Communicating Difficult Ideas Lucidly

The author has done a commendable job on both fronts. His explanations are concise and often have an insight that makes it easier for the reader to get a grip on the subject. Moreover, A V Rajwade has covered some of the intricacies of the Indian market with helpful advice for corporate treasurers.

The sheer breadth of this edition is breathtaking. In the six main sections of the book, Rajwade has covered virtually every subject relating to treasury and risk management. The first two sections deal with some of the standard issues on the development of foreign exchange markets and international finance.

 

These sections have important information for corporate treasurers on how, for example, the Indian forward market works and how the various Reserve Bank of India permitted schemes can be used to minimise financing costs.

Section three, on derivatives, is an essential read for any one wishing to acquaint themselves with the esoteric end of this market. For those who aren't satisfied with just explanations of what derivatives can do, there is a seductive Black-Scholes calculation for option pricing. It is a tremendously lucid presentation.

Derivative instruments can be classified according to three features: the type of contract, the underlying assets, and whether these instruments are traded on an exchange or in the over the counter (OTC) markets. The three basic types of derivative instruments being forwards and futures, option contracts and swaps.

Future contracts are agreements between two parties to exchange a fixed quantity of assets at a future date at a predetermined price. Futures contracts are exchange traded instruments whereas forward contracts are traditionally over the counter products. Rajwade has taken great pains to see that this book provides enough meat for readers who want to understand both over-the-counter derivatives and trade derivatives in depth.

The next section deals with exchange rate forecasting and the discussion on technical analysis versus fundamentals is interesting. One justification for charting is that it is self-fulfilling