Fundamentals of Futures
and Options Markets, Ninth Edition

Many changes have been made to update material and improve the presentation. The derivatives market’s move toward OIS discounting has continued since the eighth edition was written. Indeed OIS discounting is now the standard valuation approach. This has allowed me to streamline the material in the first seven chapters of Fundamentals. LIBOR discounting is no longer presented as a way to value instruments such as swaps and forward rate agreements. The valuation of these instruments requires (a) forward rates for the rate used to calculate payments (usually LIBOR) and (b) zero coupon risk-free zero curve used for discounting (usually the OIS zero curve). Most instructors will find the new presentation appealing and more logical. It can be extended to situations where payments are dependent on any risky rate.

Other changes include

· A more detailed discussion of new regulations concerning the trading and clearing of over-the-counter derivatives

· A major revision to the chapter on swaps (Chapter 7) to improve presentation and reflect the derivatives markets’ move to OIS discounting

· A fuller description of the impact of daily settlement when futures are used for hedging

· More details on the calculation and use of Greek letters

· A fuller discussion of the expected shortfall measure in Chapter 20, reflecting its increasing importance

· A new version of the acclaimed software DerivaGem, tailored to the needs of readers of this book