Customer Reviews

Managing Financial Risk: A Guide to Derivative Products, Financial Engineering, and Value Maximization

5 star:		(1)
4 star:		(3)
3 star:		(1)
2 star:		(3)
1 star:		(1)

 

 

We used this book in an MBA Financial Risk course. I think it' a fantastic book for everyone who want to get a big picutre of derivatives applied to financial risk management. It's a great basic book in order to proceed futher studies in topics like Value at Risk. Smithson amd Smith done a great job in covering many subjects in one book. You learn about the basics of derivatives, numerical methods, engineering products, and handling risk for financial and non financial companies.

For those of you who may not be aware, Charles Smithson is the "father" of the building-block approach to making derivatives understandable, showing a linked, family-tree approach, rather than each explaining each one separately with no clear connections. He is both a top practitioner with many years of senior-level experience, as well as an academic for more theoretical work.

I am amazed at some of the negative reviews. I can only think that is because there aren't enough partial differential equations and complex pricing/hedging models (there really aren't any, but that doesn't make this a simplistic book). I also teach finance at the Masters level, as well as teaching practical applications of derivatives to various bank clients.

In my oppinion, this is the single best book on derivatives for non-specialists that I have seen (and I have seen most of the derivatives books around). Even people on the trading floor would benefit from the clear forest-for-the-trees approach. This is not an easy book, though it doesn't require any more than school algebra (with the exeption of one chapter on option pricing, contributed by Cliff Smith and, even there, the calculus could be skipped over lightly). This book will give the reader a very good understanding of the most important aspects of derivatives and their applications. This is something that is often woefully lacking in banks, where the focus is on the minutiae of quantitative models, treated almost as an exercise in math, without a very clear understanding of the finance that the math is there to model. The treatment is broad and balanced, from pure product knowledge to issuer applications to investor applications and to banks managing their own market risk. This breadth is very rare in derivatives books.

My only criticisms are that there are some mistakes (as in most technical books that are not textbooks, benefiting from the review of many students, if you look hard enough for them) and there is insufficient emphasis now on credit derivatives and the management of credit risk, though I feel sure Charles Smithson will address that in the next edition - he has written a separate book "Credit Portfolio Management."

Perhaps someone should take up the offer of a free copy from a previous reviewer - a real "free lunch." I highly recommend this book to relative beginners, as well as to experienced practitioners who want more breadth.

I also use this book as part of the Masters course in Sydney and I cannot remember the last time I picked it up to read as I have better things to do with my time than try and work through the glaring errors in formulae, graphs and general commentary. The presentation is verbose and circumlocutory and to add to the frustration often wrong. I feel obliged to warn potential buyers not to make the same mistake that I have. Gallitz on Financial Engineering is a far more interesting and accurate text and for the rigours of applied financial maths Mastering financial calculations teaches you more in 200 pages than Smithson could in a lifetime of trying to improve on this first edition. If anyone would like my copy of Smithson I'm happy to give it away for fear further sales may encourage McGraw Hill to continue publishing the book.

This book has lots of good information, but it needs better organization. A glossary and a more extensive index would help, but importantly, the author needs to learn to give clear definition at the point at which he introduces a new concept. E.g. there are no references in the index to the different concepts of risk (performance risk, financial price risk, etc.), and where these various concepts are first used there tend to be no introductory and no later (post elaboration) essentializing explanation or definition of the pertinent concept. This is not a book for neophytes to this subject; since I am one, I found it very unwieldy reading.

I had to buy this book as it was the text book for one of the subjects that I am studying.

Dated: e.g. Many examples that deal with European currencies that were replaced by the Euro.

Errors: In the illustrations, there are some calculations that take incorrect parameters to derive the results (obviously yielding wrong results). This is misleading and time consuming.

Verbosity: The book explains in twenty pages something that can be explained in five.

No good.

We are using it as our textbook for our Master course in Australia. Both the teacher and students found that the practical examples are very interesting. However, there are inconsistencies in the usage of exchange rate presentations. Some mathematical calculations and charts are obviously wrong. Mr Smithson, please spend more time to amend your book. Thanks.

I bought this book to give myself a thorough education on derivatives. And, I got it. It is very readable, yet it covers all the topics in adequate technical detail, so you can hold your own in the company of derivatives traders and the like. I often refer to this book, to refresh my memory on the different structure of option models, or how to value an interest rate swap. This is the sort of stuff you will not remember unless you use these concepts on a weekly basis. But, with this book, it does not matter, it is easy to refresh your knowledge.

The book is written in a complex way. For example, a simple future contract, was explained in long and complex way. It is not able to show the point directly. Anyway, it is not a bad point. It has some quite excellent practical example. It is the most valuable parts of the book.

A good find in a world full of books based on the same subject. Worth spending your time on. Read it and enjoy it.