Sebastien Bossu

Advanced Equity Derivatives (eBook, PDF)

Volatility and Correlation

• Format: PDF

Produktbeschreibung

In Advanced Equity Derivatives: Volatility and Correlation, Sébastien Bossu reviews and explains the advanced concepts used for pricing and hedging equity exotic derivatives. Designed for financial modelers, option traders and sophisticated investors, the content covers the most important theoretical and practical extensions of the Black-Scholes model. Each chapter includes numerous illustrations and a short selection of problems, covering key topics such as implied volatility surface models, pricing with implied distributions, local volatility models, volatility derivatives, correlation measures, correlation trading, local correlation models and stochastic correlation. The author has a dual professional and academic background, making Advanced Equity Derivatives: Volatility and Correlation the perfect reference for quantitative researchers and mathematically savvy finance professionals looking to acquire an in-depth understanding of equity exotic derivatives pricing and hedging.

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Produktdetails

• Verlag: John Wiley & Sons
• Seitenzahl: 176
• Erscheinungstermin: 5. Mai 2014
• Englisch
• ISBN-13: 9781118774847
• Artikelnr.: 41047340

Autorenporträt

SÉBASTIEN BOSSU is Principal at Ogee Group LLC, an investment management and software development business based in New York. His past experience includes positions as director of Equity Derivatives Structuring for a London bank and exotics structurer at J.P. Morgan. Bossu is currently an adjunct professor at Pace University and also recently taught at Fordham University.

Inhaltsangabe

Foreword xi Preface xiii Acknowledgments xv CHAPTER 1 Exotic Derivatives 1 1
1 Single
Asset Exotics 1 1
2 Multi
Asset Exotics 4 1
3 Structured Products 9 References 11 Problems 11 CHAPTER 2 The Implied Volatility Surface 15 2
1 The Implied Volatility Smile and Its Consequences 15 2
2 Interpolation and Extrapolation 20 2
3 Implied Volatility Surface Properties 22 2
4 Implied Volatility Surface Models 22 References 29 Problems 30 CHAPTER 3 Implied Distributions 33 3
1 Butterfly Spreads and the Implied Distribution 33 3
2 European Payoff Pricing and Replication 36 3
3 Pricing Methods for European Payoffs 39 3
4 Greeks 41 References 42 Problems 42 CHAPTER 4 Local Volatility and Beyond 45 4
1 Local Volatility Trees 45 4
2 Local Volatility in Continuous Time 46 4
3 Calculating Local Volatilities 48 4
4 Stochastic Volatility 50 References 55 Problems 55 CHAPTER 5 Volatility Derivatives 59 5
1 Volatility Trading 59 5
2 Variance Swaps 61 5
3 Realized Volatility Derivatives 65 5
4 Implied Volatility Derivatives 67 References 70 Problems 70 CHAPTER 6 Introducing Correlation 73 6
1 Measuring Correlation 73 6
2 Correlation Matrices 75 6
3 Correlation Average 77 6
4 Black
Scholes with Constant Correlation 82 6
5 Local Volatility with Constant Correlation 84 References 84 Problems 85 CHAPTER 7 Correlation Trading 87 7
1 Dispersion Trading 87 7
2 Correlation Swaps 91 Problems 93 CHAPTER 8 Local Correlation 95 8
1 The Implied Correlation Smile and Its Consequences 95 8
2 Local Volatility with Local Correlation 97 8
3 Dynamic Local Correlation Models 99 8
4 Limitations 99 References 100 Problems 100 CHAPTER 9 Stochastic Correlation 103 9
1 Stochastic Single Correlation 103 9
2 Stochastic Average Correlation 104 9
3 Stochastic Correlation Matrix 108 References 111 Problems 111 Appendix A Probability Review 115 A
1 Standard Probability Theory 115 A
2 Random Variables, Distribution, and Independence 116 A
3 Conditioning 117 A
4 Random Processes and Stochastic Calculus 118 Appendix B Linear Algebra Review 119 B
1 Euclidean Spaces 119 B
2 Square Matrix Decompositions 120 Solutions Manual 123 Author's Note 143 About the Author 145 Index 147