Derivatives Markets, 3rd edition
Published by Pearson (September 6, 2012) © 2013
- Robert L. McDonald Northwestern University
eTextbook
- Anytime, anywhere learning with the Pearson+ app
- Easy-to-use search, navigation and notebook
- Simpler studying with flashcards
- Hardcover, paperback or looseleaf edition
- Affordable rental option for select titles
- Free shipping on looseleafs and traditional textbooks
To be financially literate in today’s market, business students must have a solid understanding of derivatives concepts and instruments and the uses of those instruments in corporations. The Third Edition has an accessible mathematical presentation, and more importantly, helps students gain intuition by linking theories and concepts together with an engaging narrative that emphasizes the core economic principles underlying the pricing and uses of derivatives.
The third edition has been updated to include new data and examples throughout.
To be financially literate in today’s market, business students must have a solid understanding of derivatives concepts and instruments and the uses of those instruments in corporations. The Third Edition has an accessible mathematical presentation, and more importantly, helps students gain intuition by linking theories and concepts together with an engaging narrative that emphasizes the core economic principles underlying the pricing and uses of derivatives.
NEW FEATURES
The third edition has been updated to include new data and examples throughout.
Boxed material has been updated to include current topics including:
James Carville on derivatives; prediction markets; Bernie Madoff; hedging and Southwest Airlines; Forbidden Futures; tanker-based arbitrage; LIBOR during the financial crisis; repo during the financial crisis; Islamic finance; the Bank Capital debate; Google and compensation options; Warren Buffet’s written put options; Hedging the PBGC’s liabilities; black swans; standardizing CDS; Government credit guarantees; structured finance and the financial crisis; Abacus and Magnetar; and more.
New chapter 22. This new chapter emphasizes the economic underpinnings of option pricing and explains more general variations on risk-neutral pricing. A discussion of Warren Buffett’s criticism of the Black-Scholes put pricing formula is included, as well as coverage of portfolio theory, martingale pricing and implications.
An extensive revision of the fixed income chapter including discussion of the taxonomy of fixed income models, the Hull-White model, and the LIBOR market model.
Updated references to the financial crisis and subsequent regulatory changes throughout.
Increased coverage of logistics of trading, including clearinghouses, and measures of market size including the OTC market.
Updated discussion on the calculation and interpretation of hedge ratios.
Revamped introductory discussion of commodities, including the differences between commodities and financial assets, and commodities terminology.
Expanded discussion of hedging jet fuel with other oil-related products.
Discussion of synthetic commodities and commodity indices.
Expanded discussion of implied volatility, including risk reversals.
Revamped and tightened discussion of structures.
New discussion of reverse convertible bonds.
New discussion of tranching.
Expanded discussion of efficient Monte Carlo valuation.
New discussion of correlated processes.
Revised discussion of quanto pricing.
Enhanced discussion of pricing models and implied volatility.
Updated discussion of the credit default swaps during the financial crisis.
New discussion of CDO-squareds.
The third edition has been updated to include new data and examples throughout.
Boxed material has been updated to include current topics including:
James Carville on derivatives; prediction markets; Bernie Madoff; hedging and Southwest Airlines; Forbidden Futures; tanker-based arbitrage; LIBOR during the financial crisis; repo during the financial crisis; Islamic finance; the Bank Capital debate; Google and compensation options; Warren Buffet’s written put options; Hedging the PBGC’s liabilities; black swans; standardizing CDS; Government credit guarantees; structured finance and the financial crisis; Abacus and Magnetar; and more.
New chapter 22. This new chapter emphasizes the economic underpinnings of option pricing and explains more general variations on risk-neutral pricing. A discussion of Warren Buffett’s criticism of the Black-Scholes put pricing formula is included, as well as coverage of portfolio theory, martingale pricing and implications.
An extensive revision of the fixed income chapter including discussion of the taxonomy of fixed income models, the Hull-White model, and the LIBOR market model.
Updated references to the financial crisis and subsequent regulatory changes throughout.
Increased coverage of logistics of trading, including clearinghouses, and measures of market size including the OTC market.
Updated discussion on the calculation and interpretation of hedge ratios.
Revamped introductory discussion of commodities, including the differences between commodities and financial assets, and commodities terminology.
Expanded discussion of hedging jet fuel with other oil-related products.
Discussion of synthetic commodities and commodity indices.
Expanded discussion of implied volatility, including risk reversals.
Revamped and tightened discussion of structures.
New discussion of reverse convertible bonds.
New discussion of tranching.
Expanded discussion of efficient Monte Carlo valuation.
New discussion of correlated processes.
Revised discussion of quanto pricing.
Enhanced discussion of pricing models and implied volatility.
Updated discussion of the credit default swaps during the financial crisis.
New discussion of CDO-squareds.
Brief Contents
- Preface
- Chapter 1 Introduction to Derivatives
PART ONE INSURANCE, HEDGING, AND SIMPLE STRATEGIES
- Chapter 2 An Introduction to Forwards and Options
- Chapter 3 Insurance, Collars, and Other Strategies
- Chapter 4 Introduction to Risk Management
PART TWO FORWARDS, FUTURES, AND SWAPS
- Chapter 5 Financial Forwards and Futures
- Chapter 6 Commodity Forwards and Futures
- Chapter 7 Interest Rate Forwards and Futures
- Chapter 8 Swaps
PART THREE OPTIONS
- Chapter 9 Parity and Other Option Relationships
- Chapter 10 Binomial Option Pricing: Basic Concepts
- Chapter 11 Binomial Option Pricing: Selected Topics
- Chapter 12 The Black-Scholes Formula
- Chapter 13 Market-Making and Delta-Hedging
- Chapter 14 Exotic Options: I
PART FOUR FINANCIAL ENGINEERING AND APPLICATIONS
- Chapter 15 Financial Engineering and Security Design
- Chapter 16 Corporate Applications
- Chapter 17 Real Options
PART FIVE ADVANCED PRICING THEORY AND APPLICATIONS
- Chapter 18 The Lognormal Distribution
- Chapter 19 Monte Carlo Valuation
- Chapter 20 Brownian Motion and Ito's Lemma
- Chapter 21 The Black-Scholes-Merton Equation
- Chapter 22 Risk-Neutral and Martingale Pricing
- Chapter 23 Exotic Options: II
- Chapter 24 Volatility
- Chapter 25 Interest Rate and Bond Derivatives
- Chapter 26 Value at Risk
- Chapter 27 Credit Risk
Appendixes
- App. A The Greek Alphabet
- App. B Continuous Compounding
- App. C Jensen's Inequality
- App. D An Introduction to Visual Basic for Applications
Glossary
References
Index
Need help? Get in touch