Swaps/Financial Derivatives
Products, Pricing, Applications and Risk Management

Now in its third edition, this is essentially an encyclopedia for financial derivatives. Physically, it is a massive four-volume set. It will take up a foot on your bookshelf. It isn't the kind of book you read straight through. Rather, it is a reference offering exquisitely detailed discussions of every aspect of the derivatives markets—the instruments, financial engineering, risk management, operations, technology, legal issues, regulation, history. It is all here. Discussions have a depth that an experienced OTC derivatives trader would appreciate.

 

For example, Das devotes 74 pages to non-generic swaps. Here you will find product descriptions, pricing calculations, applications and summary terms for numerous instruments encountered day-to-day by derivatives dealers—overnight index swaps, amortizing swaps, deferred start swaps, spreadlocks, etc.

The book has 306 pages on legal, regulatory, accounting and tax issues. The treatment is well organized and written for non-lawyers. It details applicable US and UK laws (the two primary bodies of law applied to OTC derivatives) and mentions issues related to local law in other jurisdictions.

Operations and related technology are described. Topics include the various functions performed by a back office, data acquisition and cleaning, standard front-, middle- and back-office technology used by dealers, the build vs. buy decision, etc.

While the book's focus is on financial derivatives, it has 222 pages devoted to commodity- and energy-linked structures.

Risk management is discussed in detail—organization as well as the various types of risks and how they are measured. There are 44 pages on liquidity risk alone—about the most sophisticated treatment of liquidity risk I have read anywhere.

Needless to say, any book review can only scrape the surface of all that is here. The four volumes together contain 4700 pages!

I think that is the one significant problem with this book. It gets bigger with each edition, and its development is evolutionary. Because it is mostly written by one author, not everything can be updated with each new edition. Some material is dated. For example, the treatment of value-at-risk reads like something from 1993. Other sections are entirely up to date—the discussion of Basle II, for example. For the next edition (and I hope there is a next edition), I think Das should focus on recruiting other writers and make the book more of an edited collection.

Who is this book for? Primarily, it is for derivatives dealers and other market participants. This is the kind of book every trading floor should have. Consultants will find it invaluable. I also recommend it for regulators and end users of derivatives. Even academics who want a window on what practitioners are up to will find much in these pages.

Contents

Volume 1

ROLE AND FUNCTION OF DERIVATIVES

1. Financial Derivatives Building Blocks  Forward & Option Contracts

DERIVATIVE INSTRUMENTS

2. Exchange-Traded Products

3. Over-The-Counter Products

PRICING & VALUING DERIVATIVE INSTRUMENTS

4. Derivatives Pricing Framework

5. Interest Rates & Yield Curves

6. Pricing Forward & Futures Contracts

7. Option Pricing

8. Interest Rate Options Pricing

9. Estimating Volatility & Correlation

10. Pricing Interest Rate & Currency Swaps

11. Swap Spreads

DERIVATIVE TRADING & PORTFOLIO MANAGEMENT

12. Derivatives Trading & Portfolio Management

13. Hedging Interest Rate Risk  Individual Instruments

14. Hedging Interest Rate Risk  Portfolios

15. Measuring Option Price Sensitivities

16. Delta Hedging/Management of Option Portfolios

Volume 2

RISK MANAGEMENT PRINCIPLES

17. Framework For Risk Management

MARKET RISK

18. Market Risk Measurement

19. Stress Testing

20. Portfolio Valuation/Mark-To-Market

CREDIT RISK

21. Derivative Credit Risk: Measurement

22. Derivative Credit Exposure: Management & Credit Enhancement

23. Derivative Product Companies

OTHER RISKS

24. Liquidity Risk

25. Model Risk

26. Operational Risk

ORGANIZATION OF RISK MANAGEMENT

27. Risk Management Function

28. Risk Adjusted Performance Management

OPERATIONAL ASPECTS

29. Operational, Systems & Technology Issues

30. Legal Issues and Documentation

31. Accounting for Swaps and Financial Derivatives

32. Taxation Aspects of Swaps and Financial Derivatives

REGULATORY ASPECTS OF DERIVATIVES

33. Credit Risk: Regulatory Framework

34. Market Risk: Regulatory Framework

Volume 3

DERIVATIVE APPLICATIONS

35. Applications of Derivative Products

36. Applications of Futures, Swaps & Options

37. New Issues Arbitrage

SYNTHETIC ASSETS

38. Synthetic Assets  Asset Swaps, Structured Notes, Repackaging and Structured Investment Vehicles

EXOTIC OPTIONS

39. Exotic Options

40. Packaged Forwards & Options

41. Path Dependent Exotic Options

42. Time Dependent Exotic Options

43. Limit Dependent Exotic Options

44. Pay-off Modified Exotic Options.

45. MultiFactor Exotic Options

46. Volatility Products

INTEREST RATE & FX STRUCTURES

47. Non Generic Swaps

48. Basis Swaps

49. Option On Swaps/Swaptions

50. Callable Bonds

51. Constant Maturity Products

52. Index Amortizing Products

53. Interest Rate Linked Notes

54. Currency Linked Notes

Volume 4

EQUITY LINKED STRUCTURES

55. Equity Derivatives

56. Convertible Securities

57. Structured Convertible Securities

58. Equity Linked Notes

59. Equity Derivatives  Investor Applications

60. Equity Capital Management

COMMODITY LINKED STRUCTURES

61. Commodity Derivatives  Commodity Futures & Options/Commodity Swaps/Commodity Linked Notes

62. Commodity Derivatives  Energy

63. Commodity Derivatives  Metal Markets

64. Commodity Derivatives  Agricultural and Other Markets

CREDIT DERIVATIVES

65. Credit Derivative Products

66. Credit Linked Notes/Collateralized Debt Obligations

67. Credit Derivatives/Default Risk  Pricing and Modelling

68. Credit Derivatives   Applications/Markets

NEW MARKETS

69. Inflation Indexed Notes and Derivatives

70. Alternative Risk Transfer/Insurance Derivatives

71. Weather Derivatives

72. New Markets  Property; Bandwidth; Macro-Economic & Environmental Derivatives

73. Tax and Structured Derivatives Transaction

EVOLUTION OF DERIVATIVES MARKETS

74. Electronic Markets and Derivatives Trading

75. Financial Derivatives  Evolution and Prospects
 

 

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