Using Equity Derivatives in Portfolio Management

Frank J. Fabozzi and Francesco A. Fabozzi

Chapter 14 in Fundamentals of Institutional Asset Management, 2020, pp 395-424 from World Scientific Publishing Co. Pte. Ltd.

Abstract: In Chapter 6, we reviewed the four types of derivatives — futures/forwards, swaps, options, and caps/floors — and the fundamental features of derivative instruments. We did not focus on any specific underlying or on how they are utilized by asset managers. When the underlying for a derivative is a common stock or some common stock index, the derivative is referred to as an equity derivative. In this chapter, we describe the different types of equity derivatives (stock index futures, equity swaps, and listed options on stocks and stock indexes) and derivatives that can be used to obtain exposure to market volatility. We then illustrate how they are used in managing a common stock portfolio.

Keywords: Investment Risks; Investment Vehicles; Portfolio Theory; Asset Pricing Theory; Mean-Variance Analysis; Measuring Return; Measuring Risk; Company Equity Analysis; Equity Valuation Models; Common Stock Alpha Strategies; Common Stock Beta Strategies; Smart Beta Strategies; Factor Investing; Equity Indexing; Equity Derivatives; Bond Analytics; Bond Pricing; Interest Rate Risk; Duration; Interest Rate Derivatives; Credit Derivatives; Multi-Asset Portfolio Strategies; Collective Investment Vehicles; Alternative Assets (search for similar items in EconPapers)
JEL-codes: G1 G11 G3 G30 (search for similar items in EconPapers)
Date: 2020
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