Best Books on Derivatives

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List of Top 10 Best Derivatives Books

Derivatives are essentially financial instruments whose value depends on underlying assets such as stocks, bonds, and other forms of traditional securities. Below is the list of top books on derivatives –

  1. John Hull’s – Fundamentals of Futures and Options Market ( Get this book )
  2. Derivatives The Wild Beast of Finance ( Get this book )
  3. Merton Miller on Derivatives
  4. Trading and Pricing Financial Derivatives ( Get this book )
  5. Introduction To Derivative Securities, Financial Markets, And Risk Management ( Get this book )
  6. Option Volatility & Pricing ( Get this book )
  7. All About Derivatives (All About Series) ( Get this book )
  8. Interest Rate Swaps and Other Derivatives ( Get this book )
  9. Derivatives Demystified ( Get this book )
  10. Derivatives Essentials ( Get this book )

Let us discuss each of the Derivatives books in detail along with its key takeaways and reviews.

Best Books on Derivatives

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#1 – Fundamentals of Futures and Options Market

by John Hull  (Author)  

Fundamentals of Futures and Options Markets Paperback

Book Review

Best Takeaway from this Best Derivatives book

  • Introductory work on futures and options markets, which would help readers acquire a basic understanding of derivatives, including their evaluation and analysis.
  • Usually, detailed knowledge of relevant mathematical concepts is necessary for understanding the complex nature of derivative instruments; however, this work skillfully presents the concepts for those with relatively little mathematical understanding.
  • This enhances the value of this work as an introductory guide to derivatives markets.
  • A highly acclaimed work on the fundamentals of derivatives for students as well as seasoned professionals.
<< Get this book >>

#2 – Derivatives The Wild Beast of Finance

A Path to Effective Globalisation? 1st Edition by Alfred Steinherr  (Author)

Derivatives The Wild Beast of Finance: A Path to Effective Globalisation?

Book Review

  • This top derivatives book is an attempt at portraying derivatives markets in their true global perspective and to analyze its impact on the future of the financial world.
  • First published in 1998, this work carried predictions related to implications of the then prevailing conditions in derivatives markets on global financial markets, and his foresight by and large proved to be correct.
  • His fundamental fear was related to the lack of adequate risk assessment and management in the derivatives markets and how it could potentially destabilize the financial markets.
  • It is true that the value of risk has slowly been realized in the global context for the past couple of decades, and at a great value to the corporations and investors involved.
  • What makes the current edition of special value is that the author has taken special care to enhance the readability of the work and has reassessed current market conditions as well for the interested readers.
  • An eye-opening read for those versed in the concepts and principles that drive the derivatives markets and the element of risk in these and other financial markets.

Best Takeaway from this Top derivatives book

  • Significant work on the future of risk management in derivatives markets and what it means for the rest of the financial world.
  • The author brings his erudition to work while explaining some of the most complex concepts related to derivatives and their functioning while analyzing the derivatives market, and without invoking a lot of technical details at that.
  • In the current edition, he shares his thoughts on how derivatives markets and the element of risk might shape the future of the global economy.
  • A highly recommended read for professionals as well as erudite readers with interest in financial issues with wide-ranging implications.
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#3 – Merton Miller on Derivatives

by Merton H. Miller  (Author)  

Book Review

  • This best derivatives book is a collection of essays on derivatives by Nobel laureate Merton Miller, which address a number of critical issues related to derivatives.
  • For long, derivatives have been viewed with skepticism by industry at large and often treated as a mystery, but Miller does an excellent job of demystifying derivatives for his readers with a flair.
  • He offers a rare and critical insight into the exciting world of derivatives, which has revolutionized the financial world and brings out the real value of derivatives ineffective financial risk management and price discovery.
  • He offers an objective evaluation of financial disasters, including Procter & Gamble, Orange County, and Barings Bank, for which derivatives are usually held responsible.
  • He argues against derivatives being perceived as fraught with risks, how they have been of great help in hedging against risk, and if anything, ‘derivatives revolution’ has made a managing risk that much easier.
  • In short, an eye-opening treatise on much-misunderstood derivatives and how they have proved to be a beneficial instrument instead of a malignant one.

Best Takeaway from this Best book on Derivatives

#4 – Trading and Pricing Financial Derivatives

A Guide to Futures, Options, and Swaps

by Patrick Boyle, Jesse McDougall

Trading and Pricing Financial Derivatives: A Guide to Futures, Options, and Swaps, Second Edition

The book will introduce you to the world of derivatives, such as futures, options, and swaps. It is a handy book on derivatives trading that can be used as a textbook for undergraduate and graduate courses.

Book Review

Although this book was published to be used as a textbook at the University of London, England, it is equally suitable for both beginners and those with intermediate knowledge. The best part about this book is that it doesn’t require any advanced mathematical knowledge as attempts to explain each concept as clearly as possible. The authors have used their years of experience in the financial marketsFinancial MarketsThe term "financial market" refers to the marketplace where activities such as the creation and trading of various financial assets such as bonds, stocks, commodities, currencies, and derivatives take place. It provides a platform for sellers and buyers to interact and trade at a price determined by market forces.read more, as investment bankers and hedge fund managers, to make the book very informative and yet quite easy to understand. This book should be recommended to everyone who is interested in derivativesDerivativesDerivatives in finance are financial instruments that derive their value from the value of the underlying asset. The underlying asset can be bonds, stocks, currency, commodities, etc. The four types of derivatives are - Option contracts, Future derivatives contracts, Swaps, Forward derivative contracts. read more.

Best takeaway from this book

  • It is suitable for both beginners and people with intermediate knowledge of derivatives.
  • It can serve as a good starting point for candidates who want to pursue the career of a quantitative analyst.
  • It is a straightforward and well-structured book that explains all financial derivative concepts with the help of great examples.
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#5 – Introduction To Derivative Securities, Financial Markets, And Risk Management

by Robert A. Jarrow, Arkadev Chatterjea

An Introduction to Derivative Securities, Financial Markets, and Risk Management: 2nd Edition

As the name clearly suggests, this book introduces you to various concepts pertaining to derivatives, financial markets and risk management.

Book Review

This book is quite different (in a pleasant way) from the others available in the market owing to the simplicity of the explanations provided. You will find that there is a great mix of theory and the practical aspects of derivatives trading, which is backed by meticulous examples referencing relevant case studies. In fact, it is highly inspired by what actually happens in the financial markets. If you are an instructor or tutor, the book can be of great help to you as it comes with worked-out solutions to problem sets along with illustrative slides, which will reduce your prep time significantly without compromising students’ learning experience.

Best takeaway from this book

  • The level of mathematics used is suitable for lower-division college students.
  • The supplementary materials provided can be a great help to the tutors who use them as a course textbook.
  • The illustrations used in the book are closely related to the real markets.
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#6 – Option Volatility & Pricing

Advanced Trading Strategies and Techniques

by Sheldon Natenberg

Option Volatility & Pricing: Advanced Trading Strategies and Techniques

The book discusses the basics of option theory and explains how it can be used for identifying trading opportunities. It also covers a wide variety of advanced option trading strategiesOption Trading StrategiesOptions Trading refers to a situation where the trader can purchase or sell a security at a particular rate within a specific period. Its strategies include Long Call Options, Short Call Options, Long Put Options, Short Put Options, Long Straddle Options, & Short Straddle Options etc. read more.

Book Review

This book is one of the most extensively read books on options trading around the world. The reason is that it captures the most recent developments, maintains focus on volatility, and discusses the market appropriate option trading strategies. The book is written in a clear and easy-to-understand language as it focuses on the key concepts of options trading. It is highly theoretical and is full of graphs and charts, which can be very useful for graduate students. In short, it demonstrates how you should approach the market and the options trading strategies from the perspective of a professional trader.

Best takeaway from this book

  • It is one of the most informative books that cover all aspects of options trading in a concise manner.
  • It is extremely well-written and appropriately explains how volatility affects options pricing and trading.
  • It is not suitable for rookie options traders but is a must-read for intermediate level options traders.
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#7 – All About Derivatives (All about series)

Paperback – November 16, 2010 by Michael Durbin  (Author)

All About Derivatives Second Edition (All About Series)

Book Review

  • This best derivatives book is an excellent introductory work on derivatives which presents the fundamental concepts related to derivatives with a rare degree of clarity using an uncomplicated approach for benefit of the readers.
  • This work covers a lot of groundwork on various derivatives contracts, including forwards, futures, swaps, and options, along with critical concepts such as cost of carrying, settlement, valuation, and payoff, among others.
  • The author also provides useful information related to pricing methods and the mathematics employed for determining fair value. Other topics include several hedging strategies that can be utilized for managing various types of risks.
  • This work makes complex concepts on derivatives highly accessible to the readers and helps them acquire knowledge of basic tools and techniques for trading and hedging with derivatives to manage risks better.

Best Takeaway from this best book on Derivatives

  • A succinct introduction to derivatives, including information on the types of derivative contracts available and techniques for trading and hedging in this unique class of financial instruments with a high degree of success.
  • One of the best things about this work is the lucidity with which complex concepts have been explained that make this work a useful guide for any beginner.
  • A must-read for students, professionals as well as professional traders.
<< Get this book >>

#8 – Interest Rate Swaps and Other Derivatives

(Columbia Business School Publishing) Hardcover – August 28, 2012, by Howard Corb  (Author)

Interest Rate Swaps and Other Derivatives (Columbia Business School Publishing)

Book Review

Best Takeaway from this best derivatives book

  • A focused guide on interest rate swaps and other derivatives which offers a lot of useful information on these derivatives along with common trading strategies for derivatives and their applications.
  • The author explains how traders can take advantage of unique trading opportunities in the derivatives market, which might be difficult to locate in conventional markets, and how to make the most of them.
  • A highly conversational style adopted by the author makes the readers feel at home with relatively complex concepts.
  • A commendable read meant to double up as a textbook for students and a reference work for professionals.
<< Get this book >>

#9 – Derivatives Demystified

A Step-by-Step Guide to Forwards, Futures, Swaps, and Options- Kindle Edition by Andrew M. Chisholm (Author)  

Derivatives Demystified: A Step-by-Step Guide to Forwards, Futures, Swaps and Options

Book Review

Best Takeaway from this top derivatives book

  • An indispensable guide to understanding derivatives without getting stuck in complex mathematical concepts.
  • Basic forms of derivatives and their utility is explained in detail, along with their application in different markets to take advantage of unique trading and hedging opportunities.
  • The author also discusses the critical role of derivatives in the 2008 credit crisis before bringing the focus on the regulatory framework for derivatives, which plays a crucial role in shaping the future of the derivatives market.
  • In short, a power-packed guide on derivatives and their applications for students and seasoned professionals. 
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#10 – Derivatives Essentials

An Introduction to Forwards, Futures, Options and Swaps (Wiley Finance) by Aron Gottesman

Derivatives Essentials (Wiley Finance)

Book Review

  • Living up to its title, this best book on derivatives focuses on the essentials of derivatives, providing information of great practical utility on trading terms and conventions, methodologies for pricing and valuation of derivative instruments.
  • Practical trading strategies and techniques are provided for different types of derivativesTypes Of DerivativesA derivative is a financial instrument whose structure of payoff is derived from the value of the underlying assets. The three types of derivatives are forward contract, futures contract, and options.read more, including forwards, futures, swaps, and options, along with other related products.
  • This work is designed to help readers become acquainted with the fundamentals of derivatives while including the bare essentials of mathematics and laying greater stress on practical applications of these concepts instead.
  • It is structured to help develop a greater understanding of the ‘behavior’ of various derivative instruments, which invests an individual with the power to make informed decisions and devise novel trading strategies personalized to their specific needs and preferences.
  • Trading strategies and techniques are illustrated with the help of practical examples to help readers develop practical understanding and confidence in their abilities to trade in derivatives.

Best Takeaway from this top book on derivatives

<< Get this book >>

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Reader Interactions

Comments

  1. Bryce Matthews says

    These are some of the best books which I have got to know through your blog. Thanks for sharing this informative list of books. Any books related to subject Economics?

  2. Jake Mills says

    Superb!! Very useful books not only for students and professionals but also people like me who deal with stock trading market.