Book Review: Exotic Options Trading by Frans de Weert

I've been looking for a book like this one for a while. If you don't care for wordy review and just want to get a score, I'll hand it an 85/100, perhaps because I find this kind of book written by practitioners so rare (if you don't agree with that and instead have come across many of them better than this title, do leave a message below for me).

You would not find any fancy SDE or PDE in this book, though graphs are used to illustrate the option exposures and replications. When I said in the last paragraph that "this kind of book...[are] so rare" what I mean in particular is an in-depth analysis and explanation of concerns from a trader's perspective, e.g. what exposures would this exotic have, how to hedge it effectively, what are the execution risk when you are long/short, where does volatility skew come into play and so on.

Since the author was a trader he approaches the topic in a market-oriented fashion. For example, in the section discussing skew and smile the author explains how skew in FX market can be thought of in terms of the relative strength of the two currencies in the pair. The book is pretty well structured, starting with good-o option basics, Greeks, hedging, then goes on to volatility skew and smile, simple option strategies (call/put spread, straddle etc.) and finally to exotics.

The structure of the book is not too rigid, meaning that here and there the author would elaborate by inserting related discussions (the latter half is more formally structured, with each type of exotics constituting a chapter). This turns out to be a nice feature (well, to me at least) because it would really defeat the purpose if the "side" discussions were not intertwined into the "main" stuff. Plus, the book is not that long (200 pages) so this is more like a read-it-through text than your usual dictionary-sized desk top reference.

Pro:
- Quite clearly written
- Not many alternative titles with comparable scope/objective

Con:
- Doesn't discuss pricing and modeling (but then those are not the objectives of it, so not really a con)
- Occasionally some places seem to be not so rigorous. For example when using the put-call parity did the author forget to put in the cash term?

Bottom line:
Written by a trader for people who wants to learn more about real world concerns when trading options


p.s. Is book review like this helpful at all?