McDonald R.L. Derivatives Markets

3rd ed. — Prentice Hall, 2009. — 984 p. — ISBN: 0321543084, 9780321543080.To be financially literate in today’s market, one 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 readers 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.
Derivatives tools and concepts permeate modern finance. An authoritative treatment from a recognized expert, Derivatives Markets presents the sometimes challenging world of futures, options, and other derivatives in an accessible, cohesive, and intuitive manner. Some features of the book include:
Insights into pricing models. Formulas are motivated and explained intuitively. Links between the various derivative instruments are highlighted. Students learn how derivatives markets work, with an emphasis on the role of competitive market-makers in determining prices.
A tiered approach to mathematics. Most of the book assumes only basic mathematics, such as solving two equations in two unknowns. The last quarter of the book uses calculus, and provides an introduction to the concepts and pricing techniques that are widely used in derivatives today.
An applied emphasis. Chapters on corporate applications, financial engineering, and real options illustrate the broad applicability of the tools and models developed in the book. A rich array of examples bolsters the theory.
A computation-friendly approach. The option pricing functions used in the text are available in accompanying Excel spreadsheets. Visual Basic code for the pricing functions is included, and can be modified for your own use.Introduction to Derivatives
Insurance, Hedging, and Simple Strategies
An Introduction to Forwards and Options
Insurance, Collars, and Other Strategies
Introduction to Risk Management
Forwards, Futures, and Swaps
Financial Forwards and Futures
Commodity Forwards and Futures
Interest Rate Forwards and Futures
Swaps
Options
Parity and Other Option Relationships
Binomial Option Pricing: Basic Concepts
Binomial Option Pricing: Selected Topics
The Black-Scholes Formula
Market-Making and Delta-Hedging
Exotic Options: I
Financial Engineering and Applications
Financial Engineering and Security Design
Corporate Applications
Real Options
Advanced Pricing Theory and Applications
The Lognormal Distribution
Monte Carlo Valuation
Brownian Motion and It ˆ o’s Lemma
The Black-Scholes-Merton Equation
Risk-Neutral and Martingale Pricing
Exotic Options: II
Volatility
Interest Rate and Bond Derivatives
Value at Risk
Credit RiskAppendix A The Greek Alphabet
Appendix B Continuous Compounding
Appendix C Jensen’s Inequality
Appendix D An Introduction to Visual Basic for Applications