Nassim Nicholas Taleb is the founder of Empirica Capital LLC, a hedge fund operator, and a fellow at the Courant Institute of Mathematical Sciences of New York University. He has held a variety of senior derivative trading positions in New York and London and worked as an independent floor trader in Chicago. Dr. Taleb was inducted in February 2001 in the Derivatives Strategy Hall of Fame. He received an MBA from the Wharton School and a Ph.D. from University Paris-Dauphine.

• Introduction Dynamic Hedging 1 Part 1 Markets, Instruments, People1 Introduction to the Instruments 9 2 The Generalized Option 383 Market Making and Market Using 484. Liquidity and Liquidity Holes 685 Arbitrage and the Arbitrageurs 80 6 Volatility and Correlation 88 Part II Measuring Option Risks7 Adapting Black-Scholes-Merton: The Delta 115 8 Gamma and Shadow Gamma 1329 Vega and the Volatility Surface 147 10 Theta and Minor Greeks 16711 The Greeks and Their Behavior 19112 Fungibility, Convergence, and Stacking 20813 Some Wrinkles of Option Markets 22214 Bucketing and Topography 22915 Beware the Distribution 23816 Option Trading Concepts 256Part III Trading and Hedging Exotic Options17 Binary Options: European Style 27318 Binary Options: American Style 29519 Barrier Options (I) 31220 Barrier Options (II) 34721 Compound, Choosers, and Higher Order Options 37622 Multiasset Options 38323 Minor Exotics: Lookback and Asian Options 403Part IV ModulesModule A Brownian Motion on a Spreadsheet, a Tutorial 415Module B Risk Neutrality Explained 426Module C Numeraire Relativity and the Two-Country Paradox 431Module D Correlation Triangles: A Graphical Case Study 438Module E The Value-at-Risk 445Module F Probabilistic Rankings in Arbitrage 453Module G Option Pricing 459Notes 479Bibliography 490Index 499

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