Introduction

Frank J. Fabozzi () and Marielle Jong
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Frank J. Fabozzi: Johns Hopkins University
Marielle Jong: Grenoble Ecole de Management

Chapter Chapter 1 in Derivatives Applications in Asset Management, 2025, pp 3-20 from Springer

Abstract: Abstract Derivatives are indispensable tools in modern asset management, providing unparalleled flexibility for managing risks, optimizing asset allocation, and enhancing income generation. This chapter explores the foundational concepts of derivatives, categorizing them into risk-sharing instruments, such as futures and swaps, and insurance-based instruments, like options and credit default swaps. By examining the design and purpose of these instruments, the chapter illustrates how derivatives enable portfolio managers to address complex investment objectives. Applications discussed include futures for tactical asset allocation, options for generating income, and swaps for managing interest rate and credit risks. The chapter also highlights derivatives’ strategic use in multi-asset portfolios, offering solutions for hedging tail risks, mitigating currency volatility, and implementing tactical overlays. This chapter establishes a robust framework for effectively integrating derivatives into asset management strategies by bridging theoretical insights with practical applications.

Keywords: Derivatives; Risk management; Asset allocation; Futures contracts; Credit default swaps; Portfolio optimization (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-86354-7_1

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DOI: 10.1007/978-3-031-86354-7_1

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