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WALL STREET - Derivatives
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 1973 - Fisher Black, Myron Scholes published Black-Scholes Option Pricing Formula in Journal of Political Economy; specified first successful options pricing formula (mathematics of option pricing, dynamic hedging strategies using options and other derivatives); described general framework for pricing derivative securities, created financial engineering; one of most important mathematical tools in modem theory of finance (Black, F. and Scholes, M. [1973]. "The Pricing of Options and Corporate Liabilities". Journal of Political Economy, Vol. 86, p.637). April 26, 1973 - Chicago Board Options Exchange opened for trading (911 contracts on 16 underlying stocks).

1977 - Securitization - Salomon Brothers (Lewis S. Ranieri) and Bank of America Corp. (BAC ) developed first private (non-Government Sponsored Enterprise) mortgage-backed securities (MBS); bonds pooled thousands of mortgages, passed homeowners' payments through to investors (only 15 states recognized MBS as legal investments); created "securitization," converting of home loans into bonds that could be sold anywhere in world = capital markets as source of funds for housing, commercial real estate; 1982 - developed "collateralized mortgage obligation" (repackaged pools of 30-year mortgages into collections of 2-, 5-, and 10-year bonds to sell to wide range of investors; seen as template for cutting costs); led effort to obtain federal legislation to support, build the market (Tax Reform Act of 1986); 1999 - size of market was $678 billion (41.6% credit card receivables, 19.8% home equity loans, 11.8% auto loans); 2008 - size of market $531.2 trillion.

October 2008 - Size of Market for Derivative Products:



(CME Group), Erika S. Olson (2010). Zero-Sum Game: The Rise of the Worlds Largest Derivatives Exchange. (Hoboken, NJ: Wiley, 256 p.). Former Managing Director at the Chicago Board of Trade. Derivative securities -- United States; CME Group. 2007 - Chicago Board of Trade (CBOT), Chicago Mercantile Exchange (CME) merged, formed CME Group; 2008 - acquired New York Mercantile Exchange (95% share of trading in U.S. regulated futures); multi-billion-dollar bidding war that erupted between financial giants as they fought for control of CBOT; reasons behind recent, spectacular growth of 160-year-old market; how derivatives affect lives of average consumers worldwide (influene interest rates on credit cards, cost of cheeseburger, price of gallon of gas); inner workings of futures exchanges, types of derivatives.

(J. P. Morgan Chase & Co.), Gillan Tett (2009). Fool's Gold: How the Bold Dream of a Small Tribe at J.P. Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe. (New York, NY: Free Press, 304 p.). Journalist (Financial Times). J.P. Morgan & Co.; Credit derivatives --United States --History; Housing --United States --Finance; Financial crises --United States. "Shadow banking" world; how Morgan team's bold ideas for new kind of financial alchemy in 1994 helped to ignite revolution in banking, escalated wildly out of control; created credit derivatives; catapulted Morgan to top of derivatives trade, fueled extraordinary banking boom beyond limits of acceptable risk; how Morgan leaders engineered bank's escape from carnage, how possible for larger banking world, regulators, rating agencies to have spotted, heeded terrible risks of meltdown.

Marc Allaire, Marty Kearney (2003). Understanding LEAPS: Using the Most Effective Option Strategies for Maximum Advantage. (New York, NY: McGraw-Hill, 286 p.). Stock options.

Fred D. Arditti (1996). Derivatives: A Comprehensive Resource for Options, Futures, Interest Rate Swaps, and Mortgage Securities. (Boston, MA: Harvard Business School Press, 394 p.). Derivative securities--United States.

Satyajit Das (2006). Traders, Guns and Money: Knowns and Unknowns in the Dazzling World of Derivatives. (New York, NY: Financial Times Prentice Hall, 352 p.). Derivative securities. Exposť of culture, games, deceptions played out every day in trading rooms around the world.

Richard Folcker (2001). Derivatives Diary: The Strategies of an Independent Fund Manager. (New York, NY: Wiley, 128 p.). Management Consultant Specializing in Global Risk Management. Investment advisors; Investment analysis--Marketing; Derivative securities.  

Bruce I. Jacobs; with a foreword by Harry M. Markowitz (1999). Capital Ideas and Market Realities: Option Replication, Investor Behavior, and Stock Market Crashes. (Malden, MA: Blackwelll Publishers, 399 p.). Hedging (Finance); Financial crises; Stock options.

Donald MacKenzie (2006). An Engine, not a Camera: How Financial Models Shape Markets. (Cambridge, MA: MIT Press, 377 p.). Professor, Sociology (University of Edinburgh). Capital market--Mathematical models; Derivative securities--Mathematical models; Financial crises--Mathematical models; Financial crises--Case studies. How America’s capital markets have grown into their current form; emergence of modern economic theories of finance affected financial markets in fundamental ways.

Philip McBride Johnson (1999). Derivatives: A Managers Guide to the World's Most Powerful Financial Instruments. (New York, NY: McGraw-Hill, 210 p.). Derivative securities.

Merton H. Miller (1997). Merton Miller on Derivatives. (New York, NY: Wiley, 226 p.). Nobel Laureate, Professor Emeritus of Finance (University of Chicago). Derivative securities--United States.

Nassim Taleb (1997). Dynamic Hedging: Managing Vanilla and Exotic Options. (New York, NY: Wiley, 506 p.). Options (Finance); Exotic options (Finance); Hedging (Finance); Derivative securities.



CBOE Bibliography                                                                                                                                               http://www.cboe.com/otec/ssb/education.asp?cid=bib                                      

Chicago Board Options Exchange (CBOE ) provides these as general descriptions of material covered and level of discussion, not as recommendations.

International Swaps and Derivatives Association              http://www.isda.org                                                                                              

Represents participants in the privately negotiated derivatives industry, is the largest global financial trade association, by number of member firms. ISDA was chartered in 1985, and today has over 750 member institutions from 52 countries on six continents. These members include most of the world's major institutions that deal in privately negotiated derivatives, as well as many of the businesses, governmental entities and other end users that rely on over-the-counter derivatives to manage efficiently the financial market risks inherent in their core economic activities. Since its inception, ISDA has pioneered efforts to identify and reduce the sources of risk in the derivatives and risk management business. Among its most notable accomplishments are: developing the ISDA Master Agreement; publishing a wide range of related documentation materials and instruments covering a variety of transaction types; producing legal opinions on the enforceability of netting and collateral arrangements (available only to ISDA members); securing recognition of the risk-reducing effects of netting in determining capital requirements; promoting sound risk management practices, and advancing the understanding and treatment of derivatives and risk management from public policy and regulatory capital perspectives.


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