Preface

Derivatives is no longer an unknown term. It has both positive and negative connotations like hedging, speculation and financial crisis. However, many people are not aware of the pros and cons of derivatives. Derivatives have grown rapidly and play a dominant role in global financial markets. They are embedded directly or indirectly inside almost every financial instrument and investment.

Nowadays financial contracts of derivatives are not only associated with speculation. Today in the global world markets, derivatives have become the need of the hour especially for people who wish to take their business to new heights while dealing in the international markets.

Understanding of derivatives is important not only for entrepreneurs who run their own business and for corporate executives but also for students aspiring to have a career in finance like chartered accountancy and MBA. Despite the plethora of books and articles published on this topic, Financial Derivatives with a focus on currency and interest rate derivatives has rarely been dealt with in a simple and practical manner. The target audience of this book comprises students and would be participants of the derivative market.

This book attempts to put forth the theory and practice of currency derivatives and interest rate derivatives, and delves on why financial market and derivatives behave the way they do. It emphasizes the understanding of different strategies adopted by market participants in real life, and their financial risk and reward under multiple scenarios.

The salient features of the book are as follows:

• It provides detailed theory and practical facts.
• It also provides concepts backed by explanations and illustrations.
• The features include screenshots of Thomson Reuters 3000Xtra.
• It focuses primarily on foreign exchange and interest rate derivatives which account for 90 per cent of the world’s derivative market turnover.
• It presents the rich personal experience of authors who have worked in the area of financial derivatives at prominent financial institutions/banks in India.

Special Thanks

We, Aman Chugh and Divik Maheshwari, would like to express our sincere gratitude to Mr Sanjeev Bajaj, Managing Director and Head of Credit Suisse AG, Mumbai Branch, whose foreword for the first edition has put us in a state of elated bliss.

We are grateful to Thomson Reuters for permitting us to publish screenshots of charts and various data from their market desktop product Reuters 3000Xtra. This has added the uniqueness and reader friendliness to this book.

We wish to extend our thanks to Pearson and its team members comprising Raza Khan, Debapriya Mukherjee and Ruchi Sachdev who have ensured the publication of this book in the shortest span of time and provided their valuable feedback, from their rich experience, for improving the quality of the book. We would also like to thank all the esteemed personalities who have reviewed our book and have provided their valuable suggestions to embellish it.

Aman Chugh Divik Maheshwari