Essays in Derivatives: Risk-Transfer Tools and Topics Made Easy (Wiley Finance Series) / Edition 2

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Overview

Derivatives can be a painfully difficult subject to master,usually requiring a steep learning curve. As Don Chance points out,"many legal pads are used up, sometimes frustratingly, in workingthrough some of the principles covered in technical derivativesbooks." This book is different. In the updated second edition ofChance's well-received Essays in Derivatives, the author once againkeeps derivatives simple enough for the beginner, but offers enoughin-depth information to satisfy the more experienced investor.

This book provides up-to-date and detailed coverage of variousfinancial products related to derivatives in several key areas:derivatives and their markets, the basic instruments, derivativepricing, derivative strategies, exotic instruments, and fixedincome securities and derivatives. Chance begins with the basics,defining what a derivative is, outlining four commontypes—forward contracts, futures contracts, options, andswaps—and explaining the kinds of situations in which one typemight be used and preferred over another. From there, he graduallymoves on to more complex topics—all presented in the sameaccessible, down-to-earth style and nontechnical language.

Since the first edition of this book was published in 1998, thederivatives business has become vastly more sophisticated.Recognizing this, the author has eliminated outdated material and,in addition to revising almost every chapter in the book, has addedmany completely new chapters, covering subjects that include whyderivatives are used, forward and futures pricing, operationalrisk, volatility derivatives, weather derivatives, good and badpractices, and other new topics. In addition, the end of eachchapter includes practice questions that allow you to test how muchof the material has been retained. Answers are provided at the endof the book.

The material in Essays in Derivatives will appeal to individualsat all levels of expertise. Beginners will find these essaysparticularly useful in gaining a fundamental grasp of the subject,and experts will appreciate the simple manner in which suchseemingly complicated subjects can be presented. Both will agree: abasic understanding of derivatives need not be hard . . . and caneven be enjoyable.

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Product Details

  • ISBN-13: 9780470086254
  • Publisher: Wiley
  • Publication date: 6/10/2008
  • Series: Wiley Finance Series, #387
  • Edition description: Second Edition
  • Edition number: 2
  • Pages: 432
  • Product dimensions: 6.20 (w) x 9.10 (h) x 1.50 (d)

Meet the Author

DON M. CHANCE holds the William H. Wright Jr. Endowed Chair for Financial Services at the E. J. Ourso College of Business Administration at Louisiana State University. He was formerly the First Union Professor of Financial Risk Management at the Pamplin College of Business at Virginia Tech. Prior to his academic career, Chance worked for a large southeastern bank. Professor Chance has had numerous articles published in academic and practitioner journals, is often quoted in the media, and has an extensive consulting practice. He holds a PhD in finance from LSU and is a CFA charterholder.

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Table of Contents

Preface To The New Edition.

Preface To The First Edition.

Section One. Derivatives And Their Markets.

Essay 1. The Structure Of Derivative Markets.

Essay 2. A Brief History Of Derivatives.

Essay 3. Why Derivatives?

Essay 4. Forward Contracts And Futures Contracts.

Essay 5. Options.

Essay 6. Swaps.

Essay 7. Types Of Risks.

Section Two. The Basic Instruments.

Essay 8. Interest Rate Derivatives: FRAs And Options.

Essay 9. Interest Rate Derivatives: Swaps.

Essay 10. Currency Swaps.

Essay 11. Structured Notes.

Essay 12. Securitized Instruments.

Essay 13. Equity Swaps.

Essay 14. Equity-Linked Debt.

Essay 15. Commodity Swaps.

Essay 16. American Versus European Options.

Essay 17. Swaptions.

Essay 18. Credit Derivatives.

Essay 19. Volatility Derivatives.

Essay 20. Weather And Environmental Derivatives.

Section Three. Derivative Pricing.

Essay 21. Forward And Futures Pricing.

Essay 22. Put-Call Parity For European Options On Assets.

Essay 23. Put-Call Parity For American Options On Assets.

Essay 24. Call Options As Insurance And Margin.

Essay 25. A Nontechnical Introduction To Brownian Motion.

Essay 26. Building A Model Of Brownian Motion In The StockMarket.

Essay 27. Option Pricing: The Black-Scholes-Merton Model.

Essay 28. Option Pricing: The Binomial Model.

Essay 29. Option Pricing: Numerical Methods.

Essay 30. Dynamic Option Replication.

Essay 31. Risk-Neutral Pricing Of Derivatives: I.

Essay 32. Risk-Neutral Pricing Of Derivatives: II.

Essay 33. It's All Greek To Me.

Essay 34. Implied Volatility.

Essay 35. American Call Option Pricing.

Essay 36. American Put Option Pricing.

Essay 37. Swap Pricing.

Section Four. Derivative Strategies.

Essay 38. Asset Allocation With Derivatives.

Essay 39. Protective Puts And Portfolio Insurance.

Essay 40. Misconceptions About Covered Call Writing.

Essay 41. Hedge Funds And Other Privately Managed Accounts.

Essay 42. Spreads, Collars, And Prepaid Forwards.

Essay 43. Box Spreads.

Section Five. Exotic Instruments.

Essay 44. Barrier Options.

Essay 45. Straddles And Chooser Options.

Essay 46. Compound And Installment Options.

Essay 47. Digital Options.

Essay 48. Geographic Options.

Essay 49. Multi-Asset Options.

Essay 50. Range Forwards And Break Forwards.

Essay 51. Lookback Options.

Essay 52. Deferred Start And Contingent Premium Options.

Section Six. Fixed Income Securities And Derivatives.

Essay 53. Duration.

Essay 54. Limitations Of Duration And The Concept OfConvexity.

Essay 55. The Term Structure Of Interest Rates.

Essay 56. Theories Of The Term Structure: I.

Essay 57. Theories Of The Term Structure: II.

Essay 58. Simple Models Of The Term Structure: Vasicek AndCox-Ingersoll-Ross.

Essay 59. No-Arbitrage Models Of The Term Structure: Ho-Lee AndHeath-Jarrow-Morton.

Essay 60. Tree Pricing Of Bond And Interest Rate Derivatives:I.

Essay 61. Tree Pricing Of Bonds And Interest Rate Derivatives:II.

Essay 62. Tree Pricing Of Bonds And Interest Rate Derivatives:III.

Essay 63. Tree Pricing Of Bonds And Interest Rate Derivatives:IV.

Essay 64. Tree Pricing Of Bonds And Interest Rate Derivatives:V.

Section Seven. Other Topics And Issues.

Essay 65. Stock Options.

Essay 66.Value At Risk.

Essay 67. Stock As An Option .

Essay 68. The Credit Risk Of Derivatives.

Essay 69. Operational Risk.

Essay 70. Risk Management In An Organization.

Essay 71. Accounting And Disclosure Of Derivatives.

Essay 72. Worst Practices In Derivatives.

Essay 73. Best Practices In Derivatives.

Recommended Reading.

Answers To End-Of-Essay Questions.

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