DERIVATIVES ON THE INTERNET

Having read some of the articles in the Financial Pipeline's Derivatives section, you may be looking for additional sources of information online about derivatives. The Internet provides a tremendous amount of information about financial risk management and derivative instruments that complements the information on the Financial Pipeline. Increasingly, individuals can find resources online that were previously available only to sophisticated bank traders and fund managers. One good starting-off point is the links www.victoryrisk.com/links.htm section of the Victory Risk Management Consulting www.victoryrisk.com page. Most of the links to which this article refers are listed on that page. The Victory links are updated frequently.

News and Information about Financial Markets

At the beginning of every trading day (or trading cycle for individuals who position investments at different intervals), the first thing that an investor, trader, risk manager or fund manager must do is to check the latest, timeliest developments in overnight markets, including the news.

There are different levels of information available to us on the Internet ranging from the quick news bites that might suit spot traders or day traders to in-depth analysis of key market developments.

For quick news bites, the best sources are the sites maintained by some of the major financial news organizations:

These have headlines of the major overnight news stories, in some cases providing a brief synopsis of the content of the individual story. These stories are more oriented towards the macro-economic developments in overnight markets including release of economic statistics in foreign countries, the performance of foreign capital markets, political developments abroad and general market-related news.

The problem with the Internet is the amount of information that needs to be sifted. One very quick and easy analysis that I like of the developments in overnight markets and the identification of the key issues in today's markets is Marc Chandler's commentary on TheStreet.com www.thestreet.com.

Most newspapers have web sites at which individuals can peruse headline stories. While these stories may not be as current as news junkies and day traders would like, they do indicate some of the local flavour to the news.

For Canadian news, there are two national newspapers,
The National Post www.nationalpost.com and
The Globe And Mail www.theglobeandmail.com.

Internationally,
The New York Times www.nytimes.com,
The South China Morning Post www.scmp.com,
The Washington Post www.washingtonpost.com and, most notably,
The Financial Times www.ft.com/hippocampus are all excellent resources.

Issues in Financial Risk Management

Earlier articles referred to developments in risk measurement. The undisputed leader when it comes to risk measurement methodology has to be J.P. Morgan's spinoff company RiskMetrics www.riskmetrics.com. Not only does the RiskMetrics web site provide all the information necessary for obtaining an understanding of the RiskMetrics methodology but there are also chat rooms for discussing its application and, of more direct interest to readers of the Financial Pipeline, online education in derivatives and financial risk management. Check out also the Credit Suisse First Boston CreditRisk+ site www.csfp.co.uk/csfpfod/html/csfp_10.htm that is the platform for CSFB's credit risk measurement methodology that competes with Morgan's CreditMetrics.

For people who have further interest in Value-at-Risk, Barry Schachters web site www.gloriamundi.org gives a very good overview of the academic research. It is also a gateway to VaR-related sites.

Other sources online include organizations such as:

The Global Association of Risk Professionals is an Internet-based organization of individuals involved in all aspects of financial risk management, most of whom use derivatives or oversee derivatives in the context of their daily working lives. The GARP chat room is unique in that you will find comments, questions and answers from individuals spanning the continuum of knowledge and experience.

CIBC Wood Gundys School of Financial Products

www.schoolfp.cibc.com/new/index.htm is another online education tool that may be of some interest to individuals who want to learn more about derivatives. It includes Java applets that show the way derivatives pricing calculators work.

Other Sites of Interest

NumaWeb www.numa.com is an excellent resource for information about derivatives on the Internet. It has online calculators, references to employment opportunities and links to other derivatives resources.

The International Finance & Commodities Institute finance.wat.ch/IFCI has some useful information about derivatives.

Conclusion

These are all useful places to start. After going through these web sites, the user will have a good idea of the kinds of information they require and the networking effects of the Internet will introduce them to more relevant links.

Article by Chand Sooran, Principal Victory Risk Management Consulting, Inc.

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