Step–By–Step Introduction to Financial Derivatives and Asset Allocation. A Practical Guide for Undergraduate, Postgraduate, Investors and Practitioners

This book is designed to provide an overview and introduction to the financial derivatives. Derivatives are a very complicated subject in terms of mathematics and understanding, so it becomes very important to use simple definition and basic mathematics. A lot of students and especially the one that do not have strong quantitative skills will feel vulnerable when taking this subject. If the level of mathematical sophistication is too high, the material is likely to be inaccessible to many students. If it is too low, some important issues will inevitable be treated in a rather superficial way. The book covers BA and BS, MA and MS in Risk Management, Business Administration, Financial Services, International Business and Financial Derivatives and BS's in Computational Finance.Options, swaps, futures and forward contracts are the most typical types of derivatives. But what is a derivative? It is a security whose pricing structure is derived from a main asset such as stocks, commodities, bonds, currencies, interest rates and market indexes. The valuation of a derivative product is determined by changes of the main asset. They are risky products and due to the leverage effect they provide high positive or negative returns. They are mainly used for two reasons. Firstly, they are used to hedge or reduce risk. Secondly, they are used to speculate based on the stock exchange momentum and macroeconomic factors of each country. High volatility in the stock markets that is created from economic crisis, debt problems, bankruptcy and low liquidity has forced the practitioners to design options, swaps and futures contracts