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Derivatives: Markets, Valuation, and Risk Management

Derivatives: Markets, Valuation, and Risk Management

Robert E. Whaley

ISBN: 978-0-470-08638-4

Feb 2007

960 pages



Robert Whaley has more than twenty-five years of experience in the world of finance, and with this book he shares his hard-won knowledge in the field of derivatives with you. Divided into ten information-packed parts, Derivatives shows you how this financial tool can be used in practice to create risk management, valuation, and investment solutions that are appropriate for a variety of market situations.

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Preface ix

Acknowledgments xxv

About the Author xxvii

PART ONE: Derivative Markets 1

CHAPTER 1: Derivative Contracts and Markets 3

PART TWO: Fundamentals of Valuation 49

CHAPTER 2: Assumptions and Interest Rate Mechanics 51

CHAPTER 3: Relation between Return and Risk 89

PART THREE: Forwards/Futures/Swap Valuation 119

CHAPTER 4: No-Arbitrage Price Relations: Forwards, Futures, Swaps 121

CHAPTER 5: Risk Management Strategies: Futures 143

PART FOUR: Option Valuation 173

CHAPTER 6: No-Arbitrage Price Relations: Options 175

CHAPTER 7: Valuing Standard Options Analytically 201

CHAPTER 8: Valuing Nonstandard Options Analytically 261

CHAPTER 9: Valuing Options Numerically 303

CHAPTER 10: Risk Management Strategies: Options 347

PART FIVE: Stock Derivatives 381

CHAPTER 11: Stock Products 383

CHAPTER 12: Corporate Securities 419

CHAPTER 13: Compensation Agreements 451

PART SIX: Stock Index Derivatives 467

CHAPTER 14: Stock Index Products: Futures and Options 469

CHAPTER 15: Stock Index Products: Strategy Based 517

PART SEVEN: Currency Derivatives 563

CHAPTER 16: Currency Products 565

PART EIGHT: Interest Rate Derivatives 601

CHAPTER 17: Interest Rate Products: Futures and Options 603

CHAPTER 18: Interest Rate Products: Swaps 637

CHAPTER 19: Credit Products 679

CHAPTER 20: Valuing Interest Rate Products Numerically 705

PART NINE: Commodity Derivatives 729

CHAPTER 21: Commodity Products 731

PART TEN: Lessons Learned 771

CHAPTER 22: Key Lessons 773


A. Elementary Statistics 779

B. Regression Analysis 821

C. Statistical Tables 861

D. Glossary 869