SUMMARY

• Covers the spectrum of hybrid investments, from equity-linked notes to volatility products and structured hedge fund investments

• Illustrates the applications of such products and possible investment strategies under specific market conditions and/or investor objectives

• Merges theory and practice into an understandable whole with the inclusion of case studies and practical examples that can be utilised into your work

• Provides both background and advanced reading on the concepts and products as the underpinning mathematics

• Enables the reader to understand the esoteric nature of volatility and the trading of realised and implied volatility, illustrated through a variety of products - including OTC variance swaps, options on realised variance and the listed VIX

• Presents analysis of credit default swaps and equity default swap correlation and associated products

• Addresses the challenges hybrid products pose to the risk management and information technology systems of an organisation that is structuring, hedging or investing in such products

• Topics include position reporting and analysis, position valuation and understanding how changes occur with constantly evolving market conditions

• Alexander Batchvarov is an investment banker who has been at the forefront of innovation in this field over recent years and has assembled a team of equally well-qualified contributors

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  TABLE OF CONTENTS

Foreword by Sponsor: Application Networks

Intro by Consultant Editor: Alexander Batchvarov

Section One: The Traditional Hybrids

I: Equity Linked Notes
William Bamber (Bear Stearns)

II: Innovations to Give Issuers Flexibility in Equity-Linked Funding
Robert James Grantham (Bloomberg)

III: Trust Preferred Securities Enhance Investor, Issuer Opportunities
James J. McEntee III (Cohen Brothers)

Section Two: The Math Behind Structuring and Pricing Hybrid Products

IV: The Impact of Market Level, Volatility and Correlation on Structured Products
Kristien Meykens, Lode Roose and Jürgen Vandenbroucke (KBC)

V: Pricing Hybrid Structures
Grazia De Silvestro, Massimo Giranzani, Rolando Santambrogio, Giancarlo Frugoli, Ferdinando Samaria (UBM)

Section Three: Volatility Products

VI: Volatility Products: Motivation and Mechanics
Ben Bowler (Merrill Lynch)

VII: CBOE VIX Futures
Catherine Shalen and John Hiatt (CBOE)

Section Four: The Less Known Hybrid Products

VIII: Risk Analysis of CDS/ EDS Correlation Products
Kai Gilkes, Norbert Jobst (Standard and Poors)

IX: CDO Equity
Doug Lucas, Laurie S. Goodman and Frank J. Fabozzi (UBS and Yale University)

X: Application of Traditional Structuring Techniques to the Creation of New Hybrid Products
Altynay Davletova, Alexander Batchvarov, William Davies (Merrill Lynch)

XI: A Primer on Structured Hedge Fund Products
Mehraj Mattoo (DRKW)

Section Five: The Hybrids' Challenge to Risk Management

XII: Risk Management and IT Issues
Benedict Roth (WestLB AG)

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  AUTHOR BIOGRAPHY

Alexander Batchvarov Managing Director of International Structured Product Research after joining Merrill Lynch in March 1998 as the Head of International Structured Credit Research. He and his team provide research coverage of the Structured Credit market developments in Europe, Latin America and Asia. The team regularly publishes The International Structured Credit Weekly to provide in-depth analysis of market developments, as well as research reports dedicated to specific transactions or sectors of the market, such as MBS in different countries, long-dated bonds, securities finance companies, etc. Mr. Batchvarov's team has consistently been ranked No. 1 securitisation research provider in investors surveys by ISR, SFI, EuroMoney, Credit Magazine and Institutional Investor.
Prior to joining Merrill Lynch, Alexander Batchvarov worked for several years as a Structured Finance Analyst in the ABS Group and a Sovereign Analyst in the Sovereign Risk Unit of Moody's Investors Service in London and New York. Prior to Moody's, Alexander was a Manager in the emerging markets Financial Institutions group in Citibank in New York.
Mr. Batchvarov holds a Ph.D. in International Economics from the National Academy of Sciences in Bulgaria and an MBA in Finance from University of Alberta in Canada. He is a CFA Charterholder and a member of AIMR and NYSSA.

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  CONTRIBUTORS

Alexander Batchvarov - Merrill Lynch, Ben Roth, Kai Gilkes - Standard and Poors, William Bamber - Bear Stearns, Hassan Houari - BarclaysCapital, Jim Grantham - Bloomberg, Ferdinando Samaria - UBM, Doug Lucas, Laurie S. Goodman and Frank J. Fabozzi - UBS and Yale University, Catherine Shalen and John Hiatt - CBOE, Kristien Meykens et al - KBC, Ben Bowler - Merrill Lynch
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