This text for derivatives courses are suitable for advanced undergraduates and both introductory and advanced derivatives courses at the MBA level. The material in derivatives courses is challenging for most students.

1. Introduction to Derivatives. I. INSURANCE, HEDGING, AND SIMPLE STRATEGIES. 2. An Introduction to Forwards and Options. 3. Insurance, Collars, and Other Strategies. 4. Introduction to Risk Management. II. FORWARDS, FUTURES, AND SWAPS. 5. Financial Forwards and Futures. 6. Commodity Forwards and Futures. 7. Interest Rates Forwards and Futures. 8. Swaps. III. OPTIONS. 9. Parity and Other Option Relationships. 10. Binomial Option Pricing: I. 11. Binomial Option Pricing: II. 12. The Black-Scholes Formula. 13. Market-Making and Delta-Hedging. 14. Exotic Options: I. IV. FINANCIAL ENGINEERING AND APPLICATIONS. 15. Financial Engineering and Security Design. 16. Corporate Applications. 17. Real Options. V. ADVANCED PRICING THEORY. 18. The Lognormal Distribution. 19. Monte Carlo Valuation. 20. Brownian Motion and Ito's Lemma. 21. The Black-Scholes Equation. 22. Exotic Options: II. 23. Volatility 24. Interest Rate Models. 25. Value at Risk. 26. Credit Risk APPENDIXES. A. The Greek Alphabet. B. Continuous Compounding. C. Jensen's Inequality. D. An Introduction to VBA. E. Option Functions Available in Excel.