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- Product code: 23547
- ISBN: 0470013222,
ISBN13: 9780470013229,
384 pages, hardback
Published by John Wiley & Sons on 2007
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Description of Derivatives |
"Derivatives Models on Models" takes a theoretical and practical look at some of the latest and most important ideas behind derivatives pricing models. In each chapter the author highlights the latest thinking and trends in the area. A wide range of topics are covered, including valuation methods on stocks paying discrete dividend, Asian options, American barrier options, complex barrier options, reset options, and electricity derivatives. The book also discusses the latest ideas surrounding finance like the robustness of dynamic delta hedging, option hedging, negative probabilities and space-time finance. The accompanying CD-ROM with additional Excel sheets includes the mathematical models covered in the book. The book also includes interviews with some of the world's top names in the industry, and an insight into the history behind some of the greatest discoveries in quantitative finance.
The interviewees include: Clive Granger, Nobel Prize winner in Economics 2003, on Cointegration; Nassim Taleb on Black Swans; Stephen Ross on Arbitrage Pricing Theory; Emanuel Derman the Wall Street Quant; Edward Thorp on Gambling and Trading; Peter Carr the Wall Street Wizard of Option Symmetry and Volatility; Aaron Brown on Gambling, Poker and Trading; David Bates on Crash and Jumps; Andrei Khrennikov on Negative Probabilities; Elie Ayache on Option Trading and Modeling; Peter Jaeckel on Monte Carlo Simulation; Alan Lewis on Stochastic Volatility and Jumps; Paul Wilmott on Paul Wilmott; Knut Aase on Catastrophes and Financial Economics; Eduardo Schwartz the Yoga Master of Quantitative Finance; and, Bruno Dupire on Local and Stochastic Volatility Models.
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Contents of Derivatives |
Author’s “Disclaimer”
Introduction
Derivatives Models on Models
Nassim Taleb on Black Swans
Chapter 1 The Discovery of Fat-Tails in Price Data
Edward Thorp on Gambling and Trading
Chapter 2 Option Pricing and Hedging from Theory to Practice: Know Your Weapon III
1 The Partly Ignored and Forgotten History
2 Discrete Dynamic Delta Hedging under Geometric Brownian Motion
3 Dynamic Delta Hedging Under Jump-Diffusion
4 Equilibrium Models
5 Portfolio Construction and Options Against Options
6 Conclusions
Alan Lewis on Stochastic Volatility and Jumps
Chapter 3 Back to Basics: A New Approach to the Discrete Dividend Problem Together with Jørgen Haug and Alan Lewis
1 Introduction
2 General Solution
3 Dividend Models
4 Applications
Emanuel Derman the Wall Street Quant
Chapter 4 Closed Form Valuation of American Barrier Options
1 Analytical Valuation of American Barrier Options
2 Numerical Comparison
3 Conclusion
Peter Carr, The Wall Street Wizard of Option Symmetry and Volatility
Chapter 5 Valuation of Complex Barrier Options Using Barrier Symmetry
1 Plain Vanilla Put–Call Symmetry
2 Barrier Put–Call Symmetry
3 Simple, Intuitive and Accurate Valuation of Double Barrier Options
4 Static Hedging in the Real World
5 Conclusion
Granger on Cointegration
Chapter 6 Knock-in/out Margrabe with Jørgen Haug
1 Margrabe Options
2 Knock-in/out Margrabe Options
3 Applications
Stephen Ross on APT
Chapter 7 Resetting Strikes, Barriers and Time with Jørgen Haug
1 Introduction
2 Reset Strike Barrier Options
3 Reset Barrier Options
4 Resetting Time
5 Conclusion
Bruno Dupire the Stochastic Wall Street Quant
Chapter 8 Asian Pyramid Power with Jørgen Haug and William Margrabe
1 Celia in Derivativesland
2 Calibrating to the Term Structure of Volatility
3 From Geometric to Arithmetic
4 The Dollars
Eduardo Schwartz: the Yoga Master of Mathematical Finance
Chapter 9 Practical Valuation of Power Derivatives
1 Introduction
2 Energy Swaps/Forwards
3 Power Options
4 Still, What About Fat-Tails?
Aaron Brown on Gambling, Poker and Trading
Chapter 10 A Look in the Antimatter Mirror
1 Garbage in, Garbage Out?
2 Conclusion
Knut Aase on Catastrophes and Financial Economics
Chapter 11 Negative Volatility and the Survival of the Western Financial Markets Knut K. Aase
1 Introduction
2 Negative Volatility – A Direct Approach
3 The Value of a European Call Option for any Value – Positive or Negative – of the Volatility
4 Negative Volatility – The Haug interpretation
5 Chaotic Behavior from Deterministic Dynamics
6 Conclusions
Elie Ayache on Option Trading and Modeling
Chapter 12 Frozen Time Arbitrage
1 Time Measure Arbitrage
2 Time Travel Arbitrage
3 Conclusion
Haug on Wilmott and Wilmott on Wilmott.
Chapter 13 Space-time Finance The Relativity Theory’s Implications for Mathematical Finance
1 Introduction
2 Time dilation
3 Advanced stage of Space-time Finance
4 Space-time Uncertainty
5 Is High Speed Velocity Possible?
6 Black-Scholes in Special Relativity
7 Relativity and Fat-Tailed Distributions
8 General Relativity and Space-time Finance
9 Was Einstein Right?
10 Traveling Back in Time Using Wormholes
11 Conclusion
Andrei Khrennikov on Negative Probabilities
Chapter 14 Why so Negative about Negative Probabilities?
1 The History of Negative Probability
2 Negative Probabilities in Quantitative Finance
3 Getting the Negative Probabilities to Really Work in Your Favor
4 Hidden Variables in Finance
5 The Future of Negative Probabilities in Quantitative Finance
6 Appendix: Negative Probabilities in CRR Equivalent Trinomial Tree
David Bates on Crash and Jumps
Chapter 15 Hidden Conditions and Coin Flip Blow Up's
1 Blowing Up
2 Coin Flip Blow Up's
Peter Jaeckel on Monte Carlo Simulation
Index
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About E.G. Haug |
Dr Espen Gaarder Haug has more than 15 years of experience in Derivatives research and trading, and has worked for more than 20 years as a trader. Until recently he worked as a proprietary trader in J.P. Morgan New York, and as a derivatives trader for two multi-billion dollar hedge funds; Amaranth Investor and Paloma Partners, located in Greenwich Connecticut. Before that he worked for Tempus Financial Engineering, Chase Manhattan Bank (now J.P. Morgan Chase) and Den Norske Bank. He is the author of The Complete Guide of Option Pricing Formulas, which has become a reference manual among Wall Street professionals. He has a PhD from the Norwegian University of Science and Technology where he specialized in Option Valuation and Trading and has published extensively in practitioner and academic journals. He is currently considering setting up his own investment company - possibly the first Anti-Hedge fund!
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