Risk Takers: Uses and Abuses of Financial Derivatives

Because there is no table of content here, I would like to take the priviledge to type one for you. Ch 1 Employee stock options: what every MBA should know Ch 2 Roche Holding: the company, its financial strategy, and bull spread warrants Ch 3 The three amigos (three option traders) Ch 4 Metallgesellschaft AG: illusion of P/L, reality of cash flows Ch 5 Swaps that shook an industry; P & G vs Bankers Trust Ch 6 Orange County: the largest municipal failure in US history Ch 7 Barings Bank PLC: Lesson's lessons Ch 8 Long-Term Mismanagement: "John Merriwether and the Arb Boys" IMHO, the author had delivered well what he promised on the book title. The cases are representative, concise but sufficiently detailed. The review questions in the end of each chapter and the absence of sophisticated option pricing formula make it particularly suitable as an HBR type textbooks on derivatives for business school undergrads. However, I am obliged to comment that the author had overlooked the negative influence of investmment bankers on the proliferation of derviatives. For readers who want to get a more complete picture, I would strongly recommend "Devil Take the Hindmost: A History of Financial Speculation by Edward Chancellor", "Fiasco by Frank Partnoy", "Eyewitness to Wall Street by David Colbert" and "Wall Street Meat by Andy Kessler".

This book features examples of both good and bad uses of derivatives. All the scandals we read about in the newspaper are a result of certain factors which we can learn from. It is clear that each scandal has a lesson for us to learn from, but derivatives as financial instruments in itself are not bad or destructive. This book shows these lessons with simple explanations. A must-have book.