An introduction to equity derivatives: theory and practice

Everything you need to get a grip on the complex world of derivativesWritten by the internationally respected academic/finance professional author team of Sebastien Bossu and Philipe Henrotte, An Introduction to Equity Derivatives isthe fully updated and expanded second edition of the popular Finance and Derivatives. It covers all of the fundamentals of quantitative finance clearly andconcisely without going into unnecessary technical detail. Designed for both new practitioners and students, it requires no prior background in finance andfeatures 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, portfoliotheory, derivates pricing, delta-hedging, the Black-Scholes model, and more.An accompanying website features supplementary material for readersAn excellentresource for finance professionals and investors looking to acquire an understanding of financial derivatives theory and practiceCompletely revised and updated with new chapters, including coverage of cutting-edge concepts in volatility trading and exotic productsNew foreword by Emmanuel Derman, one of the world's most acclaimed research scientists in quantitative finance INDICE: ForewordPrefaceAddendumPART I BUILDING BLOCKS1 Interest Rate1-1 Measuring Time1-2 Interest Rate1-2.1 Gross Interest Rate1-2.2 Compounding. Compound Interest Rate1-2.3 Conversion Formula1-2.4 Annualization1-3 Discounting1-3.1 Present Value1-3.2 Discount Rate and Required Return1-4 Problems2 ClassicalInvestment Rules2-1 Rate of Return. Time of Return2-1.1 Gross Rate of Return (ROR)2-1.2 Time of Return (TOR)2-2 Net Present Value (NPV)2-3 Internal Rate ofReturn (IRR)2-4 Other Investment Rules2-5 Further Reading2-6 Problems3 Fixed Income3-1 Financial Markets3-1.1 Securities and Portfolios3-1.2 Value and Price3-1.3 Financial Markets and Short-selling3-1.4 Arbitrage3-1.5 Price of a Portfolio3-2 Bonds3-2.1 Treasury Bonds3-2.2 Zero-Coupon Bonds3-2.3 Bond Markets3-3Yield3-3.1 Yield to Maturity3-3.2 Yield Curve3-3.3 Approximate Valuation3-4 Zero-Coupon Yield Curve. Arbitrage Price3-4.1 Zero-Coupon Rate Curve3-4.2 Arbitrage Price of a Bond3-4.3 Zero-Coupon Rate Calculation by Inference: the €˜Bootstrapping€™ Method3-5 Further Reading3-6 Problems4 Portfolio Theory4-1 Risk and Return of an Asset4-1.1 Average Return and Volatility4-1.2 Risk-free Asset.Sharpe Ratio4-2 Risk and Return of a Portfolio4-2.1 Portfolio Valuation4-2.2 Return of a Portfolio4-2.3 Volatility of a Portfolio4-3 Gains of Diversification Portfolio Optimization4-4 Capital Asset Pricing Model4-5 Further Reading4-6ProblemsPART II FIRST STEPS IN EQUITY DERIVATIVES5 Equity Derivatives5-1 Introduction5-2 Forward Contracts5-2.1 Payoff5-2.2 Arbitrage Price5-2.3 Forward Price5-2.4 Impact of Dividends5-3 €˜Plain Vanilla€™ Options5-3.1 Payoff5-3.2 Option Value5-3.3 Put-Call Parity5-3.4 Option Strategies5-4 Further Reading5-5 Problems6 The Binomial Model6-1 One-Step Binomial Model6-1.1 An Example6-1.2 General Formulas6-2 Multi-Step Binomial Trees6-3 Binomial Valuation Algorithm6-4 Further Reading6-5 Problems7 The Lognormal Model7-1 Fair Value7-1.1 Probability Distribution of ST7-1.2 Discount Rate7-2 Closed-Form Formulas for European Options7-3 Monte-Carlo Method7-4 Further Reading7-5 Problems8 Dynamic Hedging8-1 Hedging Option Risks8-1.1 Delta-hedging8-1.2 Other Risk Parameters: the €˜Greeks€™8-1.3 Hedging the Greeks8-2 The P&L of Delta-hedged Options8-2.1 Gamma8-2.2 Theta8-2.3 Option Trading P&L Proxy8-3 Further Reading8-4 ProblemsPART III ADVANCED MODELS AND TECHNIQUES9 Models for Asset Prices in ContinuousTime9-1 Continuously Compounded Interest Rate9-1.1 Fractional Interest Rate9-1.2 Continuous Interest Rate9-2 Introduction to Models for the Behavior of Asset Prices in Continuous Time9-3 Introduction to Stochastic Processes9-3.1 Standard Brownian Motion9-3.2 Generalized Brownian Motion9-3.3 Geometric Brownian Motion9-4 Introduction to Stochastic Calculus9-4.1 Ito Process9-4.2 The Ito-Doeblin Theorem9-4.3 Heuristic Proof of the Ito-Doeblin Theorem9-5 Further Reading9-6 Problems10 The Black-Scholes Model10-1 The Black-Scholes Partial Differential Equation10-1.1 Ito-Doeblin Theorem for the Derivative€™s Value10-1.2 Riskless Hedged portfolio10-1.3 Arbitrage Argument10-1.4 Partial Differential Equation10-1.5 Continuous Delta-hedging10-2 The Black-Scholes Formulas for European Vanilla Options10-3 Volatility10-3.1 Historical Volatility10-3.2 Implied Volatility10-4 Further Reading10-5 Problems11 Volatility Trading11-1 Implied andRealized Volatilities11-1.1 Realized Volatility11-1.2 Implied Volatility11-2 Volatility Trading Using Options11-3 Volatility Trading Using Variance Swaps11-3.1 Variance Swap Payoff11-3.2 Variance Swap Market11-3.3 Variance Swap Hedging and Pricing11-4 Further Reading11-5 Problems12 Exotic Derivatives12-1 Single-Asset Exotics12-1.1 Digital Options12-1.2 Asian Options12-1.3 Barrier Options12-1.4 Lookback Options12-1.5 Forward Start Options12-1.6 Cliquet Options12-1.7 Structured Products12-2 Multi-Asset Exotics12-2.1 Spread Options12-2.2 Basket Options12-2.3 Worst-of and Best-of Options12-2.4 Quanto Options12-2.5 Structured Products12-2.6 Dispersion and Correlation Trading12-3 Beyond Black-Scholes12-3.1 Black-Scholes on Multiple Assets12-3.2 Fitting the Smile12-3.3 Discrete Hedging and Transaction Costs12-3.4 Correlation Modeling12-4 Further Reading12-5 ProblemsSOLUTIONSProblem SolutionsAPPENDICESA Probability ReviewA-1 States of Nature. Random Variables. EventsA-2 Probability. Expectation. VarianceA-3 Distribution. Normal DistributionA-4 Independence. CorrelationA-5 Probability FormulasA-6 Further ReadingB Calculus ReviewB-1 Functions of Two Variables xand yB-2 Taylor ExpansionsC Finance FormulasC-1 Rates and YieldsC-2 Present Value. Arbitrage PriceC-3 Forward ContractsC-4 OptionsC-5 VolatilityC-6 Stochastic Processes. Stochastic CalculusC-7 Greeks etc.Index

• ISBN: 978-1-119-96185-7
• Editorial: John Wiley & Sons
• Encuadernacion: Cartoné
• Páginas: 232
• Fecha Publicación: 23/04/2012
• Nº Volúmenes: 1
• Idioma: Inglés