The literature on derivatives pricing has long been dominated by academics, but we are now starting to see full-length books written by practitioners. Examples are Brockhaus, et. al. (1999) and James and Weber (2000). To date, results have been outstanding. Practitioners write with the same technical sophistication as academics, but offer practical techniques and insights that could only be gleaned from working on a trading floor. The writing tends to be breezy and light; skips the basics and goes straight to results. For readers who are comfortable with the occasional stochastic integral, these practitioner books are a goldmine.

This edited collection on foreign exchange financial engineering fits the same mold. Editors Halaka and Wystup both work for Commerzbank. They have compiled 27 outstanding chapters by 23 authors. They have contributed significant content themselves and have done an excellent job promoting a uniform style of writing across all chapters. The book offers easy reading with results that flow one after another. Sources are cited or maybe a summary is given for how a proof might be written, and then it is off to another result or perhaps a discussion of how some instrument is really hedged.

The book is divided into three parts. The first contains 12 chapters with practical insights on techniques used day-to-day to manage an FX derivatives book. One chapter covers the impact of non-trading days on derivatives pricing. Another covers components of FX volatility—smile, skew, butterfly and reversal. There are chapters on pricing of first- and second-generation exotics, and an entire chapter focuses on quantos. Another chapter covers put-call parity and hedging of compound options. A chapter explains "forward" and "backward" partial differential equations. All are sophisticated and cutting-edge.

The second part has two chapters on using and calculating the Greeks for exotics. Much of the focus is on efficient computation based upon homogeneity and related techniques.

The third part contains chapters on advanced pricing models and computational techniques. There are chapters on finite differences, variance reduction, fast Fourier transforms, quasi-Monte Carlo methods and binomial trees. For the most part these assume basic familiarity and delve more deeply into the respective topics. Chapters on models cover such things as local volatility surfaces, jump-diffusion models, models for long-dated options and other instruments, Heston's volatility model, etc.