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.
Helping readers accurately price a vast array of derivatives, this self-contained text explains how to solve complex functional equations through numerical methods. It addresses key computational ...methods in finance, including transform techniques, the finite difference method, and Monte Carlo simulation. Developed from the author's courses at Columbia University and the Courant Institute of New York University, the book also covers model calibration and optimization and describes techniques, such as Kalman and particle filters, for parameter estimation.
The book aims to define the most common types of derivatives in terms of the scope of the European VAT Directive and in terms of exempt financial services.
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.
Quantitative Finance is expanding rapidly. One of the aspects of the recent financial crisis is that, given the complexity of financial products, the demand for people with high numeracy skills is ...likely to grow and this means more recognition will be given to Quantitative Finance in existing and new course structures worldwide. Evidence has suggested that many holders of complex financial securities before the financial crisis did not have in-house experts or rely on a third-party in order to assess the risk exposure of their investments. Therefore, this experience shows the need for better understanding of risk associate with complex financial securities in the future. The Mathematics of Derivative Securities with Applications in MATLAB provides readers with an introduction to probability theory, stochastic calculus and stochastic processes, followed by discussion on the application of that knowledge to solve complex financial problems such as pricing and hedging exotic options, pricing American derivatives, pricing and hedging under stochastic volatility and an introduction to interest rates modelling. The book begins with an overview of MATLAB and the various components that will be used alongside it throughout the textbook. Following this, the first part of the book is an in depth introduction to Probability theory, Stochastic Processes and Ito Calculus and Ito Integral. This is essential to fully understand some of the mathematical concepts used in the following part of the book. The second part focuses on financial engineering and guides the reader through the fundamental theorem of asset pricing using the Black and Scholes Economy and Formula, Options Pricing through European and American style options, summaries of Exotic Options, Stochastic Volatility Models and Interest rate Modelling. Topics covered in this part are explained using MATLAB codes showing how the theoretical models are used practically. Authored from an academic's perspective, the book discusses complex analytical issues and intricate financial instruments in a way that it is accessible to postgraduate students with or without a previous background in probability theory and finance. It is written to be the ideal primary reference book or a perfect companion to other related works. The book uses clear and detailed mathematical explanation accompanied by examples involving real case scenarios throughout and provides MATLAB codes for a variety of topics.
This book is a collection of original papers by Robert Jarrow that contributed to significant advances in financial economics. Divided into three parts, Part I concerns option pricing theory and its ...foundations. The papers here deal with the famous Black-Scholes-Merton model, characterizations of the American put option, and the first applications of arbitrage pricing theory to market manipulation and liquidity risk.
Implementing Models of Financial Derivatives is a comprehensive treatment of advanced implementation techniques in VBA for models of financial derivatives. Aimed at readers who are already familiar ...with the basics of VBA it emphasizes a fully object oriented approach to valuation applications, chiefly in the context of Monte Carlo simulation but also more broadly for lattice and PDE methods. Its unique approach to valuation, emphasizing effective implementation from both the numerical and the computational perspectives makes it an invaluable resource. The book comes with a library of almost a hundred Excel spreadsheets containing implementations of all the methods and models it investigates, including a large number of useful utility procedures. Exercises structured around four application streams supplement the exposition in each chapter, taking the reader from basic procedural level programming up to high level object oriented implementations. Written in eight parts, parts 1-4 emphasize application design in VBA, focused around the development of a plain Monte Carlo application. Part 5 assesses the performance of VBA for this application, and the final 3 emphasize the implementation of a fast and accurate Monte Carlo method for option valuation. Key topics include: ?Fully polymorphic factories in VBA; ?Polymorphic input and output using the TextStream and FileSystemObject objects; ?Valuing a book of options; ?Detailed assessment of the performance of VBA data structures; ?Theory, implementation, and comparison of the main Monte Carlo variance reduction methods; ?Assessment of discretization methods and their application to option valuation in models like CIR and Heston; ?Fast valuation of Bermudan options by Monte Carlo. Fundamental theory and implementations of lattice and PDE methods are presented in appendices and developed through the book in the exercise streams. Spanning the two worlds of academic theory and industrial practice, this book is not only suitable as a classroom text in VBA, in simulation methods, and as an introduction to object oriented design, it is also a reference for model implementers and quants working alongside derivatives groups. Its implementations are a valuable resource for students, teachers and developers alike. Note: CD-ROM/DVD and other supplementary materials are not included as part of eBook file.
The Chinese Yuan Zhang, Peter G
2011, 2011., 2011-02-15, Letnik:
678
eBook
Few topics have attracted as much attention worldwide in recent years as the RMB. These debates have gained added urgency in light of the financial crisis and the topic of RMB revaluation is now ...being actively debated in countries all over the world from Tunisia to the United States. This book explores the ever-changing role of the RMB and the related derivative products. However, it does so from a view that is heavily influenced by the fallout from the financial crisis as well as the in the context of the increasing maturity of the Chinese capital markets. The author has drawn on his experience as a regulator to provide invaluable views, insights and information on RMB derivative products and the development of this market going forward.Key topics include:Overview of current China economy and its capital marketIn-depth analysis on the China's banking system and foreign exchange systemExtensive analysis of on-shore and off-shore financial products in ChinaExplanation of the needs and reasons for RMB products innovationInsights into the internationalization of the RMBNot only will this book leave its readers with a much clearer idea of the structure of China's capital markets but it also gives insights on the market going forward leveraged through Peter Zhang's many years of experience as both a senior banker and through his integral role in the key regulatory authority of the banking sector, the CBRC.
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