Derivatives and Internal Models

PART I: FUNDAMENTALS Introduction Legal Framework Fundamental Risk Factors of Financial Markets Financial Instruments Derivatives and Underlyings PART II: METHODS Overview of the Assumptions for Different Valuation Methods Arbitrage The Black-Scholes Differential Equation Integral Forms and Analytic Solutions in the Black-Scholes World Numerical Solutions of Differential Equations using Finite Differences Binomial and Trinomial Trees Monte-Carlo Simulations Hedging Martingale and Numeraire Interest rates and Term Structure Models PART III: INSTRUMENTS Spot Transactions on Interest Instruments Forward Rate Transactions Plain Vanilla Options Exotic Options Structured Products and Stripping PART IV: RISK Fundamentals The Variance-Covariance Method Simulation Methods Interest Rate Risk and Cash Flows Example VaR-Computation Backtesting: Checking the Applied Methods Organizational Implementation of Risk Management PART V: MARKET DATA Term Structure Volatilities Time Series Analysis Probability and Statistics