Harnessing the Power of Financial Markets for the Public Good

Country Studies and Data

The "Tobin Tax" Debate

II. Derivatives

Journals and Magazines

Credit Derivatives

Employee Stock Options

Long-Term Capital Management

Enron

III. Securities

Mortgage Backed Securities

Policy Analyses

IV. Banking

Policy Analyses and Regulation

Bank and S&L Failures

V. Foreign Exchange Markets

Overview and Market Description

DATA Sources

I. General Finance

Textbooks

Bodie, Zvi and Robert C. Merton. 2000. Finance. Upper Saddle River: Prentice-Hall.

This textbook for upper level undergraduates and masters level students is more noteworthy for its author – Robert Merton of Nobel prize and Long Term Capital Market fame and infamy – than the quality of the book.

Brealey, Richard and Stewart C. Meyers. 2000. Principles of Corporate Finance, 6^th Edition. Irwin, McGraw-Hill.

This is THE TEXT used by most MBA programs around the nation. It is the King James treatment of corporate finance gospel. Most people who have studied finance at universities have learned from this book. It is large and thorough and expensive; it describes financial markets and explains the theories of how they work.

Copeland, T. and J.F. Weston. 1988. Financial Theory and Corporate Policy. Addison-Wesley.

I find this to be the best masters level textbook on finance theory. It hits the right level for math and thoroughness. It is clearly written and the graphs are readily comprehensible. It covers nearly everything that needs to be covered in fixed income analysis (pricing bonds and swaps), capital asset pricing model (pricing stocks), Black-Scholes and Binomial options pricing models, and other things in between.

Huang, C. and R. Litzenberger. 1988. Foundations of Financial Economics. Prentice-Hall.

This text is more appropriate for PhD students in financial economics. It is very theoretical and mathematical, and the style of presentation will not be familiar to students not familiar with Arrow-Debreu treatment of microeconomic theory.

General Overview, not necessarily textbooks

Garbade, Kenneth. 1982. Securities Markets. McGraw-Hill.

Good overview of financial markets and the basics of financial theory applied to pricing bonds, stocks, and options. Not too mathematical, but rigorous and thorough and very accessible for the senior undergrad or masters level student.

Van Horne, James C. 1978. Financial Market Rates and Flows. Prentice-Hall. Englewood Cliffs, NJ.

Sharpe, William. 1970. Portfolio Theory and Capital Markets. McGraw-Hill.

From the father of the capital asset pricing model, the theory of portfolio analysis, the CAPM model, risk-averse and risk-neutral investors, and the rest.

Stigum, Marcia. 1981. Money Market Calculations – Yields, break-evens, and arbitrage. Dow Jones – Irwin Publishers, Homewood, Illinois.

One of her ubiquitous but useful books on financial markets. This one focuses on the particulars of how specific interest rates are calculated for a wide variety of credit market and capital market instruments. It also contains a description of the Treasury, futures and other credit markets.

Eatwell, John, Murray Milgate and Peter Newman (editors). 1987. Finance -- The New Palgrave. W.W. Norton. New York, NY.

This is the Financial section of the larger four volume The New Palgrave published in 1987.

Lee, Ruben. 1998. What Is An Exchange. Oxford University Press, New York.

Reuters. 1999. An Introduction to Foreign Exchange and Money Markets. Reuters, Financial Training Series and John Wiley & Sons, Singapore.

Veale, Stuart R. 2000. Stocks, Bonds, Options and Futures. Prentice Hall Press – New York Institute of Finance.

Dalton, John M. 1988. How The Stock Market Works, 2^nd Edition. Prentice Hall Press. New York Institute of Finance.

Readers will find this a perfect introduction into how the stock market works. It discusses order routing, trading, clearing, margin lending, short selling and many other pertinent details.

Country Studies and Data

Bernstein, Peter L. 1996. Against The Gods – The Remarkable Story of Risk. John Wiley and Sons. New York, NY.

An excellent history of the concepts of probability and statistics and their ultimate application to the pricing of risk for the purpose of risk management. This is great intellectual history of many of the ideas in financial economics. It is well written and very accessible to the intelligent but non-economist reader.

Bernstein, Peter L. 2000. The Power Of Gold – The History Of An Obsession. John Wiley and Sons. New York, NY.

Bryan, Lowell and Diana Farrell. 1996. Market Unbound – Unleashing Global Capitalism. John Wiley and Sons. New York, NY.

Although the books sounds too rah-rah-rah about capital market liberalization, it like Ron Chernow’s book below explains the importance of the rise of securitization of capital and the demise of traditional banking and what it means for economic decision making under capitalism.

Chernow, Ron. 1997. The Death of the Banker – The Decline and Fall of the Great Financial Dynasties and the Triumph of the Small Investor. Vintage Books, New York.

Chancellor, Edward. 1999. Devil Take the Hindmost – A History of Financial Speculation. A Plume Book published by the Penguin Group. London, England.

This is a great history of financial markets and their excesses. It is more than a history of speculation; it is also a history of fraud and manipulation. It is wonderfully written and spiced with utterances from many of the great literary, political and philosophical minds of the past four centuries who were often swept up in the euphoria and manias and swindles that preceded the great financial crashes.

Galbraith, John Kenneth. 1990. A Short History of Financial Euphoria – Financial Genius Is Before The Fall. Whittle Direct Books. Knoxville, Tenn.

Kindleberger, Charles P. 1978. Manias, Panics and Crashes – A History of Financial Crises. Basic Books. New York, NY.

This is one of the classic texts that every subsequent study refers to.

Basle Committee on Banking Supervision. 1999. Supervisory lessons to be drawn from the Asian Crisis. Working Paper No.2.

Calvo, Guillermo; Goldstein, Morris.1996. Private Capital Flows to Emerging Markets after the Mexican Crisis. Institute for International Economics, Washington, D.C.

Corsetti, Giancarlo; Pesenti, Paolo; Roubini, Nouriel. 1998. “What caused the Asian currency and financial crisis? A macro overview.” NBER Working Paper No. W6833.

Darby, Michael.1994. OTC derivatives and systemic risk to the global financial system. NBER Working Paper 4801.

Eatwell, John; Taylor, Lance.2000. Global finance at risk - the case for international regulation. New Press, New-York.

Eichengreen, Barry. 1999. Toward a new International Financial Architecture: A practical Post-Asia Agenda. Institute for International Economics. Washington, D.C.

Folkerts-Landau, David and Carl Johan Londgrin. 1998. "Toward a framework for financial stability." International Monetary Fund. Washington D.C.

Garber, Peter.1998. Derivatives in International Capital Flows. NBER Working Paper No. W6623.

Garber, Peter.1996. Managing Risks to Financial Markets from Volatile Capital Flows: The Role of Prudential Regulation. International Journal of Finance & Economics, Vol. 1, pp.183-195.

Garber, Peter and Subir Lall. 1998. Derivative products in exchange rate crises. Proceedings from Federal Reserve Bank of San Francisco, pp. 206-231.

Kregel, J.A..1998, Derivatives and global capital flows: applications to Asia”. Cambridge Journal of Economics, Cambridge, UK, Vol.22, pp.677-692.

Llewellyn, David. 1999."The Economic Rationale for Financial Regulation". London, Financial Services Authority, Occasional Paper Series, no. 1.

Teunissen, Jan Joost (editor). 1998. “Regulatory and Supervisory Challenges in the New Era of Global Finance.” Forum on Debt and Development, The Hague.

Wyplosz, Charles. 1998."International Financial Instability". UN Development Program.

Malaysia:

IMF Country information: Malaysia

Central Bank of Malaysia

Malaysian Securities Commission

Kuala Lumpur Stock Exchange

Malaysian Derivatives Exchange

Malaysia Monetary Exchange

Malaysian Derivatives Clearing House

Taiwan:

Securities and Futures Institute.2001. Taiwan Securities and Futures Markets, Taipei

Law Source Retrieval System – Securities and Futures Laws and Regulations

Central Bank of Taiwan

Securities and Futures Commission

Taiwan Stock Exchange

Taiwan Futures Exchange

Taiwan Securities Central Depository

Taiwan OTC Exchange

The Tobin Tax Debate

Arestis, Philip and Malcolm Sawyer. 1997. “How Many Cheers for the Tobin Transaction Tax?” Cambridge Journal of Economics, 21, 753-768.

Arestis, P. And Sawyer, M. 1998. “Keynesian Economic Policies for the New Millennium.” The Economic Journal, Vol. 108, pp. 181-95.

Baker, Dean. 2000. "Taxing Financial Speculation, Shifting the Tax Burden from Wages to Wagers." Washington, D.C.: Center for Economic and Policy Research, www.cepr.net.

Baker, Dean. 2000. "The Feasibility of a Unilateral Speculation Tax in the United States." Washington, D.C., Center for Economic and Political Research.

Baker, Dean. 2000. "Effective Currency Transaction Taxes: The Need to Tax Derivatives." Washington, D.C., Center for Economic and Political Research.

Campbell, John Y. and Kenneth A. Froot. 1993. "International Experiences with Securities Transaction Taxes." National Bureau of Economic Research, Working Paper No. 4587.

Davidson, Paul. 1997. “Are Grains of Sand In the Wheels of International Finance Sufficient To Do The Job When Boulders Are Often Required?” Economic Journal, 107, pp. 671-86.

Davidson, Paul. 1998. “Volatile Financial Markets and the Speculator.” Economics Issues. September.

Demsetz, Harold. 1968. “The Cost of Transacting.” Quarterly Journal of Economics, 82, pp. 33-53.

Dodd, Randall. 1996. Memorandum on OTC Clearing to the Off-Exchange Task Force of the Commodity Futures Trading Commission. Washington, D.C. December 12, 1996.

Dodd, Randall. 2000. “Repaying Treasury Debt: Implications for Financial Markets and Monetary Policy.” Manuscript available at www.financialpolicy.org

Dodd, Randall. 2002. "Primer: Transactions Taxes, or The Tobin Tax." Washington, D.C., DSC Special Policy Brief. (available at www.financialpolicy.org)

Dodd, Randall. 2003. "Lessons for Tobin Tax Advocates: The Politics of Policy and the Economics of Market Microstructure." Washington, D.C., DSC Special Policy Report. (available at www.financialpolicy.org)

Eichengreen B., Tobin, J., and Wyplosz, C. 1995. “The Case For Sand In The Wheels Of International Finance”, The Economic Journal, 105, pp. 162-72.

Epps, T. 1976. "The Demand for Brokers' Services: The Relation Between Security Trading Volume and Transaction Cost." The Bell Journal of Economics, pp 163-194.

Felix, David. 1994. "The Tobin Tax proposal: background, issues and prospects.", UNDP Working Paper #191 (June 1994)

Felix, David. 1995. "Financial Globalization versus Free Trade: The Case for the Tobin Tax." UNCTAD Discussion Paper No. 108 (November 1995).

Felix, David. 1995. "Financial Globalization and the Tobin Tax." Challenge, Vol. 38, No. 3, pp. 56-59, (May/June 1995).

Garber¸ Peter and Mark P. Taylor. 1995. "Sand in the Wheels of Foreign Exchange Markets: A Skeptical Note." Economic Journal, Vol. 105, pp. 173-180.

Grabel, Ilene. 1996. "Stock market, rentier interest, and the current Mexican crisis." Journal of Economic Issues, Vol. 30, No. 2, pp. 443-449 (June 1996).

Greenway, David. 1995. “Policy Forum: Sand In The Wheels of International Finance, Editorial Note.” The Economic Journal, Vol. 105, pp. 160-61.

Habermeier, Karl and Andrei Kirilenko. 2001. "Securities Transaction Taxes and Financial Markets." Washington, D.C., IMF Working Paper (May, 2001).

Hakkio, Craig. 1994. "Should we throw sand in the gears of financial markets?" Federal Reserve Bank of Kansas City Economic Review, Vol. 79, No.2, pp.17-30.

Hammond, Suzanne (editor). 1997. Securities Transaction Taxes: False Hopes and Unintended Consequences. Chicago: Irwin Professional Publishers.

Hahnel, Robin. 1999. Panic Rules: Everything you need to know about the global economy. Massachusetts: South End Press.

Haq, Mahbub ul, Inge Kaul and Isabelle Grunberg (editors). 1996. The Tobin Tax: Coping with Financial Volatility. London, Oxford University Press.

Harrod, R.F. 1951. The Life of John Maynard Keynes. Avon for St. Martin’s Press. New York.

Hasbrouck, Joes and George Sofianos. 1993. "The Trades of Market Makers: An Empirical Analysis of NYSE Specialists." Journal of Finance, pp. 1565-93.

Hu, Shing-yang. 1998. "The Effects of a Stock Transactions Tax on the Stock Market – Experiences from Asian Markets." Pacific-Basin Financial Journal 6, pp. 347-64.

Hubbard, Glenn. 1993. "Securities Transactions Taxes: Tax design, revenue, and policy considerations", Tax Notes, pp. 985-1000 (November 22, 1993)

Jickling, Mark. 2002. "Securities Fees and SEC Pay Parity." CRS Report for Congress, Library of Congress. Washington, D.C.

Johnson, Robert. 1997. "The Tobin Tax: another lost opportunity?" Development in Practice, Vol. 7, No. 2, (May 1997).

Jones, C. M. and Paul J. Seguin. 1997. "Transactions Costs and Price Variability: Evidence From Commission Deregulation." American Economic Review, 87, pp. 728-37.

Kasa, Kevin. “Time for a Tobin Tax?” Federal Reserve Bank of San Francisco, Economic Letter, Number 99-12. April 9, 1999.

Kaul, Inge, Isabelle Grunberg and Marc A. Stern. 1999. Global Public Goods: International Cooperation in the 21st Century. New York: Oxford University Press.

Kelly, Ruth. 1993. "Taxing the Speculator: the route to Forex stability." Fabian Society Discussion Paper No. 15 (May 1993).

Kenen, Peter B. 1995. "Capital Controls, the EMS and EMU", The Economic Journal, pp.181-191 (January 1995).

Keynes, John Maynard. 1936. The General Theory of Employment, Interest and Money. Harvest/ Harcourt Brace Jovanovich. London.

Kiefer, Donald W. 1990. “The Securities Transactions Tax: an Overview of the Issues.” CRS Report for Congress. July 25, 1990.

Kupiec, P. H.A. P. White and G. Duffee. 1994. “A Securities Transaction Tax: Beyond the Rhetoric.” Research in Financial Services.

Kupiec, Paul H. 1995. "A securities transactions tax and capital market efficiency." Contemporary Economic Policy, Vol. 13, No. 1, pp.101-112 (January 1995).

Kyriacou and L. Sarno. 1999. "The Temporal Relationship Between Derivatives Trading And Spot Market Volatility In The UK: An Empirical Investigation." Journal of Futures Markets, 19(3).

Madhavan, Ananth. 2000. "Market Microstructure: A Survey." Journal of Financial Market, pp. 205-58.

Martell, Terrence and A.S. Wolf. “Determinants of Trading Volumes in Futures Markets.” Journal of Futures Markets, 3, 1987. pp. 233-244.

Mendez, Ruben P. 1995. "Harnessing the global foreign currency market: proposal for a foreign currency exchange." In Issues in Global Governance, papers written for the Commission on Global Governance, pp. 425-441.

Mendez, Ruben P. 1992. International Public Finance. New York: Oxford University Press.

Michalos, Alex C . 2000. "A Handful of Sand in the Wheels of Financial Speculation." Working Paper, University of Northern British Columbia. pp.1-28 (March 2000).

Michalos, Alex C. 1997. Good Taxes: The case for taxing foreign currency exchange and other financial transactions. New York, Duncan Press.

OECD. 1997. "Taxation of global trading of financial instruments." Tax Notes International, 97 TNI 31-21, (February 14, 1997).

Palley, Thomas I. 1999. "Speculation and Tobin Taxes: Why Sand in the Wheels can Increase Economic Efficiency", Journal of Economics, Vol. 69, 113-126. American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), Technical Working Paper No. T015 (1999).

Palley, Thomas I. 2001. “The Case for A Currency Transactions Tax.” Challenge, May-June, pp. 70-89.

Patterson, Ben and Michal Galliano. 1999. The Feasibility of an International “Tobin Tax.” European Parliament, Economic Affairs Series. March 1999.

Pollin, Robert, Dean Baker and Marc Schaberg. 2001. "Securities Transaction Taxes for U.S. Financial Markets." Political Economy Research Institute, Working Paper #20.

Schmidt, Rodney. 1999. “A Feasible Foreign Exchange Transaction Tax. Manuscript, North-South Institute.” (March 1999).

Schmidt, Rodney. 2000. “Efficient Capital Controls.” Manuscript, International Development Research Centre, Government of Canada. December.

Schwert, G. William and Paul J. Seguin. 1993. "Securities transaction taxes: An overview of costs, benefits and unresolved questions." Financial Analysts Journal, Vol. 49, No. 5, pp. 27-35 (September/October 1993).

Shiller, Robert J. 1981. “Do Stock Markets Move Too Much To Be Justified By Subsequent Changes in Dividends?” American Economic Review, 71, pp. 421-35.

Shome, Parthasarathi and Janet G. Stotsky. 1996. "Financial Transactions Taxes", Tax Notes International, 96 TNI 1-17, (January 2, 1996).

Singh, Kavaljit. 1999. "Tobin Tax: An Idea Whose Time Has Come", Economic and Political Weekly, pp. 1019-1020 (May 1, 1999).

Singh, Kavaljit. 1998. "Capital Controls, State Intervention and Public Action in the Era of Financial Globalization." PIRG Occasional Paper No. 4, India (1998).

Singh, Kavaljit. 2000. Taming Global Financial Flows: A Citizen's Guide. New York: St Martin's Press, Inc.

Spahn, Paul Bernd. 1995. “International Financial Flows and Transactions Taxes: Survey and Options.” IMF Working Paper, 1995.

Spahn, Paul Bernd. 1996. “The Tobin Tax and Exchange Rate Stability.” Finance and Development, Vol. 33, No.2, pp. 24-27.

Shiller, R. J. 1981. “Do Stock Markets Move Too Much To Be Justified By Subsequent Changes in Dividends?” American Economic Review, 71, pp. 421-35.

Steinberg, Eleanor B. and Joseph A. Yager. 1978. "New Means of Financing International Needs: Possible Sources of Finance." Washington D.C.: The Brookings Institution, pp. 18-46 (1978).

Steinberg, Eleanor B. and Joseph A. Yager. 1978. "New Means of Financing International Needs: International Revenue Taxes." Washington D.C.: The Brookings Institution, pp. 47-98 (1978).

Stiglitz, Joseph E. 1989. “Using Tax Policy To Curb Speculative Short-Term Trading.” Journal of Financial Services Research, 3, pp. 101-113.

Stiglitz, Joseph. 1998. "Responding to Economic Crises: Policy Alternatives for Equitable Recovery and Development." The World Bank, Washington D.C. pp.1-17 (September 29, 1998).

Stoessenger, John G. 1964. "The Distribution of Cost of United Nations Operations." Financing the United Nations System, Washington D.C.: The Brookings Institution, pp.18-25 (1964).

Stoessenger, John G. 1964. "New Sources of Revenue." Financing the United Nations System, Washington D.C.: The Brookings Institution, pp. 265-292 (1964).

Stotsky, Janet G. 1996. "Why a two-tier Tobin tax won't work." International Monetary Fund, Finance & Development, Vol. 33, No.2, pp. 28-29.

Summers, Larry H., and Summers, V. P. 1989 “When Financial Markets Work Too Well: A Cautious Case For A Securities Transactions Tax.” Journal of Financial Services Research, 3, pp. 163-88.

Summers, Lawrence and Victoria Summers. 1990. “The Case for a Securities Transactions Excise Tax.” Tax Notes, August 13, 1990.

Tobin, James. 1974. “The New Economics, One Decade Older.” The Janeway Lectures on Historical Economics. Princeton, Princeton University Press.

Tobin, James. 1978. “A Proposal for International Monetary Reform.” Eastern Economic Journal, Vol. 4 (July-October), pp. 153-59.

Tobin, James. 1995. “A Currency Transactions Tax. Why and How.” Paper presented at the Conference on Globalization and Markets, CIDEI Universita “La Sapienza,” Rome.

Umlauf, S. P., “Transaction Taxes and The Behavior of The Swedish Stock Market,” Journal of Financial Economics, 23, 1993, pp. 227-40.

United Nations. 1997. Finance for Sustainable Development: The Road Ahead. United Nations Department for Policy Coordination and Sustainable Development, Division for Sustainable Development (Conference Proceedings of the Fourth Group Meeting on Financial Issues of Agenda 21, Santiago, Chile). New York: United Nations publication.

Wang, George H.K., Jot Yau and Tony Baptiste. 1997. “Trading Volume and Transaction Costs in Futures Markets.” Journal of Futures Markets.

II. Derivatives

Theory and Empirical Studies

Textbooks or basic reading

Hull, John C. 1993. Options, Futures and other Derivative Securities, 2^nd Edition. Prentice-Hall. Englewood Cliffs, New Jersey.

Kolb, Robert, 1994. Futures, Options, and Swaps. Kolb Publishing Company. Florida.

Both of these textbooks do a very good job of describing the futures and options exchanges and how they function. Both also discuss the theories of futures, options and swap prices, and the economics of their importance. They are both written at the upper undergraduate level but are interesting for graduate students who are first delving into the subject.

Liaw, Thomas and Ronald Moy. 2000. The Irwin Guide to Stocks, Bonds, Futures, and Options: A Comprehensive Guide to Wall Street's Markets. McGraw-Hill Professional Book Group.

This book provides a well written introduction to futures and options, the exchanges and the process through which they are traded.

Veale, Stuart. 2001. Stocks, Bonds, Options, Futures, 2^nd Edition. New York Institute of Finance.

The guide book is an affordable and easy to read text that includes descriptions of futures and options and how they are traded.

Neftci, Salih. 2000. An Introduction to the Mathematics of Financial Derivatives, 2^nd Edition. Academic Press.

This is a well written, very useful resource book for PhD students in financial economics. It provides an accessible treatment of some of the most contemporary math methods for pricing derivatives.

McMillan, Lawrence. Options As a Strategic Investment.

Natenberg, Shelton. Options.

General list of books and articles on derivatives:

Brewer, Jackson and F. Moser. 200. “The Value of Using Interest Rate Derivatives to Manage Risk at U.S. Banking Organizations.” Economic Perspectives. Federal Reserve Bank of Chicago.

Briys, Eric, Mondher Bellalah, Huu Minh Mai, & Francois deVarenne. 1998. OPTIONS, Derivatives Exotic and Futures. John Wiley and Sons. New York, NY.

Francis, Jack, William Toy and Greg Whittaker. 1995. The Handbook of Equity Derivatives. Irwin Publishers.

Gardner, D.C. (ed.). 1996. Introduction to Swaps. London, Pitman Publishing.

Jarrow, Robert A. and Stuart M. Turnbull. 1996. Derivative Securities. South-Western. Cincinnati, Ohio.

Lau, Frederic. 1997. Plain Words. Hong Kong Monetary Authority, Hong Kong.

Klein, Robert A. and Jess Lederman (eds.). 1994. Derivatives and Synthetics. Probus Publishing Company. Chicago, Illinois.

McLauglin, Robert M. 1999. Over-the-Counter Derivative Products. McGraw-Hill. New York, NY.

Millman, Gregory J. 1995. The Vandal's Crown: How Rebel Currency Traders Overthrew the World's Central Banks. Free Press, New York.

Millman is a monetary historian who paints brilliant portraits of people, motives and systems. It includes an excellent account of the creation of the Bretton Woods system as well as the “attacks” on various exchange rate regimes.

Peck, Anne E. (ed.). 1977. Selected Writings on Futures Markets, Volume I and II. Published by the Chicago Board of Trade.

This is an excellent collection of the classical essays on futures markets and the economics of futures. It includes work by H. Working, Leland Johnson, and Paul Samuelson.

Peck, Anne E. (ed.). 1985. Futures Markets: Their Economic Role. American Enterprise Institute. Washington, D.C.

The book is compilation of essays by senior AEI economists as well as CFTC chairman Philip Johnson (of Shad-Johnson fame) on the economic importance of derivatives, futures and options in particular, for the capital markets and the overall economy. Johnson contributes the concluding chapter on the regulation of securities and futures markets.

Pilipovic, Dragana. 1998. Energy Risk: Valuing and Managing Energy Derivatives. McGraw-Hill. New York, NY.

Ritchken, Peter. 1996. Derivative Markets: Theory, Strategy, and Applications. HarperCollins. New York, NY.

Scholes, Myron (1998). Derivatives in a Dynamic Economic. American Economic Review 88(3) (June): 350-70.

Smithson, Charles W., Clifford W. Smith, Jr., and D. Sykes Wilford. 1995. Managing Financial Risk – A Guide to Derivative Products, Financial Engineering, and Value Maximization. Irwin Publishing, New York.

This is a great source book on risk management and derivatives markets. It covers futures, options, structured notes (hybrids) and swaps. It explains how they are priced, what their economic role is, (briefly) how the markets function, and how they are used by various market participants to management risk and improve economic efficiency.

Steinherr, Alfred. 1998. Derivatives: The Wild Beasts of Finance. John Wiley and Sons, West Sussex, England. (See annotation below)

Taylor, Francesca. 1996. Mastering Derivatives Markets, A step-by-step guide to the products, applications and risks. Pitman Publishing. London, England.

Toy, William W. and J. Gregg Whittaker. 1994. The Handbook of Equity Derivatives. McGraw Hill.

Working, Hobrook. 1977. Selected Writings of Holbrook Working. Edited by Anne E. Peck. Published by the Chicago Board of Trade.

Working was the author of many of the seminal theoretical studies on the economics of futures and futures markets. This volume collects 12 of those papers into a commemorative volume.

Descriptions of Markets

Financial Derivatives – New Instruments and Their Uses. Federal Reserve Bank of Atlanta, Research Division. 1993.

This is a very readable and accessible treatment of the subject. Although the book is now dated, much of its material remains relevant. It studies the relationship between stock index futures and market volatility, describes swaps, interest rate options and some exotic options, discusses new concepts in fixed income analysis, and some implications for the instruments for financial markets.

Steinherr, Alfred. 1998. Derivatives: The Wild Beasts of Finance. John Wiley and Sons, West Sussex, England.

A wonderful overview of the derivatives markets and the dangers they pose to both the financial sector and the overall economy. (It deserves first prize for title amongst this competitive field of books on derivatives.)

Taylor, Francesca. 2000. Mastering Derivatives Markets, 2^nd Edition. FT/Prentice Hall.

Journals and Magazines

Edwards, Franklin. 1994. “System risk in OTC Derivatives Markets: Much Ado About Not too Much.” Columbia University Business School Working Papers, pp. 94-17.

Hentschel, L. & Smith Jr., C.W. (1997). "Derivatives regulation: implications for central banks", Journal of Monetary Economics, vol. 40, (p. 305-46).

Johnson, Philip McBride. 1998. “A Case Study in Jurisdictional Erosion: The CFTC Experience.” Journal On The Law of Investment and Risk Management Products, Volume 18, No. 3., pp. 1-9.

Johnson is the former CFTC Chairman who negotiated the Shad-Johnson agreement that defined the terrain of jurisdiction on equity derivatives between the CFTC and the SEC until the derivatives deregulation bill was enacted in December of 2000.

Markham, Jerry W. 1994. “‘Confederate bonds,’ ‘General Custer,’ and the Regulation of Derivative Financial Instruments.” Seton Hall Law Review. 1994.

This is a very amusing and interesting overview of the history of derivatives regulation in the U.S. from a former staffer at the CFTC.

Markham, Jerry W. 1987. The History of Commodity Futures Trading and Its Regulation. Praeger Press, New York.

Like the title says, it is a history of not only the statutes and rules, but the first chapter includes a good, short history of the some of the efforts at market manipulation in the 18^th and early 19^th centuries.

Partnoy, Frank. 1999. F.I.A.S.C.O.: The Inside Story of a Wall Street Trader. Penguin. New York, NY.

This is an excellent account from an insider about the culture and the practice of a derivatives desk at one of the largest and arguably the most sophisticated and evidently most unscrupulous derivatives desks on Wall Street. He provides an especially detailed account of the creation and issuance of structured notes and how these unsuitable investments were sold to inappropriate investors. The book also contains from amusingly sordid anecdotes about the individuals involved in that business.

Swan, Edward J. 1993. Law of Financial Services. Cavendish Publishing.

Swan, Edward J. (editor.). 1999. Issues in Derivatives Instruments. Kluwer Law International, London.

Swan puts together another great book on derivatives. This one focuses on definitions, regulation in the U.K., U.S., Germany and elsewhere, clearing houses, taxation, and margining.

Swan, Edward J. 2000. Building the Global Market: A 4000 Year History of Derivatives. Kluwer Law International.

Journal of Derivatives

Journal of Finance

Journal of Financial Economics

Journal of Futures Markets

American Banker

Derivatives Week

Newsweekly for over-the-counter derivatives traders: latest news; who's using derivatives worldwide; how and why.

Derivatives Quarterly (from Institutional Investor)

Educates the financial professional on derivatives, explaining how and why they are used, defining the risks and benefits, and providing practical strategies and real-life applications.

Financial Times (especially articles by John Plender)

Financier, The

Futures Magazine

Institutional Investor

Risk Magazine

San Francisco Chronicle (especially articles by C?)

Credit Derivatives

Das, Satyajit (editor). 1998. Credit Derivatives. John Wiley & Sons, Pte Ltd, Singapore.

Kasapi, Andrew. 1999. Mastering Credit Derivatives. FT/Prentice Hall.

Neftci, Salih. 2001. “Contingent Capital, Credit Instruments and Regulators: An Example” [See DSC Website on WEIA Conference, July 7, 2001.]

Tavakoli, Janet M. 1998. Credit Derivatives. John Wiley & Sons. USA.

Taylor, Francesca. 2000. Mastering Derivatives Markets, 2^nd Edition. FT/Prentice Hall.

Newspaper and Magazine articles

Dow Jones International News. April, 18, 2002. Credit Derivatives On Strong Growth Path - Morgan Stanley.

Financial Times. April 18, 2002. Credit derivative volumes jump.

Reuters English News Service. April 17, 2002. Credit derivatives market boomed in 2001-ISDA.

Financial Times. April 16, 2002. Liquidity lures users to credit derivatives.

Financial News. April 15, 2002. Regulators put spotlight on credit derivatives.

Reuters English News Service. April 2, 2002. Bankruptcies help Japan credit derivatives catch on.

American Banker. April 3, 2002. New Credit Derivatives And Goodwill Reports to Kick In.

Bond Week. April 1, 2002. CSFB looks to ramp up high-yield credit derivatives.

The Korea Herald. March 18, 2002. BOK calls for more incentives for credit derivatives trading.

American Banker. March 8, 2002. Derivatives Earnings Fell 23%, OCC Finds.

The Financial News. March 4, 2002. Defaults fuel rush to derivatives.

Euromoney. March 1, 2002. Credit derivatives--developing the market for credit risk transfer.

Dow Jones Newswires. February 27, 2002. Use of Credit Derivatives Is on Rise in Europe, Banks Rely on Credit Derivatives to Hedge Loans, But Regionals Lag 02/25/2002; Bank Loan Report

Dow Jones Capital Markets Report. February 25, 2002. JP Morgan Sued A Third Time Over Argentine Credit Swap.

The Asian Wall Street Journal. February 25, 2002. J.P. Morgan Chase Faces Probe --- New York Fed Investigates Accounting for Trades With Enron --- Dealings Relate to Offshore Entity.

National Business Review. February 22, 2002. Investors eye credit derivatives market for clues to failing firms.

Bank and Lender Liability Litigation Reporter. February 21, 2002. Caymans Hedge Fund Sues JP Morgan for $4M in Credit-Swap Dispute.

Business Insurance. February 18, 2002. Risk-hedging tools becoming popular.

Business Insurance. February 18, 2002. Risk-hedging tools becoming popular : Programs aim to tackle spectrum of enterprise risks.

Dow Jones Capital Markets Report. February 13, 2002. Credit Derivatives Risk.

Dow Jones Capital Markets Report. February 4, 2002. Credit Derivatives Open Year On Strong Note.

The Asian Wall Street Journal. February 1, 2002. Heard in Asia: Credit Derivatives Prove Mettle Amid Enron Crisis.

Dow Jones Capital Markets Report. January 30, 2002. Credit Derivatives Lead Meltdown In Corporate Spreads.

The Wall Street Journal Europe. January 22, 2002. Managed & Personal Investing: Credit Derivatives Lure Few Funds --- Most Managers Say Insurance, at $5 per $100, Is Too Costly Despite Risks --- Best Way to Hedge Argentina `Was Not to Own It'.

The Wall Street Journal. January 21, 2002. Credit Derivatives Survive a Series of Stress Tests As Demand for the Hedging Instruments Grows.

The Economist. January 12, 2002. With Enron and Argentina, credit derivatives pass an important test.

Bank and Lender Liability Litigation Reporter. January 10, 2002. Banks’ Use of Credit Derivatives Bounced Back in Third Quarter.

Financial Times. January 7, 2002. Investors to be more wary of credit products.

Dow Jones International News. January 3, 2002. Credit Derivatives Boom Tipped To Continue Into 2002.

Derivatives Litigation Reporter. December 31, 2001. Credit Derivatives Bounce Back in Third Quarter.

Dow Jones Capital Markets Report. December 19, 2001. Global Rate Derivatives Market Grows, Forex Shrinks: BIS.

American Banker. December 17, 2001. Preferred Issues: Credit Derivatives Get Their Chance to Shine.

The Independent. December 14, 2001. Shifting credit risk poses regulation problem, says Bank.

Dow Jones International News. December 10, 2001. Fed Paper: Riskless Potential Seen In Credit Derivatives.

High Yield Report. December 10, 2001. JPM Structures Derivatives Index Offering Broad HY Exposure.

The Wall Street Journal Europe. December 4, 2001. Enron's Collapse Spotlights The Credit-Derivatives Market --- Next Few Weeks Will Show Who Took on Risk.

Dow Jones Capital Markets Report. December 3, 2001. Enron's Fall Hits Credit Derivatives, Structured Notes.

The Financial News. December 2, 2001. ISDA banishes ambiguity in credit derivatives contracts.

The Journal of Lending & Credit Risk Management. December 1, 2001. Community Banker Guide to Credit Derivatives: Part II; Uses, Risks, and the Future.

Business Wire. November 30, 2001. S&P: Credit Derivative Exposure to Enron Is $6.3 Billion.

Business Wire. November 27, 2001. ISDA Publishes Supplement On Successor and Credit Events for Credit Derivatives.

The Journal of Lending & Credit Risk Management. November 1, 2001. Community Banker Guide to Credit Derivatives Part I: The Basics.

Employee Stock Options

Byrne, John. 1998. “How to Reward Failure: Reprice Stock Options.” Business Week.

Bureau of Labor Statistics. 2000. “Pilot Survey of Stock Options in Private Industry in 1999.”

Crimmel, Beth Levin and Jeffrey Schildkraut. 1999. “National Compensation Survey Collects Test Data on Stock Option Plans.” Compensation and Working Conditions.

Fox, Justin. 1997. “The Next Best Thing to Free Money.” Fortune.

Gillan, Stuart 2001. “Option-Based Compensation: Panacea or Pandora’s Box?” TIAA-CREF Institute.

Graham, John 2001. “Taxes and Corporate Finance: A Review.” Duke University. pp. 52-56.

Hall, Brian and Kevin Murphy. 2000. “Stock Options for Undiversified Executives.” National Bureau of Economic Research.

Hoody, Jason. 2002. Primers on Employee Stock Options. [see DSC website under section on Special Policy Briefs, Background Primers and Articles]

Johnston, David Cay. 2000. “Study Finds That Many Large Companies Pay No Taxes.” The New York Times.

Kay, John. 2001. “Insiders Call the Tune.” Financial Times.

Lebow, David et al. 1999. “Recent Trends in Compensation Practices.” Federal Reserve Board Working Paper.

Leonhardt, David and Diana Henriques. 2001. “O’Neill to Keep Alcoa Stock.” The New York Times.

Levmore, Saul. 2000. “Puzzling Stock Options and Compensation Norms.” Olin Working Paper No. 111, University of Chicago Law School.

McConnell, Pat. 2000. “Employee Stock Options: Income Tax Benefit Improves EPS and Cash Flow, Payroll Tax Expense Reduces EPS and Cash Flow.” Bear, Sterns & Co. Inc.

McGough, Robert and Mylene Mangalindan. 2000. “Tech Firms Hide Payroll Taxes on Employees’ Stock Options.” Wall Street Journal.

McIntyre, Robert and T.D. Coo Nguyen. 2000. “Corporate Income Taxes in the 1990s.” Institute on Taxation and Economic Policy.

Morgenson, Gretchen. 2001. “What Government Gives, It Can Take Away.” The New York Times.

Morgenson, Gretchen. 2001. “Some Suffer Tax Hangovers From Microsoft Option Spree.” New York Times.

Morrissey, Monique. 2000. “Background Report: Employee Stock Options.” Financial Market Center.

Mozes, Haim and Steven Raymar. 2001. “Granting and Hedging Employee Stock Options: A Tax Motivation and Empirical Tests.” Fordham University Graduate School of Business Education.

Norris, Floyd. 2001. “SEC Tells Concerns to Disclose Cancellations of Stock Purchases.” The New York Times.

Pender, Kathleen. 2000. “With Super Options, Employees, Too, Could Dodge Paying Tax Bill.” San Francisco Chronicle.

Pender, Kathleen. 2000. “Giant Cisco Didn’t Pay Any Federal Income Tax: Businesses Get Break on Employee Stock Options.” San Francisco Chronicle.

Reddy, Anitha. 2001. “Tech Giants Targeting SEC Stock Option Rule.” Washington Post.

Schizer, David. 2001. “Tax Constraints on Indexed Options.” Columbia Law and Economics Working Paper No. 188.

Schizer, David. 2000. “Executives and Hedging: The Fragile Legal Foundation of Incentive Compatibility.” Columbia Law and Economics Working Paper No. 147.

Sparks, Timothy. 1998. “Taxation of Equity Compensation.” Wilson, Sonsini, Goodrich & Rosati, P.C.

Ward, Matt. 2000. “After the Dot.Com Fall: Straddling The Two-Class Optionee Society.” Westward Pay Strategies.

Ward, Matt. 2000. “The Dark Side of Options.” Westward Pay Strategies.

Ward, Matt, et al. 2000. “Repricing Options: Best Practices for Your Dirty Laundry.” Westward Pay Strategies.

Waters, Richard. 2000. “Sprint Repricing Stock Options.” Financial Times.

Long Term Capital Management

Frank Partnoy. 2003. Infectious Greed: How Deceit and Risk Corrupted the Financial Markets.

This is an excellent book and covers LTCM better than any I have found. The Lowenstein book, by comparison, focuses too much on the personalities of the individuals managing LTCM and not on the structure of their financial operation.

Nicholas Dunbar. 2000. Inventing Money : The Story of Long-Term Capital Management and the Legends Behind It. John Wiley and Sons.

Roger Lowenstein. 2002. When Genius Failed: The Rise and Fall of Long Term Capital Management. Random House.

ENRON

Frank Partnoy. 2003. Infectious Greed: How Deceit and Risk Corrupted the Financial Markets.

This is an excellent book and covers Enron as well as other derivatives related failures and disasters. It includes key details on the financial transactions used by Enron for its nefarious deeds.

Robert Bryce. 2003. Pipe Dreams: Greed, Ego, and the Death of Enron. (with a forward by Molly Ivans).

See review of this book in Challenge by Randall Dodd. It is an excellent read and a thorough investigation of the rise and fall of Enron. It is the best overall treatment of the firm and extent of its doing and wrong-doings.

Bethany McLean and Peter Elkind. Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron .

Mimi Swartz and Sherron Watkins. Power Failure: The Inside Story of the Collapse of Enron.

Loren Fox. Enron: The Rise and Fall.

Rebecca Smith and John R. Emshwiller. 2003. 24 Days: How Two Wall Street Journal Reporters Uncovered the Lies that Destroyed Faith in Corporate America.

Peter C. Fusaro and Ross M. Miller. What Went Wrong at Enron: Everyone's Guide to the Largest Bankruptcy in U.S. History.

Edward J. Stone (Editor). Journal of Corporate Accounting and Finance: Special Issue, Enron.

U.S. Government Printing Office. Enron Government Document Sourcebook - SEC Forms and Filings from 1994, House and Senate Hearings on the Collapse of Enron and its Impact on Pensions and Auditing, with Reproductions of Internal Documents.

Julia K. Brazelton and Janice L. Ammons. Enron and Beyond: Technical Analysis of Accounting, Corporate Governance, and Securities Issues.

Brian Cruver. 2002. Anatomy of Greed: The Unshredded Truth from an Enron Insider.

George J. Benston (Editor). Following the Money: The Enron Failure and the State of Corporate Disclosure.

Dirk J. Barreveld. 2002. The Enron Collapse: Creative Accounting, Wrong Economics or Criminal Acts? a Look into the Root Causes of the Largest Bankruptcy in U.S. History.

Gordon Yale. 2002. Enron: An Accounting Analysis of How SPEs Were Used to Conceal Debt and Avoid Losses.

U.S. Government Printing Office. 21st Century Complete Guide to Enron ¿ with SEC Forms and Filings from 1994 plus House and Senate Hearings on the Collapse of Enron and its Impact on Pensions and Auditing.

Arthur L. Berkowitz. 2002. Enron: A Professional's Guide to the Events, Ethical Issues, and Proposed Reforms.

III. Securities

Textbooks

Brealey, Richard and Stewart C. Meyers. 2000. Principles of Corporate Finance, 6^th Edition. Irwin, McGraw-Hill.

This is the most popular textbook for corporate finance and is used at all the top business schools.

Mortgage Backed Securities

Chancellor, Edward. 2000. Devil Take the Hindmost. PLUME published by Penguin Books.

Dalton, John M. (editor). 2001. How the Stock Market Works, 3^rd Edition. New York Institute of Finance.

Liaw, Thomas and Ronald Moy. 2000. The Irwin Guide to Stocks, Bonds, Futures, and Options: A Comprehensive Guide to Wall Street's Markets. McGraw-Hill Professional Book Group.

Veale, Stuart. 2001. Stocks, Bonds, Options, Futures, 2^nd Edition. New York Institute of Finance.

Wachtel, Howard. M. 2003. Street of Dreams: Wall Street's first century. London, Pluto Press.

Zipf, Robert and John Allan (editors). 1995. How the Bond Market Works. New York Institute of Finance. Simon & Schuster Trade.

Stigum, Marcia and Michael A. Farrell. Ginnies, Freddies and Fannies. Richard Irwin Publisher. (out of print)

Fabozzi, Frank and John Dunlevy. 2001. Real Estate Backed Securities. John Wiley and Sons.

Brueggeman, William B. and Jeffrey D. Fisher. 2001. Real Estate Finance and Investments (Real Estate Finance and Investments, 11th Ed). McGraw Hill Publishers.

Davidson, Andrew S. and Michael D. Herskovitz. The Mortgage-Backed Securities Workbook: Hands-On Analysis, Valuation, and Strategies for Investment Decision-Making.

Tavakoli, Janet M. Collateralized Debt Obligations and Structured Finance : New Developments in Cash and Synthetic Securitization

Kendall, Leon T. and Michael J. Fishman (Editors). A Primer on Securitization.

Policy Analyses

IV. Banking

Textbooks

Mishkin, Frederic S. and Stanley G. Eakins. 2000. Financial Markets and Institutions, 3^rd Edition. Addison-Wesley.

Spong, Kenneth. 2000. Banking Regulation: Its Purposes, Implementation, and Effects, 5^th Edition. Division of Supervision and Risk Management, Federal Reserve Bank of Kansas City. [This book is free on line at Kansas Fed]