1. Lecture 1

2.  Welcome  Syllabus  Homework policy  Email  Taking notes

3.  Derivatives are financial instruments whose price and value derive from the value of the underlying assets or other variables (ISDA)  Derivatives are a “zero sum game”

4.  1840s Midwest USA farmers  1848 Chicago Board of Trade (CBOT) for grain  1874 Chicago Produce Exchange for butter/eggs  1919 Chicago Mercantile Exchange (CME)  Risk management  Land options  Risk management

5.  OTC vs. Exchanges  Eurex (E-X)  Chicago Board Options Exchange (CBOE)  Chicago Mercantile Exchange (CME)  Chicago Board of Trade (CBOT)  New York Mercantile Exchange (NYMEX)  Hong Kong Futures Exchange (HKFE)

6. Source: WFE/IOMA Derivatives Market Survey 2014

7. Source: Bank for International Settlements Dec 2007 58,244

8. Source: WFE/IOMA Derivatives Market Survey 2014

10.  Futures  Options / Warrant  Future options  Swaps  Mortgage backed securities  Forward Rate Agreement  Convertible bonds  Real options

11.  Stocks (example)  Bonds  Indices  Commodities (examples for metal and ag.)  Currencies  Weather  Carbon emissions  Radio bandwidth

12.  Arbitrage  Speculation  Hedging