### Test bank for Introduction to Derivatives and Risk Management, 9th Edition by Don M. Chance

#### Test bank for Introduction to Derivatives and Risk Management, 9th Edition by Don M. Chance

Give your students a solid understanding of financial derivatives and their use in managing the risks of financial decisions with this leading text. Chance/Brooks’ AN INTRODUCTION TO DERIVATIVES AND RISK MANAGEMENT, 9E offers an outstanding blend of institutional material, theory, and practical applications. The latest financial information throughout this edition and timely Internet updates on the text’s website ensure the material reflects the most recent changes in today’s financial world. You’ll find detailed, but flexible, coverage of options, futures, forwards, swaps, and risk management as well as a balanced introduction to pricing, trading, and strategy. You can easily address only the topics and chapters that best fit your needs. A variety of practical end-of-chapter applications, memorable examples from real businesses throughout the learning features, and minimal use of technical mathematics keep the text’s presentation accessible and engaging. Stock-Trak software, available with each new text, provides additional value and opportunity for practical working experience. Count on this exceptional text to provide the thorough introduction to derivatives and risk management that students need for success in financial business today.

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Ch 1: Introduction

Derivative Markets and Instruments

The Underlying Asset

Important Concepts in Financial and Derivative Markets

Fundamental Linkages between Spot and Derivative Markets

Role of Derivative Markets

Criticisms of Derivative Markets

Misuses of Derivatives

Derivatives and Ethics

Derivatives and Your Career

Sources of Information on Derivatives

Book Overview

Summary

Key Terms

Further Reading

Concept Checks

Questions and Problems

Part I: Options

Ch 2: Structure of Options Markets

Development of Options Markets

Call Options

Put Options

Over-the-Counter Options Market

Exchange-Listed Option Trading

Mechanics of Trading

Option Price Quotations

Types of Options

Transaction Costs in Option Trading

Regulation of Options Markets

Summary

Key Terms

Further Reading

Concept Checks

Questions and Problems

Appendix 2.A: Margin Requirements

Appendix 2.B: Taxation of Option Transactions

Ch 3: Principles of Option Pricing

Basic Notation and Terminology

Principles of Call Option Pricing

Principles of Put Option Pricing

Summary

Key Terms

Further Reading

Concept Checks

Questions and Problems

Appendix 3: Dynamics of Option Boundary Conditions: A Learning Exercise

Ch 4: Option Pricing Models: The Binomial Model

One-Period Binomial Model

Two-Period Binomial Model

Extensions of the Binomial Model

Summary

Key Terms

Further Reading

Concept Checks

Questions and Problems

Ch 5: Option Pricing Models: The Black-Scholes-Merton Model

Origins of the Black-Scholes-Merton Formula

Black-Scholes-Merton Model as the Limit of the Binomial Model

Assumptions of the Black-Scholes-Merton Model

A Nobel Formula

Variables in the Black-Scholes-Merton Model

Black-Scholes-Merton Model When the Stock Pays Dividends

Black-Scholes-Merton Model and Some Insights into American Call Options

Put Option Pricing Models

Managing the Risk of Options

Summary

Key Terms

Further Reading

Concept Checks

Questions and Problems

Appendix 5: A Shortcut to the Calculation of Implied Volatility

Ch 6: Basic Option Strategies

Terminology and Notation

Stock Transactions

Call Option Transactions

Put Option Transactions

Calls and Stock: The Covered Call

Puts and Stock: The Protective Put

Synthetic Puts and Calls

Summary

Key Terms

Further Reading

Concept Checks

Questions and Problems

Ch 7: Advanced Option Strategies

Option Spreads: Basic Concepts

Money Spreads

Calendar Spreads

Ratio Spreads

Straddles

Box Spreads

Summary

Key Terms

Further Reading

Concept Checks

Questions and Problems

Part II: Forwards, Futures, and Swaps

Ch 8: The Structure of Forward and Futures Markets

Development of Forward and Futures Markets

Over-the-Counter Forward Market

Organized Futures Trading

Futures Traders

Mechanics of Futures Trading

Futures Price Quotations

Types of Futures Contracts

Transaction Costs in Forward and Futures Trading

Regulation of Futures and Forward Markets

OTC Central Clearing

Summary

Key Terms

Further Reading

Concepts Checks

Questions and Problems

Appendix 8: Taxation of Futures Transactions in the United States

Ch 9: Principles of Pricing Forwards, Futures, and Options on Futures

Generic Carry Arbitrage

Carry Arbitrage When Underlying Generates Cash Flows

Pricing Models and Risk Premiums

Pricing Options on Futures

Summary

Key Terms

Further Reading

Concept Checks

Questions and Problems

Ch 10: Futures Arbitrage Strategies

Short-Term Interest Rate Arbitrage

Intermediate- and Long-Term Interest Rate Arbitrage

Treasury Bond Futures Spreads and the Implied Repo Rate

Stock Index Arbitrage

Foreign Exchange Arbitrage

Summary

Key Terms

Further Reading

Concept Checks

Questions and Problems

Appendix 10: Determining the CBOT Treasury Bond Conversion Factor

Ch 11: Forward and Futures Hedging, Spread, and Target Strategies

Why Hedge?

Hedging Concepts

Determination of the Hedge Ratio

Hedging Strategies

Spread Strategies

Target Strategies

Summary

Key Terms

Further Reading

Concept Checks

Questions and Problems

Appendix 11: Taxation of Hedging

Ch 12: Swaps

Interest Rate Swaps

Currency Swaps

Equity Swaps

Some Final Words about Swaps

Summary

Key Terms

Further Reading

Concept Checks

Questions and Problems

Part III: Advanced Topics

Ch 13: Interest Rate Forwards and Options

Forward Rate Agreements

Interest Rate Options

Interest Rate Swaptions and Forward Swaps

Summary

Key Terms

Further Reading

Concept Checks

Questions and Problems

Ch 14: Advanced Derivatives and Strategies

Advanced Equity Derivatives and Strategies

Advanced Interest Rate Derivatives

Exotic Options

Some Unusual Derivatives

Summary

Key Terms

Further Reading

Concepts Checks

Questions and Problems

Appendix 14: Monte Carlo Simulation

Ch 15: Financial Risk Management Techniques and Applications

Why Practice Risk Management?

Managing Market Risk

Managing Credit Risk

Other Types of Risks

Perspectives on Financial Risk Management

Summary

Key Terms

Further Reading

Concepts Checks

Questions and Problems

Ch 16: Managing Risk in an Organization

The Structure of the Risk Management Industry

Organizing the Risk Management Function in a Company

Risk Management Accounting

Risk Management Industry Standards

Responsibilities of Senior Management

Summary

Key Terms

Further Reading

Concepts Checks

Questions and Problems

Appendix A: List of Important Formulas

Appendix B: References

Appendix C: Solutions to Concept Checks

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#### Test bank for Introduction to Derivatives and Risk Management, 9th Edition by Don M. Chance

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