During the early 1990s, Risk Magazine was THE place to publish practitioner-oriented research on derivatives pricing. Many classic papers appeared between its covers. Today, other publications attract much of this research, but RISK continues to play an important role—as evidenced by this edited collection of 42 research papers published in Risk between 1999 and 2003.

The book is divided into four parts. The first comprises 14 papers on modeling volatility skew. Together, they give an excellent overview of the challenges that skew presents as well as the state of the art for modeling it. If you struggle with the difference between sticky strikes and sticky deltas—or local volatility models vs. stochastic volatility models—you will find these chapters to be a goldmine of practical information.

The second part comprises four nice papers on variance swaps and related derivatives that have volatility or correlations as underliers. Together, these chapters offer an in-depth introduction to how these instruments are used, priced and hedged.

The book's third part offers 16 papers addressing financial engineering issues raised by various exotic options—barriers, passports, binaries, etc. Because this is such an enormous topic, the section is less unified than the others. Its papers offer more a sampling of ideas than an overview of the topic.

The book's final part comprises eight papers discussing derivatives with exotic underliers: insurance, elections, weather, electricity.

This is an excellent collection of papers. While not all the papers are seminal, taken as a whole, they offer far more than the sum of their parts. Together, they immerse the reader in the cutting edge topics important to financial engineers today. While many important papers from the period were not published in RISK, the papers in this book orient you to those papers, explaining what they are about and how they fit into a broader scheme of things.

A frustrating shortcoming of the book is the fact that it does not provide original citations for the 42 papers. If you want to cite one of the papers in your own research—or just want to know when a particular paper was published—your are going to have to scrounge around for such information.

Who is this book for? I highly recommend it to anyone who wants to understand emerging trends in financial engineering. This includes both practitioners and researchers. More than anything else, this book brings to mind Taleb's (1996) book Dynamic Hedging. If you enjoyed that, you will be right at home reading this book. You will find similar sophisticated-but-not-too-technical discussions. You will love the many practical insights the 42 papers offer.