This book shows how to quantify financial risks and manage them.For a firm, the ability to manage risk is a source of competitive advantage. In particular, firms that manage risks well are better able to take advantage of growth opportunities. Derivatives are the instrument of choice to manage financial risks, and it is therefore critical for managers to understand how derivatives can be used to manage risks.



Table of Contents

1.Introduction to Derivatives. 2. Investors, Derivatives and Risk Management. 3. Creating value with risk management. 4. An integrated approach to risk management. 5. Forward and futures contracts. 6. Hedging exposures with forward and futures contracts. 7. Optimal hedges for the real world. 8. Identifying and managing cash flow exposures. 9. Hedging with options. 10. Option pricing, dynamic hedging, and the binomial model. 11. The Black-Scholes model. 12. Risk measurement and risk management with nonlinear payoffs. 13. Options on bonds and interest rates. 14. The demand and supply for derivative products. 15. Swaps. 16. Using Exotic Options. 17. Credit risks and credit derivatives. 18. The practice of risk management: Recent and future developments.