It has been the authors' experience that the overwhelming majority of students in MBA derivatives courses go on to careers where a deep conceptual, rather than solely mathematical, understanding of products and models is required. The first edition of Derivatives looks to create precisely such a blended approach, one that is formal and rigorous, yet intuitive and accessible. The main body of this book is divided into six parts. Parts 1-3 cover, respectively, futures and forwards, options and swaps. Part 4, examines term-structure modeling and the pricing of interest-rate derivatives, while Part 5 is concerned with credit derivatives and the modeling of credit risk. Part 6, discusses computational issues. Features: Full-length case studies: Several full-length case studies are integrated throughout the text including some of the most in famous derivatives disasters in history. These include Amaranth, Barings, LTCM, Metallgesellschaft, Procter and Gamble and others. These are supplemented by other case studies available on this book's website, including Ashanti, Sumitomo, the Son-of-Boss tax shelters and AIG. Extensive use of numerical examples for illustrative purposes: To enable comparability, the numerical examples are often built around a common parameterization. For example, in the chapter on option Greeks, a baseline set of parameter values is chosen and the behavior of each Greek is illustrated using departures from these baselines. End-of-chapter problems: The book offers a large number of end-of-chapter problems. These problems are of three types: Some are conceptual, mostly aimed at ensuring that the basic definitions have been understood, but occasionally involving algebraic manipulations, the second group comprises numerical exercises, problems that can be solved with a calculator or a spreadsheet, the last group contains the programming questions, questions that challenge the students to write code to implement specific models. We were fortunate to have many Silicon Valley engineers as students, from whom we received valuable feedback on these questions