Reghai Quantitative Finance

Back to Basic Principles
1. Auflage 2014
ISBN: 978-1-137-41450-2
Verlag: Palgrave Macmillan UK
Format: PDF
Kopierschutz: 1 - PDF Watermark

E-Book, Englisch, 247 Seiten

Reihe: Applied Quantitative Finance

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.

Autoren/Hrsg.

Reghai, A.

Inhaltsverzeichnis

1;Cover;1
2;Half-Title;2
3;Title;4
4;Copyright;5
5;Dedication;6
6;Contents;8
7;List of Figures;12
8;List of Tables;16
9;Foreword I;18
10;Foreword II;20
11;Acknowledgments;23
12;1 FinancialModeling;25
12.1;Introduction;25
13;2 AboutModeling;27
13.1;A Philosophy ofmodeling;27
13.2;B An example from physics and some applications in finance;35
14;3 From Black & Scholes to SmileModeling;52
14.1;A Study of derivatives under theBlack&Scholesmodel;52
14.2;Methodology;53
14.3;The search for convexity;55
14.4;Vanilla European option;58
14.4.1;Numerical application;58
14.4.2;Price scenarios;59
14.4.3;Delta gamma scenarios:;59
14.4.4;European binary option;61
14.4.5;Price Scenario;62
14.4.6;Delta and gamma scenarios;62
14.5;American binary option;64
14.5.1;Numerical application;64
14.5.2;Price scenario;64
14.5.3;Delta and gamma scenarios;65
14.6;Barrier option;66
14.6.1;Price scenario;67
14.6.2;Delta and gamma scenarios;68
14.7;Asian option;69
14.7.1;Numerical application;69
14.7.2;Price scenario;70
14.7.3;Delta and gamma scenarios;70
14.8;When is it possible to useBlack&Scholes;72
14.9;B Study of classical Smilemodels;80
14.10;Black&Scholesmodel;80
14.11;Termstructure Black&Scholes;82
14.11.1;MonteCarlo simulation;85
14.12;Terminal smilemodel;85
14.12.1;Replicationapproach (an almostmodel-free approach);88
14.12.2;MonteCarlo simulation (direct approach);89
14.12.3;MonteCarlo simulation (fastmethod);89
14.12.4;Classic example;91
14.13;Separable local volatility;92
14.14;Termstructure of parametric slices;93
14.15;Dupire/Derman&Kani local volatilitymodel;94
14.16;Stochastic volatilitymodel;102
14.17;C Models, advanced characteristics and statistical features;107
14.18;Local volatilitymodel;115
14.19;Stochastic volatilitymodel;115
15;4 What is the Fair Value in the Presence of the Smile?;118
15.1;A What is the value corresponding to the cost of hedge?;118
15.2;TheDelta spot ladder for two barrier options;120
15.3;The vega volatility ladder;120
15.4;The vega spot ladder;121
15.5;Conclusion;123
16;5 Mono Underlying Risk Exploration;125
16.1;Dividends;126
16.1.1;Models: discrete dividends;126
16.2;Models: cash amount dividendmodel;127
16.2.1;Models: proportional dividendmodel;128
16.2.2;Models:mixed dividendmodel;129
16.2.3;Models: dividend toxicity index;129
16.2.4;Statistical observations on dividends;130
16.3;Interest ratemodeling;133
16.3.1;Models:why dowe need stochastic interest rates?;133
16.3.2;Models: simple hybridmodel;134
16.3.3;Models: statistics and fair pricing;135
16.4;Forward skewmodeling;136
16.4.1;The local volatilitymodel is not enough;137
16.5;Local volatility calibration;139
16.6;Alpha stable process;139
16.7;Truncated alpha stable invariants;141
16.8;Local volatility truncated alpha stable process;143
17;6 A General Pricing Formula;146
18;7 Multi-Asset Case;148
18.1;A Study of derivatives under the multi-dimensional Black & Scholes;148
18.2;Methodology;148
18.3;PCAfor PnL explanation;151
18.3.1;Eigenvalue decomposition for symmetric operators;151
18.3.2;Stochastic application;152
18.3.3;Profit and loss explanation;153
18.4;The source of the parameters;155
18.5;Basket option;156
18.6;Worst of option (wo: call);159
18.7;Best of option(Bo: put);163
18.8;Other options (Best of call andworst of put);165
18.8.1;Model calibrationusing fixed-point algorithm;169
18.8.2;Model estimation using an envelope approach;172
18.9;Conclusion;176
19;8 Discounting and General Value Adjustment Techniques;177
19.1;Full and symmetric collateral agreement;178
19.2;Perfect collateralization;180
19.3;Applications;181
19.4;Repomarket;182
19.5;Optimal posting of collateral;182
19.6;Partial collateralization;183
19.7;Asymmetric collateralization;183
20;9 Investment Algorithms;185
20.1;What is a good strategy?;186
20.2;Asimple strategy;191
20.3;Reverse the time;193
20.4;Avoidthis datawhen learning;194
20.5;Strategies are assets;199
20.6;Multi-asset strategy construction;200
20.6.1;Signal detection;200
20.6.2;Predictionmodel;204
20.6.3;Riskminimization;205
21;10 Building Monitoring Signals;208
21.1;A Fat-tail toxicity index;208
21.2;B Volatility signals;211
21.2.1;Nature of the returns;213
21.2.2;The dynamic of the returns;217
21.2.3;Signal definition.;218
21.2.4;Asset and strategies cartography;222
21.2.5;Assetmanagement;224
21.3;C Correlation signals;225
21.3.1;Simple basketmodel;225
21.3.2;Estimating correlation level;226
21.3.3;Implied correlation skew;230
21.3.4;Multi-dimensional stochastic volatility;232
21.3.5;Local correlationmodel;235
22;General Conclusion;239
23;Solutions;240
24;Bibliography;244
25;Index;246