Ruttiens Mathematics of the Financial Markets

Financial Instruments and Derivatives Modelling, Valuation and Risk Issues
1. Auflage 2013
ISBN: 978-1-118-51348-4
Verlag: John Wiley & Sons
Format: EPUB
Kopierschutz: Adobe DRM (»Systemvoraussetzungen)

E-Book, Englisch, 352 Seiten, E-Book

Reihe: Wiley Finance Series

The book aims to prioritise what needs mastering and presentsthe content in the most understandable, concise and pedagogical wayillustrated by real market examples. Given the variety and thecomplexity of the materials the book covers, the author sortsthrough a vast array of topics in a subjective way, relying uponmore than twenty years of experience as a market practitioner. Thebook only requires the reader to be knowledgeable in the basics ofalgebra and statistics.
The Mathematical formulae are only fully proven when the proofbrings some useful insight. These formulae are translated fromalgebra into plain English to aid understanding as the vastmajority of practitioners involved in the financial markets are notrequired to compute or calculate prices or sensitivities themselvesas they have access to data providers. Thus, the intention of thisbook is for the practitioner to gain a deeper understanding ofthese calculations, both for a safety reason - it is betterto understand what is behind the data we manipulate - andsecondly being able to appreciate the magnitude of the prices weare confronted with and being able to draft a rough calculation,aside of the market data.
The author has avoided excessive formalism where possible.Formalism is securing the outputs of research, but may, in othercircumstances, burden the understanding by non-mathematicians; anexample of this case is in the chapter dedicated to the basis ofstochastic calculus.
The book is divided into two parts:
* First, the deterministic world, starting from the yield curvebuilding and related calculations (spot rates, forward rates,discrete versus continuous compounding, etc.), and continuing withspot instruments valuation (short term rates, bonds, currencies andstocks) and forward instruments valuation (forward forex, FRAs andvariants, swaps & futures);
* Second, the probabilistic world, starting with the basis ofstochastic calculus and the alternative approach of ARMA to GARCH,and continuing with derivative pricing: options, second generationoptions, volatility, credit derivatives;
* This second part is completed by a chapter dedicated to marketperformance & risk measures, and a chapter widening the scopeof quantitative models beyond the Gaussian hypothesis andevidencing the potential troubles linked to derivative pricingmodels.

Autoren/Hrsg.

Ruttiens, Alain

Inhaltsverzeichnis

Foreword by A.G. MALLIARIS, Loyola University, Chicago xi
Main Notations xiii
Introduction xv
PART I THE DETERMINISTIC ENVIRONMENT
1 Prior to the Yield Curve: Spot and Forward Rates 3
2 The Term Structure or Yield Curve 13
3 Spot Instruments 23
4 Equities and Stock Indexes 47
5 Forward Instruments 75
6 Swaps 91
7 Futures 119
PART II THE PROBABILISTIC ENVIRONMENT
8 The Basis of Stochastic Calculus 147
9 Other Financial Models: From ARMA to the GARCH Family 165
10 Option Pricing in General 175
11 Options on Specific Underlyings and Exotic Options 209
12 Volatility and Volatility Derivatives 237
13 Credit Derivatives 257
14 Market Performance and Risk Measures 275
15 Beyond the Gaussian Hypothesis: Potential Troubles with Derivatives Valuation 303
Bibliography 319
Index 323

Über Autor(innen)

About the author

ALAIN RUTTIENS has an MA degree in Chemical Engineering (Faculté Polytechnique de Mons, Belgium). He joined the former Banque Indosuez in Belgium in 1981, and ended his bank career as Director of Financial Engineering Department in CBC Banque, Brussels (affiliate of KBC Bank). In 2004, he started his own business as Partner of NEURON sàrl, consulting on financial markets and funds management (Luxembourg). He is also Affiliate Professor at the Ecole Supérieure de Commerce de Paris, and teaches in several universities and institutions, a.o. HEC Paris, the Sorbonne University of Paris I, the Institut d'Etudes Politiques (Paris), and the Ecole Supérieure des Affaires, Beirut (Lebanon). Alain is the author of several books and research papers.