Derivatives Demystified: A Step-by-Step Guide to Forwards, Futures, Swaps and Options

Preface

This book is based on a series of seminars delivered over a period of many years to people working in the global financial markets. The material has expanded and evolved over that time. Participation on the seminars has covered the widest possible spectrum in terms of age, background and seniority, ranging all the way from new graduate entrants to the financial services industry up to very senior managing directors. What all these many and varied individuals had in common was a strong desire to understand how derivative products are used in practice, without becoming too involved in the more complex mathematics of the subject.

The seminars (and this book) originated from the conviction that bankers, fund managers and other professionals in the modern financial markets must have a grasp of derivative products. In fact the target audience broadened out over the years to include technology specialists, operations experts, finance professionals working in the corporate environment and their business advisers. It is estimated that over 90% of the world's largest 500 companies now use derivatives to help to manage their exposures to the risks arising from factors such as currency fluctuations, interest rate changes and unstable commodity prices.

Derivatives are everywhere in the modern world, but sometimes are not easily detected except by those in the know. If you have the option to extend a loan or redeem a mortgage early, then you have a derivative product. If a company has the ...