Derivatives: A Manager's Guide to the World's Most Powerful Financial Instruments

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Derivatives: A Manager's Guide to the World's Most Powerful Financial Instruments

By Philip McBride Johnson McGraw-Hill

New York, N.Y. (1999) 140 pages, $34.95

Reviewed by Howard L. Simons "Mistakes have names, comrades. Who is responsible?"

-Josef Stalin

"...[Y]our derivatives risk management system will not work unless somebody's career is at stake, and it will work best if that 'someone' is in senior management with a shot at the top job, stock options, perks, and other emoluments of high office in jeopardy."

- Philip McBride Johnson

The mark of any great invention is when you can look at it and say, "Why didn't r think of that?" The notion of a book on derivatives written not by a rocket scientist or a salesman, but by a commodities lawyer who has had to follow the parade with broom and shovel is elegant in its conception and brilliant in its execution.

Johnson's target market, as the subtitle suggests, is not traders or system designers, but the middle and senior managers whose careers can be derailed by misunderstood risks. Former Commodity Futures Trading Commission Chairman Johnson, like all attorneys, paints the world in shades of black and pipes in the sounds of a looming dungstorm just for good measure. As a result, the entire world of derivatives is cast in the light of a necessary evil. No matter: If this is what it takes to create management understanding of the roles derivatives play not only for their own corporation's operations, but for the well-being of their environment as well, then we're all for the better.

Experienced traders and analysts might find some of the early going on the operations of futures, forwards, options and swaps a little too much on the "...for dummies" side of the ledger, but this reviewer's own experiences indicate even this approach could fly over the heads of non-trading managers. …