Market Risk Analysis, Volume III, Pricing, Hedging and Trading Financial Instruments
Published on 15. September 2008
416 pages
978-0-470-77281-2 (ISBN)
Description
Written by leading market risk academic, Professor Carol Alexander,Pricing, Hedging and Trading Financial Instruments forms part threeof the Market Risk Analysis four volume set. This book is anin-depth, practical and accessible guide to the models that areused for pricing and the strategies that are used for hedgingfinancial instruments, and to the markets in which they trade. Itprovides a comprehensive, rigorous and accessible introduction tobonds, swaps, futures and forwards and options, including varianceswaps, volatility indices and their futures and options, tostochastic volatility models and to modelling the implied and localvolatility surfaces.
All together, the Market Risk Analysis four volume setillustrates virtually every concept or formula with a practical,numerical example or a longer, empirical case study. Across allfour volumes there are approximately 300 numerical and empiricalexamples, 400 graphs and figures and 30 case studies many of whichare contained in interactive Excel spreadsheets available from thethe accompanying CD-ROM . Empirical examples and case studiesspecific to this volume include:
* Duration-Convexity approximation to bond portfolios, andportfolio immunization;
* Pricing floaters and vanilla, basis and variance swaps;
* Coupon stripping and yield curve fitting;
* Proxy hedging, and hedging international securities and energyfutures portfolios;
* Pricing models for European exotics, including barriers,Asians, look-backs, choosers, capped, contingent, power, quanto,compo, exchange, 'best-of' and spread options;
* Libor model calibration;
* Dynamic models for implied volatility based on principalcomponent analysis;
* Calibration of stochastic volatility models (Matlab code);
* Simulations from stochastic volatility and jump models;
* Duration, PV01 and volatility invariant cash flowmappings;
* Delta-gamma-theta-vega mappings for options portfolios;
* Volatility beta mapping to volatility indices.
More details
Other editions
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Book
05/2008
Wiley
€121.50
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Person
Carol Alexander is a Professor of Risk Management at the ICMA Centre, University of Reading, and Chair of the Academic Advisory Council of the Professional Risk Manager's International Association (PRMIA). She is the author of Market Models: A Guide to Financial Data Analysis(John Wiley & Sons Ltd, 2001) and has been editor and contributor of a very large number of books in finance and mathematics, including the multi-volume Professional Risk Manager's Handbook(McGraw-Hill, 2008 and PRMIA Publications). Carol has published nearly 100 academic journal articles, book chapters and books, the majority of which focus on financial risk management and mathematical finance. Professor Alexander is one of the world's leading authorities on market risk analysis. For further details, see www.icmacentre.rdg.ac.uk/alexander
Content
List of Figures.
List of Tables.
List of Examples.
Foreword.
Preface to Volume III.
III.1 Bonds and Swaps.
III.1.1 Introduction.
III.1.2 Interest Rates.
III.1.3 Categorization of Bonds.
III.1.4 Characteristics of Bonds and Interest Rates.
III.1.5 Duration and Convexity.
III.1.6 Bonds with Semi-Annual and Floating Coupons.
III.1.7 Forward Rate Agreements and Interest Rate Swaps.
III.1.8 Present Value of Basis Point.
III.1.9 Yield Curve Fitting.
III.1.10 Convertible Bonds.
III.1.10.1 Characteristics of Convertible Bonds.
III.1.10.2 Survey of Pricing Models for Convertible Bonds.
III.1.11 Summary and Conclusions.
III.2 Futures and Forwards.
III.2.1 Introduction.
III.2.2 Characteristics of Futures and Forwards.
III.2.3 Theoretical Relationships between Spot, Forward andFutures.
III.2.4 The Basis.
III.2.5 Hedging with Forwards and Futures.
III.2.6 Hedging in Practice.
III.2.7 Using Futures for Short Term Hedging.
III.2.8 Summary and Conclusions.
III.3 Options.
III.3.1 Introduction.
III.3.2 Foundations.
III.3.3 Characteristics of Vanilla Options.
III.3.4 Hedging Options.
III.3.5 Trading Options.
III.3.6 The Black-Scholes-Merton Model.
III.3.7 The Black-Scholes-Merton Greeks.
III.3.8 Interest Rate Options.
III.3.9 Pricing Exotic Options.
III.3.10 Summary and Conclusions.
III.4 Volatility.
III.4.1 Introduction.
III.4.2 Implied Volatility.
III.4.3 Local Volatility.
III.4.4 Modelling the Dynamics of Implied Volatility.
III.4.5 Stochastic Volatility Models.
III.4.6 Scale Invariance and Hedging.
III.4.7 Trading Volatility.
III.4.8 Summary and Conclusion.
III.5 Portfolio Mapping.
III.5.1 Introduction.
III.5.2 Risk Factors and Risk Factor Sensitivities.
III.5.3 Cash Flow Mapping.
III.5.4 Applications of Cash Flow Mapping to Market RiskManagement.
III.5.5 Mapping an Options Portfolio to Price Risk Factors.
III.5.6 Mapping Implied Volatility.
III.5.7 Case Study: Volatility Risk in FTSE 100 Options.
III.5.8 Summary and Conclusions.
References.
Index.
