Practical Derivatives

A Transactional Approach, Third Edition

Edited by Edmund Parker, Marcin Perzanowski

Publication date:

01 June 2017

Publisher

Globe Law and Business

ISBN-13: 9781787421127

Since the near-collapse of the global financial system back in 2008, the derivatives industry has come a long way. As derivatives were blamed for causing, or contributing to, the crisis, the politicians and regulators on both side of the Atlantic (and in most other developed jurisdictions) decided to take action. In September 2009 the G20 leaders at their meeting in Pittsburg resolved the following: “All standardised OTC derivative contracts should be traded on exchanges or electronic trading platforms, where appropriate, and cleared through central counterparties by the end of 2012 at the latest.” Even though it is now 2016, the regulators continue to work on the detailed rules, which still won’t be fully implemented for a while. Nonetheless, the derivatives markets have already changed almost beyond recognition, and continue to evolve. Featuring updated chapters, this third edition of Practical Derivatives: A Transactional Approach shows how derivatives are used in a variety of transactions, how the documentation works, and why boards need to be aware of the derivatives market. It also analyses the impact of the recent regulatory changes on derivatives transactions and related documentation. With contributions from leading law firms, investment firms and academics, this accessible book takes a transactional approach and features coverage of product innovations. This latest edition includes chapters on established markets such as equity and energy derivatives, but it also discusses the expansion of derivatives into new markets such as credit risk, weather risk and property. It features topical analysis on corporate governance and directors' duties; it includes an overview of the documentation produced by the International Swaps and Derivatives Association, the International Capital Markets Association and the German banking association; and it discusses related issues such as close-out netting. This edition would not be complete without an analysis of the recent derivatives regulation, and the transactional documentation that helps to implement the new rules. Whether you are at a bank or financial institution or from a company or organisation looking to invest or manage your risk, this title will provide you with practical tools for using derivatives in your business.

Preface 5 Edmund Parker Marcin Perzanowski Mayer Brown Part I: The regulatory and governance aspects of derivatives Corporate governance and derivatives end users 7 Paul Ali University of Melbourne Regulation of OTC derivatives 25 Ruth Frederick Senior legal counsel Close-out netting 79 Kunel Tanna Mayer Brown Part II: Documenting and designing derivatives transactions Overview of industry standard documentation 105 Guy Usher Fieldfisher Introduction to German derivatives documentation 125 Patrick Scholl Mayer Brown Documentation for cleared OTC derivatives 137 Patrick Scholl Mayer Brown Designing derivatives structures 155 John D Finnerty Rachael W Park AlixPartners LLP Part III: Derivatives asset classes and corresponding industry documentation a) Commodity derivatives Introduction to commodity derivatives 177 Edmund Parker Marcin Perzanowski Mayer Brown Overview of the 2005 ISDA 205 Commodity Definitions Edmund Parker Marcin Perzanowski Mayer Brown Emissions trading 251 Edmund Parker Mayer Brown Weather derivatives 279 Paul O Oranika Africa Business World Energy derivatives and hedging strategies 289 Christopher Clancy Cyriel de Jong KYOS Energy Consulting b) Equity derivatives Introduction to equity derivatives 303 Edmund Parker Marcin Perzanowski Mayer Brown Overview of the 2002 ISDA 339 Equity Derivatives Definitions Edmund Parker Marcin Perzanowski Mayer Brown c) Credit derivatives Introduction to credit derivatives 409 Edmund Parker Mayer Brown Overview of the 2014 ISDA 453 Credit Derivatives Definitions Edmund Parker Mayer Brown d) Other derivatives classes Interest rate derivatives 527 Natalie Ashford Vincent KP Sum Mayer Brown FX derivatives 537 David Johnson First Abu Dhabi Bank PJSC Property derivatives 565 Edmund Parker Mayer Brown Emmett Peters Addleshaw Goddard LLP About the authors 589

Here it is, the third and latest edition of ‘Practical Derivatives’, from Globe Law and Business. Having gone through three editions, this book has acquired a well-deserved reputation as an authoritative source of information and advice on the plus points and pitfalls of derivatives – and, their use in a variety of company transactions.