Good Resource on Derivatives

I recently came across this site called Global Derivatives. They've got some resources that students (and faculty) might find useful: a number of excellent spreadsheet models here and a good set of definitions here.

There's other stuff on the site you might also find useful or interesting. Check it out.

Some Interesting Uses For The VIX

David Merkel at The Aleph Blog has put up several great pieces on the VIX (the CBOE Volatility Index):

In this post, he relates changes in the VIX to changes in the S&P (a % change in the VIX results in about a 10 basis point change in the S&P in the opposite direction), with an R-squared of about 50% (i.e. variation in the VIX explain about 50% of the variation of the S&P). He also notes the mean-reversion in the VIX, and that the S&P tends to be high when the VIX is low (and vice-versa).

He lays out some of the math of VIX mean reversion here (caution - serious nerd alert ahead), and gives a few applications here (including a slick way of using implied vcolatility to get beta).

And yes, he's been added to the blogroll.

A Brief History of Derivatives (Don Chance)

Since the Unknown Son and the Unknown Daughter are in bed, and the Unknown Wife is finishing watching tv, I thought I'd make one more post before turning in. I just came across this short piece by Don Chance (professor at Louisiana State University) titled "A Brief History of Derivatives". It's a shortened version of a longer piece that apeared in the Winter 1995 Issue of Derivatives Quarterly. One line I particularly like is :

I would like to first note that some of these stories are controversial. Do they really involve derivatives? Or do the minds of people like myself and others see derivatives everywhere?

He then traces derivatives transactions from Genesis 29 (the Story of Jacob and Rachel) through the major derivatives scandals of the early 1990's such as Proctor and Gamble, Orange County, etc...

Click here for the whole article.

This would be fun background for a derivatives/risk management course, or for a talk about derivatives to an audience of non-financial folks.