Derivatives: The Theory and Practice of Financial Engineering

Abstract

PART ONE BASIC THEORY OF DERIVATIVES Products and Markets Derivatives The Random Behavior Assets Elementary Stochastic Calculus The Black-Scholes Model Partial Differential Equations The Black-Scholes Formulae and the 'Greeks' Simple Generalizations of the Black-Scholes World Early Exercise and American Options Probability Density Function and First Exit Times Multi-asset Options The Binomial Model PART TWO PATH DEPENDENCY An Introduction to Exotic and Path-dependent Options Barrier Options Strongly Path-dependent Options Asian Options Lookback Options Miscellaneous Exotics PART THREE EXTENDING BLACK-SCHOLES Defects in the Black-Scholes Model Discrete Hedging Transaction Costs Volatility Smiles and Surfaces Stochastic Volatility Uncertain Parameters Empirical Analysis of Volatility Jump Diffusion Crash Modeling Speculating with Options The Feedback effect of Hedging in Illiquid Markets Static Hedging PART FOUR INTEREST RATES AND PRODUCTS Fixed-income Products and Analysis: Yield, Duration and Convexity Swaps One-factor Interest rate Modeling Yield Curve Fitting Interest rate Derivatives Convertible Bonds Two-factor Interest Rate Modeling Empirical Behavior of the Spot Interest rate Heath, Jarrow and Morton Interest-rate Modeling Without Probabilities PART FIVE RISK MEASUREMENT AND MANAGEMENT Portfolio Management Value at Risk Credit Risk Credit Derivatives RiskMetrics, CreditMetrics and CrashMetircs PART SIX NUMERICAL METHOD Finite-difference Methods for One-factor Models Further Finite-difference Methods for One-factor Models Finite-differences Methods for Two-factor Models Monte Carlo Simulation Related Methods Finite-differences Programs Epilog Bibliography Index .

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