MRA Volume III

Volume III: Pricing, Hedging and Trading Financial Instruments has five very long chapters on the pricing, hedging and trading of bonds and swaps, futures and forwards, options and volatility as well detailed descriptions of mapping portfolios of these financial instruments to their risk factors. There are numerous examples, all coded in interactive Excel spreadsheets, including many pricing formulae for exotic options but excluding the calibration of stochastic volatility models, for which Matlab code is provided. The chapters on options and volatility together constitute 50% of the book, the slightly longer chapter on volatility concentrating on the dynamic properties the two volatility surfaces (the implied and the local volatility surfaces) that accompany an option pricing model, with particular reference to hedging. Empirical examples and case studies on the CD-ROM include:

  • Duration-Convexity approximation to bond portfolios, and portfolio immunization
  • Pricing floaters and vanilla, basis and variance swaps
  • Coupon stripping and yield curve fitting
  • Proxy hedging, and hedging international securities and energy futures portfolios
  • Pricing models for European exotics, including barriers, Asians, look-backs, choosers, capped, contingent, power, quanto, compo, exchange, ‘best-of’ and spread options
  • Libor model calibration
  • Dynamic models for implied volatility based on principal component analysis
  • Calibration of stochastic volatility models (Matlab code)
  • Simulations from stochastic volatility and jump models
  • Duration, PV01 and volatility invariant cash flow mappings
  • Delta-gamma-theta-vega mappings for options portfolios
  • Volatility beta mapping to volatility indices.

Links:

View Contents
Contents
View Preface
Preface
Discussion Forum
Discussion Forum
Typos and Changes
Corrections
Watch YouTube introduction
YouTube
View this book on Wiley.com Publisher’s website
Buy from Amazon.co.uk
Buy this book on Amazon.co.uk
Buy from Amazon.com
Buy this book on Amazon.com

ISBN: 9780470772812    408 pages    May 2008