Dynamic Hedging: Managing Vanilla and Exotic Options

by Nassim Nicholas Taleb

Book Overview

Destined to become a market classic, Dynamic Hedging is the only practical reference in exotic options hedgingand arbitrage for professional traders and money managers
Watch the professionals. From central banks to brokerages to multinationals, institutional investors are flocking to a new generation of exotic and complex options contracts and derivatives. But the promise of ever larger profits also creates the potential for catastrophic trading...

• Format: Hardcover
• Language: English
• ISBN: 0471152803
• ISBN13: 9780471152804
• Release Date: December 1996
• Publisher: Wiley
• Length: 528 Pages
• Weight: 2.60 lbs.
• Dimensions: 1.2" x 7.3" x 10.2"

Customer Reviews

Great but Where is the Second Version?

The best book on options but there are things that NT needs to add from his web site. Things happened since and we are all eager to know his opinion framed in the practical paradigm. THe bibliography also needs expanding.Also some of the charts. We need credit risk discussions.

So he's got personality...

Taleb's writing style is unique, to say the least. If you can get past it, though, his material is solid gold!The structure of the book is very disjointed and information dense. I typically read 4-5 pages, spent a day or two figuring out what nuance he was trying to communicate, and then was absolutely floored by the insight. I've read the book several times over and expect re-read it several more.Taleb's risk management perspective is at odds with "pricing" but right-on for "risk management". He would willingly trade a small certain loss for a possibly large gain rather than vice versa. This perspective is probably consistent with most dynamic hedgers; you expect the hedge to be a drain on income but also to save you from catastrophic events.As a non-trader implementing dynamic hedging programs, Taleb's perspective and insights have proven invaluable. I have avoided countless pitfalls into which I would otherwise have fallen. I look forward to future editions of this book!

A Book for Traders

I would not recommend this book to build up an academic background but rather to develop an understanding and an intuition of how dynamic options are. As a hedge fund options trader this book has been very valuable to me to validate my own observations and where necessary to correct those observations, which at the time seemed correct, but which the author through market experience manages to convey the proper meaning. This book is not only factual but also provides you with the right frame of mind to think about options. I believe you can also use the author's experience to boost your own practical experience.

A book long overdue

It is nearly impossible to write a book that is both mathematically rigorous and sufficiently down to earth to be accessible to the professional trader. This book is a step in the right direction. It maintains the mathematical accuracy and depth without bogging the reader down with technical derivation of formulae. At the same time, it is written by a trader whose experience in the real market compels him to constantly question the `nice' assumptions used to derive these formulae.Taleb is first a market practitioner who uses models and pricing formulae to enhance trading and not the other way around. If there is a discrepancy between theory and reality he doesn't blame the markets.The book is very personal and leaves no doubt what the author's opinion is on VAR, continuous hedging and other sacred cows of modern finance. The debacle in the financial markets in 1998 and the apologetic excuses by famous traders and theoreticians indicates that there is more than a grain of truth in Taleb's skepticism. The importance of this book is that whether one agrees or disagrees with Taleb, it forces the reader to question his basic assumptions and rethink common truths. The book is unique: it is stylish, philosophical, literary, and if one may say so of a hardcore financial book - it is very entertaining.

Invaluable book that bridges gap between theory and practice

Taleb's book successfully bridges the gap between well-posited but academic accounts of options theory and the practical knowledge and vernacular that are privy to the best traders. It is thoughtful and interesting, scholarly yet intuitive - and written in such picturesque prose that will at once charm and provoke you! The author makes the point well that market reality at times can be grim and much less forgiving - and certainly much richer - than current theoretical modeling make it out to be and shows how the trader can stack the odds in his or her favor. This book is an invaluable source of ideas for anyone who wants to monetize their empirical research on markets.