INDICE: Acknowledgements. List of Tables. List of Figures. 1 Introduction. 1.1 A Gentle Introduction to FX Markets. 1.2 Quotation Styles. 1.3 Risk Considerations. 1.4 Spot Settlement Rules. 1.5 Expiry and Delivery Rules. 1.6 CutoffTimes. 2 Mathematical Preliminaries. 2.1 The BlackScholes Model. 2.2 Risk Neutrality. 2.3 Derivation of the BlackScholes equation. 2.4 Integrating the SDE for ST. 2.5 BlackScholes PDEs Expressed in Logspot. 2.6 FeynmanKac and Risk-Neutral Expectation. 2.7 Risk Neutrality and the Presumption of Drift. 2.8 Valuation of European Options. 2.9 The Law of One Price. 2.10 The BlackScholes TermStructure Model. 2.11 BreedenLitzenberger Analysis. 2.12 European Digitals. 2.13 Settlement Adjustments. 2.14 Delayed Delivery Adjustments. 2.15 Pricing using Fourier Methods. 2.16 Leptokurtosis More than Fat Tails. 3 Deltas and Market Conventions. 3.1 Quote Style Conversions. 3.2 The Law of Many Deltas. 3.3 FX Delta Conventions. 3.4 Market Volatility Surfaces. 3.5 At-the-Money. 3.6 Market Strangle. 3.7 Smile Strangle and Risk Reversal. 3.8 Visualisation of Strangles. 3.9 Smile Interpolation Polynomial in Delta. 3.10 Smile Interpolation SABR. 3.11 Concluding Remarks. 4 Volatility Surface Construction. 4.1 VolatilityBackbone Flat Forward Interpolation. 4.2 Volatility Surface Temporal Interpolation. 4.3 Volatility Surface Temporal Interpolation Holidays and Weekends. 4.4 Volatility Surface Temporal Interpolation Intraday Effects. 5 Local Volatility and Implied Volatility. 5.1 Introduction. 5.2 The FokkerPlanck Equation. 5.3 Dupire's Construction of Local Volatility. 5.4 Implied Volatility and Relationship to Local Volatility. 5.5 Local Volatility as Conditional Expectation. 5.6 Local Volatility for FX Markets. 5.7 Diffusion and PDE for Local Volatility. 5.8 The CEV Model. 6 Stochastic Volatility. 6.1 Introduction. 6.2 Uncertain Volatility. 6.3 Stochastic Volatility Models. 6.4 Uncorrelated Stochastic Volatility. 6.5 Stochastic Volatility Correlated with Spot. 6.6 The FokkerPlanck PDE Approach. 6.7 The FeynmanKac PDE Approach. 6.8 Local Stochastic Volatility (LSV) Models. 7 Numerical Methods for Pricing and Calibration. 7.1 One-Dimensional Root Finding Implied Volatility Calculation. 7.2 Nonlinear Least Squares Minimisation. 7.3 Monte Carlo Simulation. 7.4 ConvectionDiffusion PDEs in Finance. 7.5 Numerical Methods for PDEs. 7.6 Explicit Finite Difference Scheme. 7.7 Explicit Finite Difference on Nonuniform Meshes. 7.8 Implicit Finite Difference Scheme. 7.9 The CrankNicolson Scheme. 7.10 Numerical Schemes for Multidimensional PDEs. 7.11 Practical Nonuniform Grid Generation Schemes. 7.12 Further Reading. 8 First Generation Exotics Binary and Barrier Options. 8.1 The Reflection Principle. 8.2 European Barriers and Binaries. 8.3 Continuously MonitoredBinaries and Barriers. 8.4 Double Ba
- ISBN: 978-0-470-68368-2
- Editorial: John Wiley & Sons
- Encuadernacion: Cartoné
- Páginas: 298
- Fecha Publicación: 26/11/2010
- Nº Volúmenes: 1
- Idioma: Inglés