WHY ADOPT THIS EDITION?

• Shows you how to use financial tools to accomplish a goal rather than describing the tools themselves
• Focuses on the engineering aspects of derivatives (how to create them) rather than emhasizing their pricing (how they act) in relation to other instruments, the financial markets, and financial market practices. 
• Describes the “engineering” elements of financial engineering instead of the mathematics underlying financial engineering 
• Explains ways to create financial tools and how the tools work together to achieve specific goals
• Use of real-world examples that illustrate applications 
Five new chapters, numerous additions to existing chapters, and an expanded collection of questions and exercises make this Second Edition an essential part of everyone s library. Between introducing swaps on its first page and presenting a case study on its last, Salih Neftci s introduction to financial engineering shows readers how to create financial assets in static and dynamic environments. Poised midway between intuition, actual events, and financial mathematics, this book can be used to solve problems in risk management, taxation, regulation, and above all, pricing.

Approx. 470 illustrations

Contents
1. Introduction
2. The Hedge Fund Industry
3. Cash Flow Engineering and Forward Contracts
4. Engineering Simple Interest Rate Derivatives
5. Introduction to Swap Engineering
6. Repo Market Strategies in Financial Engineering
7. Dynamic Replication Methods and Synthetics
8. Mechanics of Options
9. Engineering Convexity Positions
10. Options Engineering With Applications
11. Pricing Tools in Financial Engineering
12. Some Applications of the Fundamental Theorem
13. Fixed-Income Engineering
14. Tools for Volatility Engineering, Volatility Swaps, and Volatility Trading
15. Volatility as an Asset Class and the Smile
16. Credit Markets: CDS Engineering
17. Essentials of Structured Product Engineering
18. Credit Indices and their Tranches
19. Default Correlation Pricing and Trading
20. Principle Protection Techniques
21. Caps/Floors and Swaptions with an Application to Mortgages
22. Engineering of Equity Instruments: Pricing and Replication

Salih Neftci