Overview of Derivatives Markets

Beyond Stocks and Bonds: Learning about Futures, Options, Derivatives, and More

BRASS Program at the ALA Annual Conference
June 27, 2005
Chicago, Illinois

Discovering Information Resources for Commodities and Futures

Rita W. Moss

Davis Library, University of North Carolina at Chapel Hill

*************Derivatives*************

The most common types of derivatives that ordinary investors are likely to come across are futures, options, warrants and convertible bonds. But the real range of derivatives is only limited by the imagination of investment bankers.

Types of Derivatives Include

• forwards and futures
• swaps
• exchange-traded calls and puts
• explicit corporate options
• corporate debt securities
• government securities
• mortgages and insurance
• securities of other financial institutions
• exotic options
• other financial options
• natural resources
• capital assets
• other non-financial options

General Resources

Encyclopedia of Business. Jane A. Malonis, editor ; foreword by Martin S. Fridson. 2nd ed. Detroit: Gale Group, c2000. 2vs

A fairly comprehensive reference book. It provides practical and readable definitions that cover a broad range of topics. Derivatives, futures and options are included in the descriptions

Encyclopedia of Business and Finance. New York: Macmillan Reference USA, c2001. 2vs.

Very accessible and designed for the non specialist there is a concise description that includes basic types of derivative instruments and risk characteristics.

International Encyclopedia of Business and Management. Malcolm Warner, editor. 2nd ed. London : Thomson Learning, 2002. 8vs.

Contains more than 500 entries on management topics including finance. The section on Derivatives concentrates on hedging.

Hull, John C. Options, Futures & Other Derivatives. 5th ed. Upper Saddle River, NJ: Prentice Hall, c2003.

Comprehensive coverage and clear explanations of difficult material. nonessential math, this text bridges the gap between the theory and practice of derivatives. Often used as a text book.

An Introduction to Derivatives. Singapore: New York: John Wiley,1999.

Describes fundamental risk management tools and presents their application in trading, hedging and arbitraging. A basic primer designed for general audiences with a heavy use of charts and other graphics. This book has a “friendly” layout that makes it especially easy to follow.

Dictionaries/Glossaries

Most financial dictionaries contain at least some of the vocabulary of derivatives, but the following publication contains most of the specialized jargon as well as being a guide to the instruments in use. It provides more information than most typical dictionaries. Definitions also include diagrams.

Inglis-Taylor, Andrew. Dictionary of Derivatives. Basingstoke, England: Macmillan, 1995.

For those who do not have a specialized print dictionary the following Web page is extremely useful.

Derivatives Dictionary. The William Margrabe Group, Inc. Copyright © 1996–2002.

Last revised: 03/02/02. (Accessed June 18, 2005).

Web Sources/Free Statistics

Appliederivatives
erivatives.com (

A series of free monthly magazines, about all aspects of trading and using futures, options, swaps and other derivatives around the world.

Derivatives Portal

“The portal contains short descriptions and links to the most frequently read articles, books, journals, papers, newspapers/magazines and websites covering all types of derivatives and their applications.”

ISDA (International Swaps and Derivatives Association)

The global trade association for participants in the derivatives industry.

For librarians the interesting section may well be the Surveys & Market Statistics. This section includes: Margin Surveys from 2001-; Operations Benchmarking Surveys from 2000-; Summaries of Market Survey Results from 1995-; and Market Survey Historical Data 1987-.

Financial Policy Forum (Derivatives Study Center)

Derivatives Data

The Derivatives Study Center has put together spreadsheets with data from the Bank for International Settlements (BIS) and the U.S. Treasury's Office of Comptroller of the Currency (OCC).

Bank for International Settlements

This section covers time series on BIS over-the-counter and exchange-traded derivatives statistics. Data is downloadable in csv format or in pdf. Includes OTC foreign exchange derivatives, single currency interest rates derivatives and equity linked and commodities derivatives.

Office of the Comptroller of the Currency

For those interested only in derivatives at banking organizations in the United States, the Office of the Comptroller of theCurrency compiles a quarterly OCC Bank Derivatives Report based on information submitted in regulatory reports. The Reports are available from the 4th quarter of 1995.

****Futures****

Contracts covering the purchase and sale of financial instruments or physical commodities for future delivery. These orders are transacted on a commodity futures exchange.

Commodity Futures

General Commodities Information

The U.S. Department of Agriculture has always been a major supplier of data on agricultural commodities.

Chicago Board of Trade. Commodity Trading Manual. Chicago: The Board, 1999.
The Commodity Trading Manual includes chapters on the history and development of commodities trading, basic operations and trading strategies, and federal and exchange regulations.

Outlook Reports. Economic Research Service, USDA.

(accessed June 17, 2005

U.S. Dept. of the Interior. U.S. Geological Survey. Minerals Yearbook. Washington, D.C.: Government Printing Office, 1932/33. 3v. Annual.

Web version

(Accessed June 17, 2005)

Contains information on approximately 90 metals and minerals, mining and quarrying trends and an annual review of mineral production and trade, and of mineral related government and industry developments in more than 175 foreign countries.

Mineral Industry Surveys.U.S. Dept. of the Interior. U.S. Geological Survey.

(Accessed June 17, 2005)

Periodic on-line statistical and economic publications designed to provide timely statistical data on production, distribution, stocks, and consumption of significant mineral commodities.These publications are issued monthly, quarterly, or annually.

Other sources of general and specialized commodities statistics can be found in the AmericanStatistics Index, Encyclopedia of Business Information Sources, Statistical Reference Index, LexisNexis Statistics and Statistics Sources.

Journal of Commerce. New York, NY : Journal of Commerce, Inc 1927-.

(Online access at

Provides the most comprehensive newspaper coverage of commodities. The daily price tables it includes for both futures and cash markets list more commodities than comparable tables in other newspapers, with data on foreign markets, London metals, Tokyo gold, Singapore rubber, and Sydney steer, among others, as well as domestic markets. It also includes articles on individual commodities, reviews of past trading, and projections for the future

Consensus. Kansas City, Mo.: Consensus, 1971. Weekly.

Consensus focuses on commodities. Each weekly issue includes digests of current market letters, special studies, buy and sell recommendations issued by major brokerage firms, daily price quotations, and detailed price charts. There is a subscription Web version of this publication with daily updates. From the site at one can view a sample issue of the publication and also check on some of the other services offer

Regulation

Commodity Futures Trading Commission

Futures trading is regulated by the Commodity Futures Trading Commission (CFTC) ( an independent federal regulatory

commission established by Congress in 1974. The mission of the CFTC is to:

“regulate commodity futures and option markets in the United States. The agency protects market participants against manipulation, abusive trade practices and fraud.”

The site includes links to laws and regulations, disciplinary action, enforcement actions and consumer advisories.

Exchanges Designated by the CFTC as Contract Markets

Directory of Futures and Options Exchanges. Numa Financial Systems

(Accessed June 18, 2005)
Provided by Numa this site lists over 100 exchanges. The latest to be added is the Palestine Securities Exchange.

Financial Futures

Financial futures trading began in the 1970s with the trading of futures contracts on selected foreign currencies and fixed income securities, such as Treasury bills. Since then, the diversity of products and trading volume has expanded considerably.

General Resources

Bernstein, Jake. How the Futures Markets Work. 2nd ed. New York: new York Institute

of Finance, 2000. 328p.

Intended for beginners this book serves as a good introduction to the subject. Areas covered include the basic concepts of trading, hedging and analysis and it also contains a description of how an exchange works and how a trading floor is organized.

CBOT Publications

(Accessed June 17, 2005)

Or go to cbot.com and click on Education and then Publications.

There also three tutorials at

These cover Agriculture, Agricultural Options and the Dow.

Handbook of World Stock, Derivative and Commodity Exchanges. Welwyn Garden City, UK: Mondo Visione. Annual.

Previously known as both the Bridge Handbook of World Stock, Derivative & CommodityExchanges and the MSCI Handbook of World Stock, Derivative & Commodity Exchanges and the Compaq Handbook of World Stock, Derivative and Commodity Exchanges. Its strengthlies in its brief descriptions, which provide information for about 250 exchanges. Also included are the main indexes, aggregate trading data and articles from industry figures.

Futures. Chicago: Futures Magazine Inc, 1972. Monthly.

(Online subscription and some free information is available at )

Some free articles are included and a very useful Futures Classroom.

ABI/Inform has the full text from 1997!

SourceBook: Commodity and Financial Services International Directory. Chicago: Futures Magazine Inc. Annual

Contains the names and addresses of the major U.S. and non U.S. brokerage, charting, computer, and advisory services, as well as publishers, consultants and a complete list of worldwide industry regulators complete with contact information

Also online at

(Accessed June 18, 2005)

Journal of Futures Markets. New York, N.Y.: Published by J. Wiley in affiliation with the Center for the Study of Futures Markets, Columbia University, c1981-

Chronicles, through articles, the latest developments in financial futures and derivatives. “Coverage ranges from the highly practical to theoretical topics that include futures, derivatives, risk management and control, financial engineering, new financial instruments, hedging strategies, analysis of trading systems, legal, accounting, and regulatory issues, and portfolio optimization.”

Contained in ABI/Inform (1 year embargo) and Wiley Electronic Journals (current).

****Options****

Options give their holders the right (but not the obligation) to buy or sell a specified amount of an underlying security (stock, bond, futures contract, etc.) at a specified price within a specified time.

Free options quotes, delayed by 20 minutes, are generally available at all exchanges and a good place to start is the Chicago Board Options Exchange Web page.

Chicago Board Options Exchange

Free options quotes, delayed by 20 minutes.

Decisions to purchase and trade in options are based primarily on the investor's opinion of the underlying stocks so all available company resources are major resources.

General glossaries and dictionaries are available on the Web:

Two examples are:

Futures & Options Glossary

prepared by Campbell R. Harvey, J. Paul Sticht Professor of International Business, Fuqua School of Business, Duke University.

Glossary

prepared by Glyn Holtman, an independent consultant in financial risk management.

One advisory service which may be available in many libraries is supplied by Value Line.

Value Line Options. New York: Value Line, Inc., v. 12, no. 27, 1981. Weekly.

Value Line Options is a weekly that ranks options performance and evaluates risk levels for both writers and buyers of puts and calls.

*****Statistics*****

Statistics on commodities, futures and options are generally available from of all of the exchanges and from some of the time series listed above.

There are many companies that sell data sets or perform data analysis but the following resources can be found in many libraries.

CRB Commodity Yearbook. New York; Chichester: Wiley, 1939. Annual. Quarterly supplements.

An important source of current and retrospective statistical data. Provides detailed statistical data on over 100 commodities, ranging from alcohol to zinc. Coverage for each basic commodity generally includes a review of the past year's supply and demand and the conditions affecting both, a list of the exchanges on which the commodity is traded in the United States, and several tables on world production, domestic price support programs, domestic price supply, distribution, production, prices, exports, volume of trading, and other statistics. Most tables give information for at least 10 years, and some date back as far as 14 years. Included are interest rates and stock indexes futures.

(Thomson) Datastream. Boston, MA: Thomson Financial.

Is a respected historical financial numerical database covering financial instruments, equity and fixed income securities, and indicators for over 175 countries and 60 markets worldwide. One section of the database covers Financial & Commodity Futures and Traded Options.

Datastream provides wide coverage of these futures markets.

• LIFFE London International Financial Futures Exchange
• LME London Metal Exchange
• CBOT Chicago Board of Trade
• MGE Minneapolis Grain Exchange

Traded Options data is available from the main markets, including the following:

• Deutsche Termin Borse (DTB)
• European Options Exchange (EOE)
• London International Financial Futures and Options Exchange (LIFFE)
• Paris Financial Futures Exchange (MATIF)
• Paris Traded Options Market (MONEP)
• Austrian Options and Financial Futures Exchange (OTOB)
• Swiss Options and Financial Futures Exchange (SOFFEX)

Berkley Options Database. Haas School of Business. University of California, Berkley.

This source provided historical equities options (US) data.

“The Berkeley Options Data Base is a historical record of trades and quotes, time-stamped to the nearest second, for all standardized contracts traded on the Chicago Board Options Exchange, including S&P 500 index options. The data base, which is derived from the CBOE's Market Data Retrieval tapes, begins in August, 1976 and is updated annually. Data are currently available through December, 1996.

Unfortunately this service has been suspended because of the changing policies of CBOE. Some universities have data from 1976-1995.