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Applied Quantitative Finance for Equity Derivatives - Third Edition

Author: Jherek Healy

Publisher:

Published: 2021-01-28

Total Pages: 536

ISBN-13:

In its third edition, this book presents the most significant equitya derivatives models used these days. It is not a book around esoteric or cutting-edge models, but rather a book on relatively simple and standard models, viewed from the angle of a practitioner. A few key subjects explained in this book are: cash dividends for European, American, or exotic options; issues of the Dupire local volatility model and possible fixes; finite difference techniques for American options and exotics; Non-parametric regression for American options in Monte-Carlo, randomized simulations; the particle method for stochastic-local-volatility model with quasi-random numbers; numerical methods for the variance and volatility swaps; quadratures for options under stochastic volatility models; VIX options and dividend derivatives; backward/forward representation of exotics.The January 2021 third edition adds significant details around the physical exercise feature, how to imply the Black-Scholes volatility, the projected successive over-relaxation as well as the recent policy iteration method for the pricing of American options (particularly relevant in the case of negative interest rates), the Andersen-Lake algorithm as fast pricing routine for the case of vanilla American options under the Black-Scholes model, random number generation, antithetic variates, the vectorization of the Monte-Carlo simulation, RBF interpolation of implied volatilities, the Cos method for European option under stochastic volatility models, the Vega in stochastic volatility models. The new text also includes important corrections around the pricing of forward starting and knock-in options with finite difference methods.

Applied Quantitative Finance for Equity Derivatives

Author: Jherek Healy

Publisher:

Published: 2017-09-21

Total Pages: 390

ISBN-13: 9781977557872

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This book presents the most significant equity derivatives models used these days. It is not a book around esoteric or cutting-edge models, but rather a book on relatively simple and standard models, viewed from the angle of a practitioner. Most books present models in an abstract manner, often disconnected from how to apply them in the real world. This book intends to fill that gap, with the ambitious goal of transforming a reader unfamiliar with equity derivatives models into a specialist of such models. What's special about it? The subject of cash dividends is absent of most books, and yet a real practical problem that every equity derivatives desk faces. This books gives a thorough treatment of the subject, be it for European, American, or more exotic options under the local volatility model. Similarly, Dupire local volatility issues are usually ignored while everybody face them. It presents various refinement for numerical techniques, for example, how to properly handle barriers in the TR-BDF2 finite difference method (and others) for a maximum accuracy, how to actually perform the parametric or non-parametric regression for American options in Monte-Carlo, how to do randomized Monte-Carlo simulations, which random number generators are pertinent these days, how to apply quasi Monte-Carlo to the particle stochastic-local-volatility calibration method,which quadrature should use consider for variance swap, volatility swap or vanilla options under stochastic volatility models with known characteristic function... It covers VIX options and dividend derivatives. The backward/forward representation of exotics is well known in the industry and yet rarely presented. It does not cover esoteric payoffs that might have a nice analytical formula but are never traded in practice, or models too complex to be practical.

Applied Quantitative Finance for Equity Derivatives, Second Edition

Author: Jherek Healy

Publisher: Lulu.com

Published: 2019-01-22

Total Pages: 516

ISBN-13: 9780244741587

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Revised and corrected in December 2018, this book presents the most significant equity derivatives models used these days. It is not a book around esoteric or cutting-edge models, but rather a book on relatively simple and standard models, viewed from the angle of a practitioner. A few key subjects explained in this book are: cash dividends for European, American, or exotic options; issues of the Dupire local volatility model and possible fixes; finite difference techniques for American options and exotics; Non-parametric regression for American options in Monte-Carlo, randomized simulations; the particle method for stochastic-local-volatility model with quasi-random numbers; numerical methods for the variance and volatility swaps; quadratures for options under stochastic volatility models; VIX options and dividend derivatives; backward/forward representation of exotics. This second edition adds new arbitrage-free implied volatility interpolations, and covers various warrants, such as CBBCs.

Equity Derivatives and Hybrids

Author: Oliver Brockhaus

Publisher: Springer

Published: 2016-04-29

Total Pages: 304

ISBN-13: 1137349492

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Since the development of the Black-Scholes model, research on equity derivatives has evolved rapidly to the point where it is now difficult to cut through the myriad of literature to find relevant material. Written by a quant with many years of experience in the field this book provides an up-to-date account of equity and equity-hybrid (equity-rates, equity-credit, equity-foreign exchange) derivatives modeling from a practitioner's perspective. The content reflects the requirements of practitioners in financial institutions: Quants will find a survey of state-of-the-art models and guidance on how to efficiently implement them with regards to market data representation, calibration, and sensitivity computation. Traders and structurers will learn about structured products, selection of the most appropriate models, as well as efficient hedging methods while risk managers will better understand market, credit, and model risk and find valuable information on advanced correlation concepts. Equity Derivatives and Hybrids provides exhaustive coverage of both market standard and new approaches, including: -Empirical properties of stock returns including autocorrelation and jumps -Dividend discount models -Non-Markovian and discrete-time volatility processes -Correlation skew modeling via copula as well as local and stochastic correlation factors -Hybrid modeling covering local and stochastic processes for interest rate, hazard rate, and volatility as well as closed form solutions -Credit, debt, and funding valuation adjustment (CVA, DVA, FVA) -Monte Carlo techniques for sensitivities including algorithmic differentiation, path recycling, as well as multilevel. Written in a highly accessible manner with examples, applications, research, and ideas throughout, this book provides a valuable resource for quantitative-minded practitioners and researchers.

Applied Quantitative Finance

Author: Wolfgang Karl Härdle

Publisher: Springer

Published: 2017-08-02

Total Pages: 372

ISBN-13: 3662544865

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This volume provides practical solutions and introduces recent theoretical developments in risk management, pricing of credit derivatives, quantification of volatility and copula modeling. This third edition is devoted to modern risk analysis based on quantitative methods and textual analytics to meet the current challenges in banking and finance. It includes 14 new contributions and presents a comprehensive, state-of-the-art treatment of cutting-edge methods and topics, such as collateralized debt obligations, the high-frequency analysis of market liquidity, and realized volatility. The book is divided into three parts: Part 1 revisits important market risk issues, while Part 2 introduces novel concepts in credit risk and its management along with updated quantitative methods. The third part discusses the dynamics of risk management and includes risk analysis of energy markets and for cryptocurrencies. Digital assets, such as blockchain-based currencies, have become popular b ut are theoretically challenging when based on conventional methods. Among others, it introduces a modern text-mining method called dynamic topic modeling in detail and applies it to the message board of Bitcoins. The unique synthesis of theory and practice supported by computational tools is reflected not only in the selection of topics, but also in the fine balance of scientific contributions on practical implementation and theoretical concepts. This link between theory and practice offers theoreticians insights into considerations of applicability and, vice versa, provides practitioners convenient access to new techniques in quantitative finance. Hence the book will appeal both to researchers, including master and PhD students, and practitioners, such as financial engineers. The results presented in the book are fully reproducible and all quantlets needed for calculations are provided on an accompanying website. The Quantlet platform quantlet.de, quantlet.com, quantlet.org is an integrated QuantNet environment consisting of different types of statistics-related documents and program codes. Its goal is to promote reproducibility and offer a platform for sharing validated knowledge native to the social web. QuantNet and the corresponding Data-Driven Documents-based visualization allows readers to reproduce the tables, pictures and calculations inside this Springer book.

Equity Derivatives

Author: Marcus Overhaus

Publisher: John Wiley & Sons

Published: 2011-08-10

Total Pages: 172

ISBN-13: 1118160878

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Written by the quantitative research team of Deutsche Bank, the world leader in innovative equity derivative transactions, this book acquaints readers with leading-edge thinking in modeling and hedging these transactions. Equity Derivatives offers a balanced, integrated presentation of theory and practice in equity derivative markets. It provides a theoretical treatment of each new modeling and hedging concept first, and then demonstrates their practical application. The book covers: the newest and fastest-growing class of derivative instruments, fund derivatives; cutting-edge developments in equity derivative modeling; new developments in correlation modeling and understanding volatility skews; and new Web-based implementation/delivery methods. Marcus Overhaus, PhD, Andrew Ferraris, DPhil, Thomas Knudsen, PhD, Frank Mao, PhD, Ross Milward, Laurent Nguyen-Ngoc, PhD, and Gero Schindlmayr, PhD, are members of the Quantitative Research team of Deutsche Bank's Global Equity Division, which is based in London and headed by Dr. Overhaus.

Problems and Solutions in Mathematical Finance, Volume 2

Author: Eric Chin

Publisher: John Wiley & Sons

Published: 2017-03-13

Total Pages: 868

ISBN-13: 1119965829

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Detailed guidance on the mathematics behind equity derivatives Problems and Solutions in Mathematical Finance Volume II is an innovative reference for quantitative practitioners and students, providing guidance through a range of mathematical problems encountered in the finance industry. This volume focuses solely on equity derivatives problems, beginning with basic problems in derivatives securities before moving on to more advanced applications, including the construction of volatility surfaces to price exotic options. By providing a methodology for solving theoretical and practical problems, whilst explaining the limitations of financial models, this book helps readers to develop the skills they need to advance their careers. The text covers a wide range of derivatives pricing, such as European, American, Asian, Barrier and other exotic options. Extensive appendices provide a summary of important formulae from calculus, theory of probability, and differential equations, for the convenience of readers. As Volume II of the four-volume Problems and Solutions in Mathematical Finance series, this book provides clear explanation of the mathematics behind equity derivatives, in order to help readers gain a deeper understanding of their mechanics and a firmer grasp of the calculations. Review the fundamentals of equity derivatives Work through problems from basic securities to advanced exotics pricing Examine numerical methods and detailed derivations of closed-form solutions Utilise formulae for probability, differential equations, and more Mathematical finance relies on mathematical models, numerical methods, computational algorithms and simulations to make trading, hedging, and investment decisions. For the practitioners and graduate students of quantitative finance, Problems and Solutions in Mathematical Finance Volume II provides essential guidance principally towards the subject of equity derivatives.

An Introduction to Equity Derivatives

Author: Sebastien Bossu

Publisher: John Wiley & Sons

Published: 2012-05-14

Total Pages: 249

ISBN-13: 1119961858

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Everything you need to get a grip on the complex world of derivatives Written by the internationally respected academic/finance professional author team of Sebastien Bossu and Philipe Henrotte, An Introduction to Equity Derivatives is the fully updated and expanded second edition of the popular Finance and Derivatives. It covers all of the fundamentals of quantitative finance clearly and concisely without going into unnecessary technical detail. Designed for both new practitioners and students, it requires no prior background in finance and features twelve chapters of gradually increasing difficulty, beginning with basic principles of interest rate and discounting, and ending with advanced concepts in derivatives, volatility trading, and exotic products. Each chapter includes numerous illustrations and exercises accompanied by the relevant financial theory. Topics covered include present value, arbitrage pricing, portfolio theory, derivates pricing, delta-hedging, the Black-Scholes model, and more. An excellent resource for finance professionals and investors looking to acquire an understanding of financial derivatives theory and practice Completely revised and updated with new chapters, including coverage of cutting-edge concepts in volatility trading and exotic products An accompanying website is available which contains additional resources including powerpoint slides and spreadsheets. Visit www.introeqd.com for details.

An Introduction to Quantitative Finance

Author: Stephen Blyth

Publisher: OUP Oxford

Published: 2013-11-07

Total Pages: 192

ISBN-13: 0191644684

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The worlds of Wall Street and The City have always held a certain allure, but in recent years have left an indelible mark on the wider public consciousness and there has been a need to become more financially literate. The quantitative nature of complex financial transactions makes them a fascinating subject area for mathematicians of all types, whether for general interest or because of the enormous monetary rewards on offer. An Introduction to Quantitative Finance concerns financial derivatives - a derivative being a contract between two entities whose value derives from the price of an underlying financial asset - and the probabilistic tools that were developed to analyse them. The theory in the text is motivated by a desire to provide a suitably rigorous yet accessible foundation to tackle problems the author encountered whilst trading derivatives on Wall Street. The book combines an unusual blend of real-world derivatives trading experience and rigorous academic background. Probability provides the key tools for analysing and valuing derivatives. The price of a derivative is closely linked to the expected value of its pay-out, and suitably scaled derivative prices are martingales, fundamentally important objects in probability theory. The prerequisite for mastering the material is an introductory undergraduate course in probability. The book is otherwise self-contained and in particular requires no additional preparation or exposure to finance. It is suitable for a one-semester course, quickly exposing readers to powerful theory and substantive problems. The book may also appeal to students who have enjoyed probability and have a desire to see how it can be applied. Signposts are given throughout the text to more advanced topics and to different approaches for those looking to take the subject further.

Quantitative Finance

Author: A. Reghai

Publisher: Springer

Published: 2014-11-25

Total Pages: 284

ISBN-13: 1137414502

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The series of recent financial crises have thrown open the world of quantitative finance and financial modeling. This book brings together proven and new methodologies from finance, physics and engineering, along with years of industry and academic experience to provide a cookbook of models for dealing with the challenges of today's markets.