The purpose of FINANCIAL FORENSICS: The Science of Derivatives is to introduce advanced students of finance to pricing and hedging techniques of a variety of option and futures contracts. This text is designed to thoroughly cover the functioning of the option and futures markets focusing on both domestic and global issues. The chapters progress to the theory of pricing options and futures contracts and the application of the principles to individual types of contracts. The principles are expanded to include the implications for pricing in a variety of global contexts. An in-depth study of credit futures pricing investigates the impact of conversion factor techniques around the world and discusses the implications. In addition, the concepts studied throughout the text are culminated in the final chapters in a study of the complexities of pricing volatility index futures (VIX) and the inclusion of derivatives in an optimal portfolio.
Organization of Text: The first four chapters of the text introduce the reader to the functioning of the options and futures markets. Following the introductory chapters, the text focuses on pricing models and limits for options followed by futures. The later chapters introduce various types of derivative contracts such as equity index futures and options, credit futures, STIR futures and volatility indices.
Intended Audience: This textbook is intended for serious students who are in the advanced stages of their study of Finance. A solid background in investments is required in order to master the material. The text is designed as a one-semester upper undergraduate or graduate course for students who wish to progress in a study of risk-management.
Pedagogic Approach: Each chapter discusses the historical background of the market and the details of the contract specifications important to pricing functions. The last section of each chapter includes a Global Perspective which covers the topics of the chapter in a global risk context. Taken together, the Global Perspective sections comprise a separate text on Global Risk Management.
Throughout each chapter Self-Test Questions provide the reader the opportunity to practice each concept; the solutions are provided at the end of the chapter. Throughout each chapter blue boxes appear which direct students to Check the Glossary For special terms. The chapters contain a News Flash box with a story of an event which highlights the points discussed. There are numerous graphs, charts and tables that present results, provide data and denote outcomes. Questions and problems appear at the end of each chapter with solutions provided in the Instructor s Manual.
