Risk Management, Derivatives, and Financial Analysis under SFAS No. 133

Senior Vice President, New Products Development at the American Stock Exchange

Risk management is concerned with the tradeoffs between financial risk and reward that inevitably face a firm's managers, its board of directors, and ultimately its shareholders. Although risk management itself is not new, what is new are the complicated financial instruments being used to manage risk-instruments that are frequently classified under the seemingly simple category of "derivatives." Use of these instruments have largely gone unreported in financial statements, much to the dismay of financial analysts and in contrast to their ideal of transparency. This volume explains firm's use of risk management practices and how those practices can be accounted.

Coverage includes

• 
  
• a practical and theoretical basis for risk management
  
• information on how a firm's use of derivatives affects financial analysts
  
• recent reforms in accounting for derivatives.

Gary L. Gastineau is Senior Vice President, New Products Development at the American Stock Exchange and an independent risk management consultant. He has prepared and published risk management research for S. G. Warburg, Swiss Bank, Salomon Brothers, and Kidder Peabody. Mr. Gastineau is author of The Options Manual, 3e (McGraw, 1988) and the Dictionary of Financial Risk Management (Probus, 1992). In addition to authoring numerous journal articles, he is on the editorial boards of the "Financial Analysts Journal," "The Journal of Derivatives," the Journal of Portfolio Management," the Journal of Financial Engineering," Derivatives Quarterly," and "Financial Practice and Education."

Donald J. Smith is Associate Professor of Finance at Boston University. He received his Ph.D in economic analysis and policy from the University of California at Berkeley. His current research interests include financial market innovations, derivatives, and interest rate risk management. His work has appeared recently in the Journal of Financial Engineering, the Journal of Finance, Financial Management, The Journal of Derivatives, and the Journal of Fixed Income. He has developed training curriculum on capital markets and derivatives for executives at Chase Manhattan Bank.