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Mastering Derivatives Markets: A Step-by-Step Guide to the Products, Applications and Risks, 4th Edition

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Mastering Derivatives Markets: A Step-by-Step Guide to the Products, Applications and Risks, 4th Edition


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  • Copyright 2010
  • Dimensions: 240X170
  • Pages: 432
  • Edition: 4th
  • Book
  • ISBN-10: 0-273-73567-5
  • ISBN-13: 978-0-273-73567-0

"The first port of call for anyone looking to truly understand derivatives markets, appreciate the role they play within the global financial system and develop the technical knowledge to trade."
Matthew Thompson, Chief Strategy & Business Development Officer, Dubai Mercantile Exchange

"An essential read for anyone serious about understanding the impact of derivatives and technology on the global financial market."
Kevin Thorogood, Global Head, Investment Banking/Energy Trading, Thunderhead Ltd

"We have used Francesca for training on derivatives in the past. She demonstrates a passion for these markets and for learning. In a fast changing world, the combination of technical learning and practical experience that Francesca applies is helpful in keeping abreast of market developments."
Rachael Hoey, Director, Business Development, CLS


Mastering Derivatives Markets provides full up-to-the-minute explanations — with worked examples and screen shots — covering the basics of options, swaps and futures across the key asset classes: rates, currency, equity, commodity and credit.

This book is relevant to anyone working within the financial markets, from the new entrant to the seasoned trader looking for updates, and to non-trading personnel working in IT, legal, compliance, risk, credit and operations.

Please note that the 'look inside' feature is currently displaying the content of Mastering Derivatives Markets Third Edition, this will be updated soon.

Mastering Derivatives Markets Fourth Edition has been completely revised and features new chapters on:

  • The most up to date thinking in the market
  • OTC clearing
  • Regulation
  • Benchmarking
  • Electronic futures trading in the FX market
  • New insights into the commodities markets
  • Carbon trading and environmental products

Sample Content

Table of Contents

Table of Contents 

 1. Background and development of the derivatives markets

  • Market background
  • Introduction
  • Key features
  • Uses of derivatives
  • Range of derivatives
  • Increasing use of the Central Counterparty Model (CCP)
  • Risk and benchmarking
  • Market volumes
  • Users and uses of derivatives
  • Straight Through Processing (STP)

2. Market fundamentals

  • Introduction
  • How banks generate income
  • Three key assumptions
  • Role and use of LIBOR
  • Day counts
  • Financial maths
  • Calculating forward rates
  • Marking to market
  • Yield curves
  • Quiz

 3. Risk — a Primer

  • Introduction
  • Finacial risks: markets, credit, liquidity
  • Operational risk
  • More esoteric risks

4. Derviatives Fundamentals

  • Range of derivatives   
  • What is a vanilla trade?
  • Settlement
  • Triggers
  • Liquidity and credit risk
  • Understanding the 'underlying'
  • Benchmarks
  • Fair value
  • Dealing with derivatives

5. Basic option concepts

  • Introduction
  • Option pricing
  • Option mechanics

6. Interest rate derivatives — single settlement instruments

  • Introduction
  • Single settlement interest rate derivatives
  • Financial futures contracts
  • Forward rate agreements (FRAs)
  • Interest rate options (IROs)
  • Quiz

7. Interest rate derivatives

  • Introduction
  • Interest rate caps and floors
  • Interest rate collars
  • Interest rate swaps
  • Quiz

8. Benchmarking in the OTC derivatives markets
Penny Davenport, Manging Director, Markit Document Exchange and Gavan Nolan, Vice President,  Credit Research, Markit Group

  • Financial benchmarking for derivatives
  • Liquidity benchmarking for derivatives
  • Operational risk measurements for derivatives
  • Conclusion

9. Currency derivatives

  • Introduction
  • Over the counter currency options
  • Currency options: reduced premium strategies
  • Simple exotic structures
  • Currency swaps
  • Exchange-traded instruments
  • Quiz

10. The impact of electronic trading on the FX Market
Ray McKenzie, Vice President, ICE

  • The early years
  • FX as part of a commodity portfolio
  • First electronic dealing platforms
  • Electronic market making
  • Phases I and II
  • Point and click vs algo traders
  • The impact of the credit crisis on banks' FX trading
  • Phase III

11. Credit derivatives

  • Introduction
  • What is credit risk?
  • Styles of trading
  • The first deals
  • Range of credit derivatives
  • Credit default swaps

12. Central clearing and the OTC market
Bill Hodgson, Founder and CEO, The OTC Space Ltd

  • The basics
  • Trade execution
  • Risks and mitigation
  • Getting trades into clearing
  • The business case and benefits
  • Predictions for market development
  • Terminology

 13. Equity derivatives

  • Introduction
  • Background
  • Single stocks or equity indices?
  • Stock index futures
  • Stock index options
  • Single stock options
  • Equity index swaps

 14. Commodity derivatives

  • Introduction
  • Exchange-traded energy derivatives
  • Exchange-traded futures contracts
  • Exchange-traded energy option contracts
  • OTC or ‘off-exchange’ energy derivatives
  • OTC option products
  • OTC oil swaps


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