Derivative-security

I bought the book as a practical reference in risk management/ applied financial engineering. I think the book accomplishes this goal.

It describes concepts and techniques in a clear, logical way and, most important, gives clearly outlined numerical examples, which help to implement the models. If all material would be written that way one didn't have to buy several introductory books and save a lot of money. This is especially true for professionals who want to implement things in a reasonable time without loosing time with (generally) confusing and incomplete derivations that have to be figured out afterwards through a painful process.

I must say though, that the work lacks to present some important concepts and techniques in interest rate risk management. As in many cases, fixed income applications were almost omitted. A treatment of PCA applications (hedging, simulation) would be very welcome and a more complete description with examples of interest rate models with implementations would complete this work.

I have read this book for the class of modeling financial derivatives and I was very impressed by the presentation of the theories of financial derivatives and risk management. The book covers derivative pricing in a very detailed form. THe best thing about this book is the presentation of the problems(mathematical) throughout the book, either through graphs, spreadsheet models, etc. It is not pure theory book, but it also contains many applications which encompas real finanical world. Such presentation enables the reader to easier comprehend the contents of the subject. Overall, the book is very very good for a beginner in finacial derivatives fiels, but it is also a great contribution to one more experienced in the field. Greatest emphasis was put on interest rate models, option models, volatility and risk management techniques.

I have encountered feelings about this book. I liked that it relates corporate finance topics with risk management, giving a better picture of how finance should be understood. I definitely agree that it is full of very valuable insights that increase our knowledge and understanding of finance and risk management. Some of my impressions about the book are:

-The book is sometimes easy to follow, but many times it is very difficult to follow.
-Many difficult parts to follow were unnecessarily complicated by the author.
-Many times the book didn't follow clearly an idea, as if each following sentence or paragraph was written by different people with something different in his mind each.
-Many times it used several lines and paragraphs to explain something simple that could be stated in one sentence.
-Some topics were explained very clearly but others were dreadfully explained.
-Some numeric examples were clear and some were very difficult to follow

My opinion is that you should look for another book on the subject; unfortunately I cannot give an advice about an alternative book.

Anyway, before reading this book you should have a good understanding about the CAPM, derivatives (futures, forwards, options), and basic probability.

This book could become a great book if the author took the time to improve its readability and coherence, because it has very valuable knowledge embedded in it.

Risk Management and Derivatives by Rene Stulz is a pioneering book into the need, value, and how to of corporate risk management. Rene Stulz is one of the leaders in this area of finance and has researched and studied it over many years, he is one of the leading experts in the understanding and managing of firm risk. The book motivates the subject by presenting existing and new arguments for the use of risk management by corporations. The book is designed to prepare current and future managers and executives for the world and value of derivatives. To assist the reader, learning objectives are presented at the beginning of each chapter. Many books approach the subject in a very technical or overly simplistic method to the use of derivatives to manage a firms risk, this book gives enough detail for a good understanding and use of derivatives for managing a firm's risk but is not to technical for the non-derivatives expert. All necessary quantitative background is provided in the book.

The book begins by discussing derivatives and how they are used to manage risks. It then goes on to look at the value of risk management from the investor as well as the firms viewpoint. The book then examines the basic derivatives tools used for managing risk, including forwards, futures and options. To help the manager in the use of these instruments the book uses many real world examples and discusses the identification and measurement of exposures. To help the reader understand the use and value of the most commonly used derivatives instruments, the author discusses their use and even explains the pricing of options using the Black-Scholes as well as the binomial pricing models. There is even a chapter on interest rate risk, which is the must common risk that is hedged. In the last several chapters of the book, the author goes beyond the basics and discusses more advanced risk management tools and instruments along with a chapter on swaps, which is a fast growing and flexible tool for hedging interest and exchange rate risks. The book concludes with an extensive discussion of the practice of risk management that examines the recent academic studies and predictions of the future of this valuable and growing field.

If you are interested in risk management or are a manager that is interested in increasing firm value and reducing risk, then this is a must read. This book is the state of the art in this exciting area of finance and is written by one of its leading pioneers.

This book covers the topic very well. It is clear and concise. Useful for anyone who wants an overview of risk management concepts. But if you are like me who understands better with lots of numbers and examples, this is not it.

A good book to tell you methodical risk analysis in the area of fincance and marketing. If more interpretaions of analysis results written there, I would have rated it as "5" stars.