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Title: Derivatives Markets by Robert L. McDonald ISBN: 0-201-72960-1 Publisher: Pearson Education Pub. Date: 06 September, 2002 Format: Hardcover Volumes: 1 List Price(USD): $131.00 |
Average Customer Rating: 5 (3 reviews)
Rating: 5
Summary: Excellent Derivatives Book
Comment: The cover and page quality make this book a joy to read compared to other derivatives texts on the market.
Even more important, Dr. McDonald's writing is clear and logical. His theory is current and well laid-out. Compared to Hull it has more PDE's and sound theory. Compared to still other derivatives texts, Dr. McDonald gives more applications to supplement the theory.
If I could only recommend one derivatives texts to students and practitioners needing a thorough overview of the market, this would be the one.
Rating: 5
Summary: A brilliant book by a master teacher
Comment: Far too many books on derivatives are written by academics who claim to be writing for intelligent professionals but are in fact really trying to impress their colleagues. This book is a wonderful exception to that general rule. It is written by a master teacher who understands the importance of knowing several different ways to solve problems, and who provides numerous examples so that the reader can check his/her own answer. The book also provides software in VBA (Visual Basic for Applications) so that the reader can experiment with the results explained in the text and apply them to his/her own problems.
McDonald is very concerned to explain the intuition behind the numerous formulas presented in the text, and presents the various chapters in an expertly-designed sequence so that new results nearly always become understandable as more general ways of seeing results presented in earlier chapters. The material progresses gradually from basic to complex, so that the dedicated reader becomes thoroughly acquainted with results that have only recently been discovered. As a consequence, this textbook becomes a handy reference work to be kept at one's desk for daily use.
I came across this book more or less by accident, and as I was browsing through it I noted with particular interest several substantial discussions of how derivative pricing can be done with real probabilities so as to arrive at the same results as pricing done with the pseudo-probabilities (or risk-neutral probabilities) discussed in most texts. These sections provided an extremely important clarification of an issue that undoubtedly occurs to nearly all students of derivative pricing but is nonetheless ignored in nearly all of the relevant textbooks and literature. I knew right then that the author understood what questions were occurring in the minds of his students and how to deal with them.
This book is a bit more expensive than some rival texts, but it is entirely worth it because of its tremendous clarity and because of the software that accompanies it. In reality, this book is a bargain.
Rating: 5
Summary: Excellent Book on Derivatives Markets
Comment: I had the privilege of using the manuscript of this book for two advanced finance courses I did at Kellogg School of Management (Northwestern University---the Author's home) and just got a chance to read the final published book. This is an excellent book on derivatives markets which should appeal to three types of readers: 1) MBA students doing their first finance course on derivatives; 2) Non-finance professionals who can easily grasp quantitative aspects of derivatives pricing schemes but lack an an intuitive understanding of why, where and how derivatives are used (I was in this category until I attended Kellogg); and, 3) Corporate finance professionals trying to understand different risk management tools. Bob McDonald did a great job in maintaining a good balance between mathematics of derivatives pricing schemes and logical explanations of several economic concepts one would encounter in derivatives. This book is going to be a popular MBA text book very soon.
In the first four chapters of the book, the author assumes that the prices of different derivative securities are known and discusses how these securities can be used for insurance and speculation (Chapter 4 has a nice introduction to risk management). Chapters 5-8 explain pricing methods for futures, forwards and swaps using simple discounting models. Chapter 6 has a lucid discussion on how would "futures contract price vs. time" curves for different commodities differ based on the seasonality, transportation costs and storability aspects specific to each commodity.
Starting in Chapter 9, the author discusses different option pricing models. The material presented in Chapters 10-13, where in the author discusses binomial option pricing models, Black-Scholes formula and delta hedging, is clearly the highlight of this book. I did not find such a crystal clear discussion of binomial pricing models and the rationale behind delta hedging in any other text book. In Chapters 15-17, the author discusses financial engineering (how to create a required payoff from basic building blocks) and corporate applications of derivatives (including real options). In the remaining chapters (Chapters 18-24), I would recommend Chapters 18, 19 and 24 to all the readers. The other chapters are not really necessary unless you plan to work on developing derivatives pricing schemes.
In summary, I strongly recommend this book to every serious student of finance.
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Title: Derivatives Markets (Student Solutions Manual) by Robert McDonald, Mark Cassano, Ruediger Fahlenbrach ISBN: 0201892782 Pub. Date: November, 2002 List Price(USD): $22.50 |
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Title: Options, Futures, and Other Derivatives (5th Edition) by John C. Hull ISBN: 0130090565 Publisher: Pearson Education Pub. Date: 03 July, 2002 List Price(USD): $146.00 |
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Title: Advanced modelling in finance using Excel and VBA by Mary Jackson, Mike Staunton, Mary Jackson, Mike Staunton ISBN: 0471499226 Publisher: John Wiley & Sons Pub. Date: 30 May, 2001 List Price(USD): $75.00 |
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Title: International Financial Management by Cheol S. Eun, Bruce G. Resnick ISBN: 0072521279 Publisher: McGraw-Hill/Irwin Pub. Date: 19 June, 2003 List Price(USD): $128.20 |
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Title: Options, Futures and Other Derivatives, Fifth Edition (Solutions Manual) by John C. Hull ISBN: 0130091448 Publisher: Prentice Hall Pub. Date: 2002 List Price(USD): $39.00 |
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