Financial derivatives - financial instruments whose value depends on other more basic instruments, such as stocks or bonds - have emerged as important risk-management tools in the corporate world. Financial Derivatives offers a broad overview of the different types of derivatives (futures, options, options on futures, and swaps), while focusing on the principles that determine market prices.

This introduction presents financial derivatives as tools for managing risk in a corporate setting, rather than as instruments of speculation. The approach reflects today's emergence of corporations and financial institutions as dominant forces in financial derivative markets. A new chapter, "Risk Management and Financial Engineering", reflects the maturation of financial engineering as a financial specialty and illustrates how financial engineers use derivatives to manage risk.