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3 of 3 people found the following review helpful
4.0 out of 5 stars A SOPHISTICATED FINANCIAL INSTRUMENT OR......, 21 Mar. 2011
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This review is from: All About Derivatives: The Easy Way to Get Started (All About Series) (Paperback)
......a gamble or "taking a view" said by those wishing to obscure Joe Public's perception of derivative trading as a casino activity.

Having read a few accounts of the causes of the recent Credit Crunch, which were littered with references to derivative trading being one of the major causes of the mind blowing frittering away of literally trillions of dollars on what according to the authors amounted to no more or no less than naked speculation, I wanted to know a little more about derivatives. Certainly Michael Durbins book "All About Derivatives - The Easy Way To Get Started", in its early stages introduces the basic derivative trades in an easily understandable way. I now know that a derivative is a price guarantee, and that most derivatives are an agreement between a future possible buyer and a future possible seller and basically fall into four types viz. Forward, Future, Swap and Options Contract each specifying an item known as the underlier, which can or must be sold.

This basic level of understanding was really all I was looking for and as the book went on to put flesh on the carcass, my willingness to learn the intricacies of derivative trading waned and my eyes started to glaze over by the time it got to The Black-Scholes Formula and Contango and Normal Backwardation! It seems to the uninitiated that a whole new dictionary of quasi-technical/scientific jargonese has been cobbled together that has the effect of deterring outsiders from understanding what is going on eg 'A One-Step Binomial Tree', 'Stochastic Volatility', and 'Pseudoequities and Pseudoprobability'.....see what I mean or should I say 'don't see'.

The author talks a great deal about the usefulness of derivatives as a legitimate hedging tool to help businesses concerns to protect their profits from the uncertainties of price, interest rates and foreign currency variations, which, of course has gone on for a long time. I just wonder if anybody knows the split in derivative trading volumes between 'genuine hedging' activity and the 'taking a view' wheeler dealers laying speculative bets? The problem with the latter is that if their trading is profitable they are showered with bonuses, but if they are 'down the pan' they just walk away leaving the shareholders or as recently seen, the taxpayers to pick up the tab. Drat it, I wish I had got on that gravy-train' when I was working!

I would imagine as good a book as you'll get for taking the first steps on the 'yellow brick' road to the wonderful wizardry of derivative trading.
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