Derivatives : The key principles

Table of contents
1. An overview ;
2. The two principle market structures ;
2.1 The participants in the markets ;
2.2 The on-exchange market ;
2.3 Derivatives exchanges ;
2.4 The OTC Market ;
3. Key Concepts ;
3.1 'Long' and 'short' ;
3.2 The bid and offer spread ;
3.3 Tick ;
3.4 Margin ;
3.5 Example of tick and margin ;
4. Products ;
4.1 Forward contract ;
4.2 Futures contract ;
4.3 Option contract ;
4.4 Warrant ;
4.5 Forward Rate Agreement (FRA) ;
4.6 Swap ;
4.7 Cap, floor and collar contracts ;
4.8 Credit derivatives and synthetic CDOs ;
4.9 Fund derivatives ;
4.10 Multi-asset derivatives ;
4.11 The securitisation of derivatives cash flows ;
4.12 Repurchase and revers repurchase agreements ;
4.13 Financial engineering ;
5. Legal and regulatory ;
5.1 Legislation and regulation ;
5.2 The general prohibition ;
5.3 Regulated activities ;
5.4 Legal market structures ;
5.5 EU legislation ;
6. Risk and the on-exchange market ;
6.1 Recognised Investment Exchanges ;
6.2 Companies Act 1989 ;
6.3 Give-up Agreements and Clearing Agreements ;
7. Risk and the OTC market ;
7.1 OTC documentation generally ;
7.2 ISDA ;
7.3 The ISDA 2002 Master Agreement and Schedule ;
7.4 ISDA credit support ;
7.5 ISDA Confirmation ;
7.6 ISDA Definitions ;
7.7 TBMA/ISMA Global Master Repurchase Agreement ;
7.8 Advantages and disadvantages ;
8. Legal Issues ;
8.1 Unregulated forwards and regulated futures ;
8.2 The swap analysed as a contract ;
8.3 Derivatives contracts derived as other contracts ;
8.4 Credit derivatives documentation ;
8.5 The doctrine of ultra vires ;
8.6 The duty of care ;
8.7 The construction of terms of a derivatives contract ;
9. End-users ;
9.1 The investment management industry ;
9.2 Hedge funds ;
9.3 Corporate treasuries ;
9.4 Prime brokerage ;
10. Capital ;
10.1 Sources of regulation ;
10.2 Banks ;
10.3 Investment businesses ;
10.4 The capital Accord ;
10.5 Basel II ;
10.6 Credit rating ;
11. Accounting and Tax ;
11.1 Financial reporting ;
11.2 The taxation of transactions: hedging or trading ;
11.3 The taxation of transactions: income or capital gains ;
11.4 The taxation of transactions: witholding tax ;
11.5 The substance of transactions ;
11.6 Records and reporting ;
11.7 'Accounting-driven' transactions ;
12. Defining the risk map