Commodity Derivatives

Like most asset classes, commodity derivatives consist of the traditional building blocks: forwards, futures, swaps, and options. The main structures used by investors to take exposure to commodities are exchange-traded products, total return swaps, and structured notes. This chapter discusses the main features of each of these products within an investment context. For example, the coverage focuses on using exchange-traded futures to compile investment indices. The section on swaps examines the total return variant of the classic “fixed for floating” structures. Because the fundamentals of derivatives are generally well documented, this chapter highlights the instances in which commodities differ from traditional financial assets. The chapter includes some popular investment structures to illustrate the use of these instruments.

Real-Estate Derivative Instruments

This chapter is dedicated to the innovation of real-estate derivatives, with a focus on vanilla products such as forwards/futures, total return swaps, and European call and put options. A description is given of the mechanics behind these instruments and their range of applications. The examples provided here highlight changes in market quotation agreements and standard market practices related to valuation of vanilla real-estate derivatives such as forwards, futures, and total return swaps. In addition, MacroShares, PICs, PIFs, and PINs are discussed.

An update on the EU securities financing transactions regulation

Purpose To provide an update and detailed explanation on the EU Regulation on Transparency of Securities Financing Transactions and of Reuse (“SFTR”). Design/methodology/approach Examines the SFTR, its key measures and requirements. Findings Concludes with a number of considerations and recommendations. For example, it advises managers of Undertakings for Collective Investment in Transferable Securities (UCITS) and alternative investment funds (AIFs) to prepare to disclose details of their use of securities financing transactions and total return swaps. Originality/value Offers information on the SFTR and explains its requirements and scope. It has been written by a partner at an international law firm.