Written by two of the most distinguished finance scholars in the industry, this introductory textbook on derivatives and risk management is highly accessible in terms of the concepts as well as the mathematics.

With its economics perspective, this rewritten and streamlined second edition textbook, is closely connected to real markets, and:

Beginning at a level that is comfortable to lower division college students, the book gradually develops the content so that its lessons can be profitably used by business majors, arts, science, and engineering graduates as well as MBAs who would work in the finance industry.

Contents:

• 
  

  About the Authors

  
  


• 
  

  Preface to Second Edition

  
  


• 
  

  Preface to First Edition

  
  


• 
  

  Introduction:

  
  
  
  
  • Derivatives and Risk Management
  
  
  • Interest Rates
  
  
  • Stocks
  
  
  • Forwards and Futures
  
  
  • Options
  
  
  • Arbitrage and Trading
  
  
  • Financial Engineering and Swaps
  
  
  
  


• 
  

  Forwards and Futures:

  
  
  
  
  • Forwards and Futures Markets
  
  
  • Futures Trading
  
  
  • Futures Regulations
  
  
  • The Cost-of-Carry Model
  
  
  • The Extended Cost-of-Carry Model
  
  
  • Futures Hedging
  
  
  
  


• 
  

  Options:

  
  
  
  
  • Options Markets and Trading
  
  
  • Option Trading Strategies
  
  
  • Option Relations
  
  
  • Single-Period Binomial Model
  
  
  • Multiperiod Binomial Model
  
  
  • The Black–Scholes–Merton Model
  
  
  • Using the Black–Scholes–Merton Model
  
  
  
  


• 
  

  Interest Rate Derivatives:

  
  
  
  
  • Yields and Forward Rates
  
  
  • Interest Rate Swaps
  
  
  • Single-Period Binomial Health–Jarrow–Morton Model
  
  
  • Multiperiod Binomial HJM Model
  
  
  • The Health–Jarrow–Morton Libor Model
  
  
  • Risk Management Models
  
  
  
  


• 
  

  Appendix A

  
  
  
  
  • Mathematics and Statistics
  
  
  
  


• 
  

  Glossary

  
  


• 
  

  References

  
  


• 
  

  Notation

  
  


• 
  

  Additional Sources and Websites

  
  


• 
  

  Books on Derivatives and Risk Management

  
  


• 
  

  Name-Index

  
  


• 
  

  Subject-Index

  
  

Readership: Undergraduate and graduate students of economics, business, arts, science and engineering, and MBAs who would work in the finance industry.

'The text is pleasantly different from others in the market, especially the clarity of the explanations provided for the concepts involved. The teaching slides provided are the best I have encountered to-date.' - Dr Nagaratnam JeyasreedharanUniversity of Tasmania, Australia

'I have read the whole book and I find it excellent. It's a great blend of theory and the 'institutional' aspects of derivatives trading.' - Professor Rafael de SantiagoIESE Business School, Spain

'This book is a great resource for a rigorous introduction to derivatives, both pricing and markets. Thanks to an elaborate set of detailed examples, references to relevant case studies, a full set of worked solutions to problem sets and slides, using this book means reduced prep time without sacrificing the students' learning experience.' - Dr Thijs van der HeijdenUniversity of Melbourne, Australia

'My understanding of derivatives has been purely mathematical, so it's great to learn about all the historical developments, the background material, and all the interesting anecdotes the authors have included.' - Professor Kevin AretzUniversity of Manchester, UK

'This book's interest rate derivatives chapters are some of the best chapters I have read, because the authors have provided an outstanding and distinctive work in teaching the basics, examples, and practical applications of interest rate derivatives and the Heath-Jarrow-Morton (HJM) model.' - Professor Scott FungCalifornia State University, East Bay, USA