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Options, swaps, futures, MBSs, CDOs, and other derivatives

Put and call options

Options allow investors and speculators to hedge downside (or upside). It allows them to trade on a belief that prices will change a lot--just not clear about direction. It allows them to benefit in any market (with leverage) if they speculate correctly. This tutorial walks through option basics and even goes into some fairly sophisticated option mechanics.

Mortgage-backed securities

What started out as a creative way to spread risk ended up fueling a monster housing bubble. This tutorial explains what mortgage-backed securities are and how they work.

Black-Scholes formula

Options have been bought and sold for ages, but finding a rational way to price them seemed beyond our mathematical know-how... until 1973 when Fischer Black and Myron Scholes showed up and gave us the Black-Scholes model. This work was later extended by Robert Merton and now underpins much of modern finance.