Derivative Markets: Theory, Strategy, and Applications

This text explains how to manage portfolios using options in financial markets. Covering all products traded in the derivative markets (options, futures, futures on options), the text shows how to use contracts as risk-transferring devices and how to value options in financial markets.Int eresting applications include how to value treasury and corporate bonds, convertibles, warrants and operating leases. Ritchken also acknowledges the need to ease readers into the mathematical expressions through more practical inclinations in the business world and also from the students perspective. The author uses a consistent five-step method of introducing new concepts. Much like a geometry textbook, this book builds upon properties, followed by proofs of the property, sometimes with possible trading strategies, tabular or graphical exhibits and applied examples. This accessible presentation provides students with practical examples, presents the underlying corporate institution and overviews derivatives engineering processes. Coverage of the various pricing relationship is backed by arbitrage proofs where needed and all the models are carefully derived, and easy to follow.