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 yearsof 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.

A one-of-a-kind guide to Brazil's unique onshore and offshore derivatives and securities markets

1 Financial archeology
1.1 Interest Rates and Inflation
1.2 Foreign Exchange
2 We mean business
2.1 Calendars
2.2 Interest Rate Fixings
2.3 Inflation Fixings
2.4 Foreign Exchange Fixings
2.5 The 3 Ts in FX option pricing: A more precise version of the Black Formula
3 Interesting BRL Interest Rates
3.1 3 months in the life of an IR Swap
3.2 3 months in the life of a DI Future
3.3 Explaining it all
3.4 A simple swap
3.5 A promising future The DI1 Future
3.6 My first numeraire A more mathematical framework for DI Futures (DI1)
3.7 The still promising Future -> The Selic Futures (OC1)
3.8 Pricing BRL interest rate futures
3.9 Giving 110%
3.10 The CDI+ spread is a multiplicative spread
3.11 How to price the 3 possible BRL Fixed X Float payoffs?
4 BRL Interest Rate Market and Credit Risk
4.1 Historical Spreads
4.2 The term structure of volatility
4.3 Potential Exposures
4.4 Zero curve: and the winner is
4.5 Smooth Operator
4.6 Sensitivities
4.7 A framework for risk
4.8 Trading forwards
4.9 Risk and P&L attribution
5 A man with two clocks ... Foreign Exchange in Brazil
5.1 FX Spot
5.2 DOL
5.3 Forward points strategies
5.4 FX Future Crosses
6 And the even more interesting USD onshore interest rates
6.1 3 months in the life of a FX Swap
6.2 3 months in the life of a DDI Future
6.3 Explaining it all
6.4 The DDI Futures (DDI) -> Why they were designed this way?<6.5 The mathematical derivation of a DDI contract price
6.6 It takes two (DDI contracts) to (con)tango -> The FRA de CUPOM strategy (FRC)
6.7 Calibration of the cupom curve
6.8 How to compute cupom interest rate risk?
6.9 Interpolation choices for the cupom curve
6.10 The SCC contract
6.11 The mathematical derivation and pricing of a SCC contract price
6.12 The SCS contract A modern, but exotic, cousin
6.13 The mathematical derivation of a SCS contract price
6.14 SCS Future pricing
6.15 Forward starting SCS contracts
6.16 A much simpler alternative to FRC contracts
6.17 A BRL Float or Fixed X USD onshore Fixed swap
7 Too many options ?
7.1 IDI Options
7.2 DI Future Options
7.3 IR Option Strategies VTF and VID
7.4 Jabuticabas: Risk Management of Options on Interest Rates
7.5 Listed FX Options
7.6 BRL/USD Listed FX options with daily margining
7.7 BRL/USD FX Options: Strategies
7.8 OTC IR and FX options
8 The Mountain goes to ... Foreign Exchange Contracts offshore
8.1 CME BRL/USD FX Futures
8.2 OTC NDFs
8.3 OTC BRL/USD Options
9 Start from where ? Constructing markets for FX Forwards, Futures, Onshore USD Interest Rates and Offshore instruments
9.1 Observability of contracts
9.2 Structures
9.3 Curve construction
9.4 The offshore x onshore spread
9.5 The mythical offshore BRL discounting curve
10 Offshore IR Products based on CDI fixings
10.1 Offshore BRL Fixed-Float swaps<10.2 Offshore BRL Fixed-Float swaptions
11 The Dual case US Libor onshore swaps
11.1 Payoff of US Libor onshore swaps
11.2 Pricing of US Libor onshore swaps
12 FX trading (Interest Rate and Fixing) Market and Credit Risk
12.1 Fixing
12.2 The term structure of the Cupom Cambial
12.3 Potential Exposures
12.4 Interpolation and sensitivities
12.5 A framework for risk
12.6 Trading forwards
12.7 Risk and P&L attribution
12.8 DOL convexity correction to a FX forward price
13 A skewed perspective of the world: FX Options
13.1 Starting from the end
13.2 Back to the beginning
13.3 Risk Management
13.4 Risk and P&L Attribution
14 Some cash is better than nothing what you need to know about cash products
14.1 Local Government Bonds
14.2 Local Corporate Bonds
14.3 Local funding practices
14.4 Offshore Government and Corporate Bonds
14.5 Liquidity (or lack of)
15 Index of choice ... Inflation-Linked Products and Curves
15.1 Government Inflation-Linked Bonds
15.2 Inflation-Linked Swaps
15.3 Exchange traded inflation-linked Futures
16 Microstructure of the listed derivatives
16.1 Microstructure: Concepts
16.2 Can durations be estimated?
16.3 What happens in practice?
16.4 What is the importance of the tick size?
16.5 The model with uncertainty zones (Robert and Rosenbaum)
16.6 DOL
16.7 DI
17 Unlucky end: On the obsolescence of products and books

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 inthese markets, everything they need to understand the market dynamics, risks, pricing and calibration of curves for all products currently available.