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© 2016

Brazilian Derivatives and Securities

Pricing and Risk Management of FX and Interest-Rate Portfolios for Local and Global Markets

Book

Table of contents

  1. Front Matter
    Pages i-xxiv
  2. Marcos C. S. Carreira, Richard J. Brostowicz
    Pages 1-39
  3. Marcos C. S. Carreira, Richard J. Brostowicz
    Pages 40-59
  4. Marcos C. S. Carreira, Richard J. Brostowicz
    Pages 60-86
  5. Marcos C. S. Carreira, Richard J. Brostowicz
    Pages 87-109
  6. Marcos C. S. Carreira, Richard J. Brostowicz
    Pages 110-119
  7. Marcos C. S. Carreira, Richard J. Brostowicz
    Pages 120-153
  8. Marcos C. S. Carreira, Richard J. Brostowicz
    Pages 154-199
  9. Marcos C. S. Carreira, Richard J. Brostowicz
    Pages 200-216
  10. Marcos C. S. Carreira, Richard J. Brostowicz
    Pages 222-233
  11. Marcos C. S. Carreira, Richard J. Brostowicz
    Pages 234-236
  12. Marcos C. S. Carreira, Richard J. Brostowicz
    Pages 237-245
  13. Marcos C. S. Carreira, Richard J. Brostowicz
    Pages 246-269
  14. Marcos C. S. Carreira, Richard J. Brostowicz
    Pages 270-275
  15. Marcos C. S. Carreira, Richard J. Brostowicz
    Pages 276-288
  16. Marcos C. S. Carreira, Richard J. Brostowicz
    Pages 289-296
  17. Marcos C. S. Carreira, Richard J. Brostowicz
    Pages 297-297
  18. Back Matter
    Pages 298-303

About this book

Introduction

The Brazilian financial markets operate in a very different way to G7 markets. Key differences include onshore and offshore markets, exponential rates, business days day-counts, and price formation from the futures markets (instead of the cash markets).

This book provides a quantitative, applied guide to the offshore and onshore Brazilian markets, with a focus on the financial instruments unique to the region. It offers a comprehensive introduction to the key financial 'archaeology' in the Brazil context, exploring interest rates, FX and inflation and key differences from G7 market finance. It explores the core industry investment banking business in detail, from FX to interest rates and cash and inflation. Finally it introduces the region's unique financial instruments, as well as their pricing and risk management needs.

Covering both introductory and complex topics, this book provides existing practitioners in Brazil, as well as those interested in becoming involved in these markets, everything they need to understand the market dynamics, risks, pricing and calibration of curves for all products currently available.

Keywords

Brazil financial archeology interest rates offshore onshore volatility zero curve pricing risk exposure inflation Bonds Corporate Bonds Credit Risk derivatives funding Futures liquidity management Option Pricing Options Portfolio risk management Swaps

Authors and affiliations

  1. 1.Quantitative Finance PractitionerBrazil
  2. 2.Banco Morgan StanleyBrazil

About the authors

Marcos Carreira is responsible for Traded Risk at HSBC Brazil. Previously he was first the Derivative Products Officer and later the Technical Modeling Officer at BM&FBovespa, with contributions on risk management, derivatives pricing, exchange fees, microstructure and HFT. At Credit Suisse Brazil, he was a Managing Director in charge of the FX and IR Options desk, after being the Risk Manager responsible for Market, Counterparty and Liquidity Risks. He started his career in Finance/Product Control at Banco de Investimentos Garantia. Mr Carreira holds an engineering degree from Instituto Tecnológico de Aeronáutica (ITA), is part of the 2016 class of the Professional Masters in Economics at Insper. He has more than 20 years of experience in the Brazilian Capital Markets. Marcos lectures for the MECAI Professional Masters course in Mathematical Finance at ICMC-USP.

Richard Brostowicz is an Executive Director and Head of Brazil Quants at Banco Morgan Stanley, Brazil. He has 8 years of experience as a quant in global markets, having worked previously at Credit Suisse, and 11 years in the Brazilian market. He studied at the University of Sao Paulo (USP) and is a lecturer for a MECAI Professional Masters course in Mathematical Finance at ICMC-USP.

Bibliographic information

Industry Sectors
Finance, Business & Banking

Reviews

The book brings to the widely traded Brazilian derivatives an intelligent analysis, that includes the latest developments in pricing – such as the choice of collateral and numéraire currency – as well as a variety of operational considerations. A 'must-read' for a number of actors.'
-Helyette Geman, Professor of Mathematical Finance, Birkbeck, University of London & Johns Hopkins University

"It is interesting to witness publication of a volume on Brazilian derivatives and securities more generally. The book is interesting not only for the emphasis on Brazilian markets. Discussion of often
overlooked details on valuation and on curves makes it an interesting read for a potential broad audience. It is written in an engaging style while reporting relevant information and analysis, thanks also to the passionate approach of the authors.'
-Professor Damiano Brigo, Chair in Mathematical Finance and Stochastic Analysis, Imperial College London

'This interesting and innovative book contains everything you need to know about doing quantitative finance in Brazil, where markets, products and rates behave very differently. It expertly tackles modeling problems unheard of in developed markets, and will be useful to anyone building financial models in non-G7 markets.'
-Emanuel Derman, Author of My Life as a Quant and Models.Behaving.Badly

'This book describes the Brazilian market since its inception, presenting the main actors and forces that transformed the Brazil of Pres. Juscelino Kubitschek in 1960 to a market economy with some of the most liquid contracts in the world. The book motivates carefully the rationale behind the major exchange-traded derivatives and their operational aspects; it also covers extensively over-the-counter derivatives. It is the first book of its kind, giving the reader a complete perspective of Brazil's formidable derivatives markets. This is a 'must-read' for asset-managers, corporate treasurers, traders, investors and academics that are interested gaining knowledge on Brazilian derivatives markets.'
-Marco Avellaneda, PhD, Professor of Mathematics, Courant Institute NYU; Managing Partner, Finance Concepts