Features

Present the basics: Material that’s accessible for beginners. Fundamentals of Futures and Options Markets covers the core material addressed in Hull’s Options, Futures and Other Derivatives but does so in a way that’s easier for undergraduate students to understand. So whether it’s your first day of college or you’re a tenured professor, this book is on your level.
Offer the latest software: DerivaGem version 2.01 is included with this book. Version 2.01 of DerivaGem allows credit derivatives to be valued, is compatible with Macs and Windows, and consists of two Excel applications:

• The Options Calculator consists of easy-to-use software for valuing a wide range of options.
• The Applications Builder consists of a number of Excel functions from which users can build their own applications. It includes a number of sample applications, enables students to explore the properties of options and numerical procedures more easily, and allows for additional assignments to be designed.

Encourage self-assessment and practice:

• End-of-chapter quizzes and problems. Students will be able to assess their knowledge with the seven quiz questions found at the end of each chapter (excluding the final chapter). This text also contains about 300 Practice Questions and over 100 Further Questions. NEW! Many new end-of-chapter problems have been added to this edition.

Keep it current: Many changes have been made to update material and improve the presentation

• The changes taking place in the way over-the-counter derivatives are traded are explained.
  
• The chapter on swaps (chapter 7) reflects the trend in the market toward OIS discounting. It explains how swaps can be valued using both LIBOR and OIS discounting.
  
• New non-technical explanations of the Black-Scholes-Merton formula are provided in chapter 13 and an appendix to chapter 12 outlines how the formula can be derived from binomial trees.
  
• New material has been added on principal protected notes (chapter 11) reflecting their importance in the market.
• Products such as DOOM options and CEBOs offered by the CME Group are covered (chapter 9).
• The material on exotic options (chapter 22) has been expanded to include a discussion of cliquet and Parisian options.
• The material on credit derivatives (chapter 23) has been updated and expanded.
• Value at risk is explained with an example using real data (chapter 20). The example and accompanying spread sheets have been improved for this edition. This makes the presentation more interesting and gives instructors the opportunity to use richer assignment questions.

New to this Edition

Updates include:

• The changes taking place in the way over-the-counter derivatives are traded are explained.
  
• The chapter on swaps (chapter 7) reflects the trend in the market toward OIS discounting. It explains how swaps can be valued using both LIBOR and OIS discounting.
  
• New non-technical explanations of the Black-Scholes-Merton formula are provided in chapter 13 and an appendix to chapter 12 outlines how the formula can be derived from binomial trees.
  
• New material has been added on principal protected notes (chapter 11) reflecting their importance in the market.
• Products such as DOOM options and CEBOs offered by the CME Group are covered (chapter 9).
• The material on exotic options (chapter 22) has been expanded to include a discussion of cliquet and Parisian options.
• The material on credit derivatives (chapter 23) has been updated and expanded.
  
• Value at risk is explained with an example using real data (chapter 20). The example and accompanying spread sheets have been improved for this edition. This makes the presentation more interesting and gives instructors the opportunity to use richer assignment questions.
• Many new end-of-chapter problems have been added.
• The Test Bank available to adopting instructors has been improved and expanded.

Table of Contents

• 1. Introduction
• 2. Mechanics of futures markets
• 3. Hedging strategies using futures
• 4. Interest rates
• 5. Determination of forward and futures prices
• 6. Interest rate futures
• 7. Swaps
• 8. Securitization and the credit crisis of 2007
• 9. Mechanics of options markets
• 10. Properties of stock options
• 11. Trading strategies involving options
• 12. Introduction to binomial trees
• 13. Valuing stock options: The Black--Scholes--Merton model
• 14. Employee stock options
• 15. Options on stock indices and currencies
• 16. Futures options
• 17. The Greek letters
• 18. Binomial trees in practice
• 19. Volatility smiles
• 20. Value at risk
• 21. Interest rate options
• 22. Exotic options and other nonstandard products
• 23. Credit derivatives
• 24. Weather, energy, and insurance derivatives
• 25. Derivatives mishaps and what we can learn from them
• Answers to Quiz Questions
• Glossary of terms
• DerivaGem software
• Major exchanges trading futures and options
• Tables for N(x)
• Index