Building upon the ideas introduced in their previous book, Derivatives in Financial Markets with Stochastic Volatility, the authors study the pricing and hedging of financial derivatives under ...stochastic volatility in equity, interest-rate, and credit markets. They present and analyze multiscale stochastic volatility models and asymptotic approximations. These can be used in equity markets, for instance, to link the prices of path-dependent exotic instruments to market implied volatilities. The methods are also used for interest rate and credit derivatives. Other applications considered include variance-reduction techniques, portfolio optimization, forward-looking estimation of CAPM 'beta', and the Heston model and generalizations of it. 'Off-the-shelf' formulas and calibration tools are provided to ease the transition for practitioners who adopt this new method. The attention to detail and explicit presentation make this also an excellent text for a graduate course in financial and applied mathematics.
The field of financial mathematics has developed tremendously over the past thirty years, and the underlying models that have taken shape in interest rate markets and bond markets, being much richer ...in structure than equity-derivative models, are particularly fascinating and complex. This book introduces the tools required for the arbitrage-free modelling of the dynamics of these markets. Andrew Cairns addresses not only seminal works but also modern developments. Refreshingly broad in scope, covering numerical methods, credit risk, and descriptive models, and with an approachable sequence of opening chapters, Interest Rate Models will make readers--be they graduate students, academics, or practitioners--confident enough to develop their own interest rate models or to price nonstandard derivatives using existing models.
The mathematical chapters begin with the simple binomial model that introduces many core ideas. But the main chapters work their way systematically through all of the main developments in continuous-time interest rate modelling. The book describes fully the broad range of approaches to interest rate modelling: short-rate models, no-arbitrage models, the Heath-Jarrow-Morton framework, multifactor models, forward measures, positive-interest models, and market models. Later chapters cover some related topics, including numerical methods, credit risk, and model calibration. Significantly, the book develops the martingale approach to bond pricing in detail, concentrating on risk-neutral pricing, before later exploring recent advances in interest rate modelling where different pricing measures are important.
Codes of finance Lepinay, Vincent Antonin
2011., 20110808, 2011, 2011-08-08, 20110101, 2011-08
eBook, Book
The financial industry's invention of complex products such as credit default swaps and other derivatives has been widely blamed for triggering the global financial crisis of 2008. Codes of Finance ...takes readers behind the scenes of the equity derivatives business at one of the world's leading investment banks before the crisis, providing a detailed firsthand account of the creation, marketing, selling, accounting, and management of these financial instruments--and of how they ultimately created havoc inside and outside the bank.
Who are the agents of financial regulation? Is good (or bad) financial governance merely the work of legislators and regulators? Here Annelise Riles argues that financial governance is made not just ...through top-down laws and policies but also through the daily use of mundane legal techniques such as collateral by a variety of secondary agents, from legal technicians and retail investors to financiers and academics and even computerized trading programs. Drawing upon her ten years of ethnographic fieldwork in the Japanese derivatives market, Riles explores the uses of collateral in the financial markets as a regulatory device for stabilizing market transactions. How collateral operates, Riles suggests, is paradigmatic of a class of low-profile, mundane, but indispensable activities and practices that are all too often ignored as we think about how markets should work and be governed. Riles seeks to democratize our understanding of legal techniques, and demonstrate how these day-to-day private actions can be reformed to produce more effective forms of market regulation.
The Islamic finance industry faces the challenging task of attempting to reconcile the risk management demands of business entities with the difficulties posed by the seemingly rigid stance taken by ...some Shari'ah scholars over hedging practices. Offering a fresh perspective, Sherif Ayoub confronts the challenge by reformulating how we might think about the theorisation of economic matters in the Islamic faith. Readers will come to understand the issues surrounding the avoidance of Riba (usury), Gharar (excessive uncertainty) and Maysir (gambling).
Regulators, much like market actors, rely on categorical distinctions. Innovations that are ambiguous to regulatory categories but not to market actors present a problem for regulators and an ...opportunity for innovative firms. Using a wide range of primary and secondary, qualitative and quantitative sources, we trace the history of one class of innovative financial derivatives—interest rate and foreign exchange swaps—to show how these instruments undermined the separation of commercial and investment banking established by the Glass-Steagall Act of 1933 even as overt political action failed to do so. Swaps did not fit neatly into existing product categories—futures, securities, loans—and thus evaded regulatory scrutiny for many years. The market success of swaps put commercial and investment banks into direct competition and, in so doing, undermined Glass-Steagall. Drawing on this case, we theorize that ambiguous innovations may disrupt the regulatory status quo and shift the political burden onto parties that want to maintain existing regulations. Our findings also suggest that category-spanning innovations may be more valuable to market participants if regulators find them difficult to interpret.
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