Sadr Interest Rate Swaps and Their Derivatives

A Practitioner's Guide
1. Auflage 2009
ISBN: 978-0-470-52611-8
Verlag: John Wiley & Sons
Format: EPUB
Kopierschutz: Adobe DRM (»Systemvoraussetzungen)

E-Book, Englisch, 272 Seiten, E-Book

Reihe: Wiley Finance Editions

An up-to-date look at the evolution of interest rate swaps andderivatives
Interest Rate Swaps and Derivatives bridges the gapbetween the theory of these instruments and their actual use inday-to-day life. This comprehensive guide covers the main "rates"products, including swaps, options (cap/floors, swaptions), CMSproducts, and Bermudan callables. It also covers the main valuationtechniques for the exotics/structured-notes area, which remains oneof the most challenging parts of the market.
* Provides a balance of relevant theory and real-world tradinginstruments for rate swaps and swap derivatives
* Uses simple settings and illustrations to reveal keyresults
* Written by an experienced trader who has worked with swaps,options, and exotics
With this book, author Amir Sadr shares his valuable insightswith practitioners in the field of interest rate derivatives-fromtraders and marketers to those in operations.

Autoren/Hrsg.

Sadr, Amir

Inhaltsverzeichnis

Preface.
"Rates" Market.
Background.
Book Structure.
Acknowledgments.
About the Author.
List of Symbols and Abbreviations.
PART ONE Cash, Repo, and Swap Markets.
CHAPTER 1 Bonds: It's All About Discounting.
Time Value of Money: Future Value, Present Value.
Price-Yield Formula.
PV01, PVBP, Convexity.
Repo, Reverse Repo.
Forward Price/Yield, Carry, Roll-Down.
CHAPTER 2 Swaps: It's Still About Discounting.
Discount Factor Curve, Zero Curve.
Forward Rate Curve.
Par-Swap Curve.
Construction of the Swap/Libor Curve.
CHAPTER 3 Interest Rate Swaps in Practice.
Market Instruments.
Swap Trading--Rates or Spreads.
Swap Spreads.
Risk, PV01, Gamma Ladder.
Calendar Rules, Date Minutiae.
CHAPTER 4 Separating Forward Curve from DiscountCurve.
Forward Curves for Assets.
Implied Forward Rates.
Float/Float Swaps.
Libor/Libor Basis Swaps.
Overnight Indexed Swaps (OIS).
PART TWO Interest-Rate Flow Options.
CHAPTER 5 Derivatives Pricing: Risk-NeutralValuation.
European-Style Contingent Claims.
One-Step Binomial Model.
From One Time-Step to Two.
From Two Time-Steps to . . .
Relative Prices.
Risk-Neutral Valuation: All Relative Prices Must beMartingales.
Interest-Rate Options Are Inherently Difficult to Value.
From Binomial Model to Equivalent Martingale Measures.
CHAPTER 6 Black's World.
A Little Bit of Randomness.
Modeling Asset Changes.
Black-Scholes-Merton/Black Formulae.
Greeks.
Digitals.
Call Is All You Need.
Calendar/Business Days, Event Vols.
CHAPTER 7 European-Style Interest-Rate Derivatives.
Market Practice.
Interest-Rate Option Trades.
Caplets/Floorlets: Options on Forward Rates.
European-Style Swaptions.
Skews, Smiles.
CMS Products.
Bond Options.
PART THREE Interest-Rate Exotics.
CHAPTER 8 Short-Rate Models.
A Quick Tour.
Dynamics to Implementation.
Lattice/Tree Implementation.
BDT Lattice Model.
Hull-White, Black-Karasinski Models.
Simulation Implementation.
CHAPTER 9 Bermudan-Style Options.
Bellman's Equation--Backward Induction.
Bermudan Swaptions.
Bermudan Cancelable Swaps, Callable/Puttable Bonds.
Bermudan-Style Options in Simulation Implementation.
CHAPTER 10 Full Term-Structure Interest-Rate Models.
Shifting Focus from Short Rate to Full Curve: Ho-Lee Model.
Heath-Jarrow-Morton (HJM) Full Term-Structure Framework.
Discrete-Time, Discrete-Tenor HJM Framework.
Forward-Forward Volatility.
Multifactor Models.
HJM Framework Typically Leads to Nonrecombining Trees.
CHAPTER 11 Forward-Measure Lens.
Numeraires Are Arbitrary.
Forward Measures.
BGM/Jamshidian Results.
Different Measures for Different Rates.
"Classic" or "New Improved": Pick Your Poison!.
CHAPTER 12 In Search of "The" Model.
Migration to Full-Term Structure Models.
Implementation Era.
Model versus Market: Liquidity and Concentration Risk.
Complexity Risk.
Remaining Challenges.
APPENDIX A Taylor Series Expansion.
Function of One Variable.
Function of Several Variables.
Ito's Lemma: Taylor Series for Diffusions.
APPENDIX B Mean-Reverting Processes.
Normal Dynamics.
Log-Normal Dynamics.
APPENDIX C Girsanov's Theorem and Change ofNumeraire.
Continuous-Time, Instantaneous-Forwards HJM Framework.
BGM Result.
Notes.
Index.

Über Autor(innen)

AMIR SADR, PhD, has experience as a quant, trader, financial software developer, and academic in fixed income markets. He traded options and exotics at HSBC in New York from 2005 to 2006 and traded at the proprietary desk for Greenwich Capital Markets (GCM) for four years prior to that. Sadr also has experience at Morgan Stanley as a vice president in the derivatives products group where he traded interest rate derivatives and exotics. Since 1996, Sadr has served as an adjunct professor at New York University in the Department of Finance and Accounting.