The book explains both more established products (such as futures, options, and swaps) and more innovative products (such as CPPI structures and those derivative contracts used as financing tools). The expansion of the derivative market to cover different underlying assets (such as freight, power trading, emissions trading, and hedge funds) is explored.
The author provides guidance as to the legal and regulatory treatment of derivatives. The book looks at the key documents that are used in both the exchange-based and over-the-counter (OTC) markets and explores the important materials published by ISDA .The book also discusses other related topics including the accounting and tax treatments of derivatives.
The book considers the background to current legal trends, including the developing strand of English case law on claims for the misselling of derivative products and the retail offer of derivatives, which has recently been the subject of considerable debate within the financial services industry.
The third edition includes a new discussion of the retail offer of derivatives, and discusses a greater number of derivative products (including CPPI structures, derivatives used as financing tools, power trading, emissions trading, multi-asset derivatives, fund-linked derivatives, derivatives based on "computed data", and the different wrappers" in which derivative exposures are made available).
It provides greatly expanded discussion of the ISDA documents used in the over-the-counter (OTC) market and looks in more detail at the duty of care (selling and misselling, including the recent decision in the "Springwell" litigation).
Readership: Finance practitioners and professionals active in the derivatives markets; legal and regulatory professionals; students studying financial law.
1. An overview2. The two principle market structures2.1. The participants in the markets2.2. The on-exchange market2.3. Derivatives exchanges2.4. The OTC Market3. Key Concepts3.1. 'Long' and 'short'3.2. The bid and offer spread3.3. Tick3.4. Margin3.5. Example of tick and margin4. Products4.1. Forward contract4.2. Futures contract4.3. Option contract4.4. Warrant4.5. Forward Rate Agreement (FRA)4.6. Swap4.7. Cap, floor and collar contracts4.8. Credit derivatives and synthetic CDOs4.9. Fund derivatives4.10. Multi-asset derivatives4.11. The securitisation of derivatives cash flows4.12. Repurchase and revers repurchase agreements4.13. Financial engineering5. Legal and regulatory5.1. Legislation and regulation5.2. The general prohibition5.3. Regulated activities5.4. Legal market structures5.5. EU legislation6. Risk and the on-exchange market6.1. Recognised Investment Exchanges6.2. Companies Act 19896.3. Give-up Agreements and Clearing Agreements7. Risk and the OTC market7.1. OTC documentation generally7.2. ISDA7.3. The ISDA 2002 Master Agreement and Schedule7.4. ISDA credit support7.5. ISDA Confirmation7.6. ISDA Definitions7.7. TBMA/ISMA Global Master Repurchase Agreement7.8. Advantages and disadvantages8. Legal Issues8.1. Unregulated forwards and regulated futures8.2. The swap analysed as a contract8.3. Derivatives contracts derived as other contracts8.4. Credit derivatives documentation8.5. The doctrine of ultra vires8.6. The duty of care8.7. The construction of terms of a derivatives contract9. End-users9.1. The investment management industry9.2. Hedge funds9.3. Corporate treasuries9.4. Prime brokerage10. Capital10.1. Sources of regulation10.2. Banks10.3. Investment businesses10.4. The capital Accord10.5. Basel II10.6. Credit rating11. Accounting and Tax11.1. Financial reporting11.2. The taxation of transactions: hedging or trading11.3. The taxation of transactions: income or capital gains11.4. The taxation of transactions: witholding tax11.5. The substance of transactions11.6. Records and reporting11.7. 'Accounting-driven' transactions12. Defining the risk map;
John-Peter Castagnino, In-house counsel at Citi.
"This is an excellent business law book. It explains the business and legal issues clearly and straightforwardly and gives the professional an understanding of the concepts and products involved." - David Stokes, Andreas Neocleous & Co LLC, JIBLR
