Exotic-option Books

Customized Deriviatives does two things that most books on options do not: 1)Provide 2-3 page in-depth descriptions of many exotic derivates and 2)Illustrate the decision process that is required to model these options using lattices. By using lattices to describe the option pricing process, Ravindran avoids producing yet another dreary options book full of equations and succeeds in producing something that somebody with less than a masters in math can understand. This may not be info that an options expert would find necessary but I had fun using this book to throw models together in conjunction with my quantitative finance class. Next to Haug's "Guide to Option Pricing Formulas", this is the most useful options book I own.

The book provides alot of intuition and explaination for a topic that is usually not explained well. i would recommend this book to anyone who is interested in marketing of exotic derivatives.

I find this book extremely useful in my job. It covers almost all aspects of exotic and hybrid instruments: the real life examples, theory behind the pricing models, implementation using different numerical methods, hedging and risk management issues, a good appendix on the basic math stuff and even a sample VBA code to do multivariate MC. Most importantly, the author took a practitioner's point of view, which makes the materials much easier to be understood and applied. However, I did encounter quite a few errors inside some of the formulas. Just name a few, Eq 3.15 and 3.18 on pg 53, Eq 3.142 on pg 98 and Eq H.61 on pg 336. However, none of them is serious (more like a typo to me). In addition, I think it is more important to get the idea right. You can always double check the formula against any math reference book. Overall, I feel it is an excellent reference book for anyone with a serious interest in structured derivatives.

One of the best books on this topic. It is a very practical book for someone with practical background. No sigma algebra to confuse you, and you do not have to know Girsanov to understand the quanto effect. You just focus on those tough issues you are running into everyday: correlations, long dated FX, cross Gamma hedging, strategic risk management for an exotic book, transaction cost in illiquide market, and so on. In addition, last paragraph of the book is the every reason make me think why this book stands out among these many books.

Although this book has the usual first edition imperfections, it stands out as the best book ever written so far on options and exotic derivatives. It is comprehensive and bears superbly the comparison with the other reference in the field, namely Hull.

Structured products, especially those involving fixed income securities and mortgage loans, have been much discussed in the press in recent months, due possibly to the "subprime crisis" and its instigation of large losses accrued by many of the world's top financial institutions. A flurry of articles have appeared in some of the major financial publications that have as their topic the excoriation of structured finance and the credit risk modeling that goes along with them. Those involved in the financial engineering of these products or those aspiring to the profession, as well as those who are not financial professionals, may be taken aback by the content of these articles. What is needed then is a sound overview of the nature of structured products, if only to set the record straight on their risks and the culpability of those who manage them.

This volume, the second of a four-volume set on financial engineering, is a sizable one but can be approached by anyone needing information on structured products. The approach that the author takes is more descriptive, and so no advanced mathematics is needed to read the book. It can also be obtained separately from the other volumes for those who only need information on structured products and credit derivatives. The purpose of the entire set of course is to give a solid foundation for the instruments typically found in financial engineering, and as such is written as a research monograph or encyclopedia. Financial professionals will no doubt view it as such while students and those curious about the subject matter may find it approachable due to its length.

Each article in this volume should not be viewed as independent from the others, and newcomers to the subject matter should be aware of this before reading a particular article. Some prior exposure to the theory behind structured products will be needed before the contents can be appreciated. This reviewer only read the chapter on credit linked notes and collateralized debt obligations and is judging the volume solely on this basis.

As such this chapter gave a good overview of the reasons why these particular products arose and the financial strategies that lie behind them. Again, the financial press has devoted a lot of space to discussing these products recently, especially collateralized debt obligations since they are felt to play a major role in the "subprime crisis." Whether this is true remains to be seen, and only an in-depth, very involved statistical study can settle this for sure, but the information in this chapter will be helpful for those who need to assess or begin such a study.

If you have ever taken a class on Derivatives, it is very likely you used the book "Option, Futures, and other Derivatives" by John Hull. Although Hull's book is a great introduction into the field of Derivatives, it is missing some crucial "real world" elements. For example, Hull's chapter on Exotics is pitiful. This book really talks about how to structure exotic derivatives so that it satisfies the hedger's need and giving him nothing more(thus reducing the cost). By learning how to structure these derivatives, you really learn what derivatives really are. This book starts from the ground up, and makes no assumptions to your derivatives knowledge. Like another reviewer has said, this book may not be useful to you if you have been structuring or pricing derivatives at a major i-bank for 10+ years, BUT it is a GREAT introduction to the subject at an advanced undergrad or an early graduate school level. Furthermore, it explains Derivatives from the consumer side, those who may wants a position hedged.

In short, This is probably the single best introductory book to exotic equity derivatives I've ever seen. Another good title for this book could have been "Applied Derivatives: A real world guide to structuring derivatives from ground up"

This is the best book on structured equity products so far, it is fun to read but never trivial.

This is still a great introduction to the subject. Being familiar with the majority of current financial 'engineering' texts, I can honestly say this is still a very good book. It does what it claims to do - and sticks to the intended audience.

This book offers readers, who have little knowlegde about structured products, the insides of it. It is easy to read and easy to understand. I bet the reviewer from New York and Seattle are in this business themselves, as to give this book such low ratings. These people are probably affraid that their clients will buy this book and find out later that they got ripped of by their ruthless bankers. If these people are in the business, they should not have bought the book it in the first place.... Go ask your colleagues!!!
It is true that the math is non-existent, but again there are loads of books written in english with loads of formulas in it that even most english speakers don't have a clue about, and most importanly, how to apply it. This is definitely a book on the side of the consumers of these products. Buy it, you won't waste your money!!!!

This is definitely a very useful book for students taking financial engineering courses or complete newcomers in the aera of structuring. The book's written in a very clear and approachable manner and the author doesn't bother you with obscur mathematics. However, being myself a structurer of derivative products, I must unfortunately say that this book didn't really improve my knowledge in the field of structuring. But since I believe that Dr. Kat's main objective was to primarily target newcomers in the area of structured products, and not any professionals working in the business, I still think that the book is a respectable achievement.

This is a ponderous work that needs close study. Most investing books omit
real information on the subject where as this one presents a massive overdose. I appreciate the author's willingness to reveal what he knows but I think in this case that I'm going to need help on the subject.

Taleb once again. Although you may require some knowledge on futures and option trading to understand the bottom of the story, it is nice book, light to read and usefull. If you trade on futures and options you should take a look inside, not becuase of the technical content but to have a close look at the man's ideas.

Before starting as a trader I had studied Hull in college and took some 'advanced' investments classes. On the first day of work I was told to read 'Dynamic Hedging'.
My impression: Hull teaches you the (very) basics and Taleb gives you insight in the concepts that are truly relevant. However, do not expect to read it and get everything he writes. As it is written from a practicioner's point of view, things will probably only become cristal clear when you re-read it after spending a considerable amount of time in the dealing room.

This isn't so much a review as an inquiry -

I'm still working through this book, but I've noticed that it is replete with algebraic errors. Taleb doesn't always go through every step of his calculations, so they're difficult to follow.

Does anyone else notice these errors or am I getting caught in the algebra? An example is on page 38 towards the top:

He says that 12,500,000/.985 is 1,269,000. Even with the rounding (shaving off the 355), I'd say he's off by a factor of 10. Shouldn't the answer by 12,690,000? To confirm this, in the next paragraph he writes that a 1 cent rise in the futures price will yield $125,000 in profits on the future (12,500,000*.01) or $126,900 on the forward hedge. Intuitively, it seems that to get $126,900, you could divide $125,000 by .985 or multiply 12,690,000 (the answer you should've previously arrived at) by .01.

There are other errors like this throughout the book - anyone else notice them?

Books-A_Million lists a revised edition, ISBN: 0471353477, with December, 2008, as a publication date. Their advance order price is $76.95.

This is an excellent reference guide to interest rate option models, I used it extensively with Implementing Derivative Models (Wiley Series in Financial Engineering)while I was writing my masters thesis. Although it is a good reference, it lacks deep demonstration of how the equations are derived, throwing a lot of them assuming that the reader is an expert on the field. So in some models the book tends to be too superficial, but as I said it is an excellent reference of IR Option Models.

It's a recommended reading for our finance/numerical mth course. I have not got a chance to read through the whole book, but looks to be a good starting point for the subject matter.

The book places more emphasis on an intuitive grasp of the complex mathematics involved, though this must mean giving up rigour to an extent.

It is really a pleasure to read this book. While covering the most important topics it remains focused on the essentials. Whenever you have to deal with a concept in the literature about fixed income instruments you are not aware off Rebonato is always a good reference to start with, similar to Hull's or Wilmott's book.

Rebonato addresses consequently practical implementation issues (although not coevering the technical details of the implementation algorithms - read the original papers for that!) that are frequently missing in so many academic publications. This makes it to one of my favorit books on my book shelf. I am looking forward to his next book on intrest rate derivatives.

Rebonato covers the material on different levels, providing not only full mathematical formulations, but also the English version of the math along with explanations of significance of the topics covered. This book is excellent for those with the mathematical background to understand the math, and is easy to follow for those with less than rigorous mathematical background. I would recommend a good foundation in general option pricing (at least an introduction to Black-Scholes and lattice modeling) prior to reading this book. Futures, Options, and Swaps by Kolb and Options, Futures, and Other Derivatives by Hull would be good preliminary readings. Rebonato does a good job in discussing the various modeling techniques, along with the strengths and weaknesses of each.

The goal of this book is to disseminate the knowledge of a very technical subject to a very wide range of audience, including finance professionals. The author did a respectable job in that regard. With some improvement in future revisions, this book seems to be one of the best introductionary texts on stochastic calculus.

This is a really lucid and detailed introduction to derivative pricing theory from the pde way of doing things. The author is an applied mathematician, of the fluid mechanics variety, and this should tell you right away what the drift of the presentation is like.

Some will argue that all of Wilmott's books are along exactly the same line, so why do we need another pde book? Given the amazing number of textbooks dedicated to the martingale approach, it is great to have yet another, fresh way of looking at the pde approach.

The derivations come with all the necessary technical details, the style is very down to earth, and to my mind original. There are many details that I personally haven't seen in any other textbook before, and there are plenty of what seem like very useful exercises.

I really like this book, and it was a pleasant surprise to see it in a local library.

This is a well-written textbook for beginners in financial derivatives. It is very comprehensive as it covers various financial products. The main attraction of this book is its exercises. Many problems come from past academic papers. I benefit a lot from doing those drills.

The book is only a undergraduate textbook with no surprise. The author just tried to collect every method in linear pde and applied to finance area. Content is more or less same as Paul Wilmott's "option pricing : mathematical models and computations".

DeRosa has picked excellent papers. If one reads the papers in detail, the currency derivatives literature, as well as related derivatives literature, becomes very easy to understand.

This book presents highly technical papers on diverse topics from variuous academics. It would be very helpful to anyone looking to understand theoretical aspects of FX derivatives. Since most papers are written by different authors, notation is not consistent. In addition, academics do not always write like Hemingway. Nevertheless, the book covers everyhting from vanillas to exotics very well.

1. Excellent book to recommend to people who want to learn more on exotic options, but... 2. Two many mistakes in numerical examples, formulas, and even theorems !!, actually damaging the quality of the book. Since this is the second edition, the reader was prepared to get a cleaner version. I suggest the author creates a Web site for all these errors. 3. All these errors, typos, etc... make this book out of reach for those who want to use the formulas but have no idea on how to correct them... 4. Many very usefull ideas for structured derivatives desks

I have just gradueted in Economic and Bussiness two months ago. The topic of my degree thesis was the barriers options, so I bought this Peter Zhang book. I think that it is a quite good book: easy to read, clear for its explanations but I found some mistakes in mathematical formulas. Here is the list: formula 10.25 page 212; formula 10.26b; formula 10.37 page 222; the example in page 232-233 is wrong because when the up-and-out call is valued the square symbol over the parameter v is missing; in page 236 the rebate growth rate is eta instead of gamma; formula 10.49b page 236; in formula 11.2 page 259 the correct parameter is gamma isnstead of f; in formula 11.27 page 277 UCDP is missing; formula 11.30 page 280; formula 11.34 page 281; formula 11.51 page 294. For more details about errata I found please e-mail elenaz@tin.it.