This book offers a comprehensive and coherent presentation of almost all aspects of Capital Market Finance, providing hands-on knowledge of advanced tools from mathematical finance in a practical setting. Filling the gap between traditional finance textbooks, which tend to avoid advanced mathematical techniques used by professionals, and books in mathematical finance, which are often more focused on mathematical refinements than on practical uses, this book employs advanced mathematical techniques to cover a broad range of key topics in capital markets. In particular, it covers all primitive assets (equities, interest and exchange rates, indices, bank loans), most vanilla and exotic derivatives (swaps, futures, options, hybrids and credit derivatives), portfolio theory and management, and risk assessment and hedging of individual positions as well as portfolios. Throughout, the authors emphasize the methodological aspects and probabilistic foundations of financial asset valuation, risk assessment and measurement. Background in financial mathematics, particularly stochastic calculus, is provided as needed, and over 200 fully worked numerical examples illustrate the theory.Based on the authors' renown master's degree courses, this book is written for students in business and finance, as well as practitioners in quantitative finance. Apart from an undergraduate-level knowledge of calculus, linear algebra and probability, the book is self-contained with no prior knowledge of market finance required.

Autorentext

Patrice Poncet, a former professor in management sciences at the University of Paris 1 Panthéon-Sorbonne and distinguished professor of finance at ESSEC Business School, is now emeritus professor of finance at ESSEC. He holds a master's degree in business administration, a master's degree in law, and a PhD in Finance from the Kellogg School of Management of Northwestern University. He has served as a director of the "Capital Market Finance" Masters and of the Doctoral Program in Management Sciences at the University of Paris 1 Panthéon-Sorbonne and has been a longtime consultant for banks and financial institutions. He is the author or co-author of twelve books and numerous scientific papers published in top economic and finance journals. Roland Portait was a Professor of Finance at ESSEC Business School and at CNAM (Conservatoire National des Arts et Métiers). Masters in mathematics, Engineer in Telecommunications (Sup-Télécom) and a graduate of the Institute of Political Studies (IEP) in Paris, he also held a PhD in Finance from the Wharton School of the University of Pennsylvania. He served as a director of the "Capital market finance and asset management" Masters at CNAM and was a consultant for financial institutions and banks. He authored and co-authored five books and numerous scientific papers published in top economics and finance journals. Igor Toder, MBA (ESSEC Business School), Engineer in Statistics (ENSAE), MSc in Applied Mathematics, Probability and Finance (University of Paris VI), is also a French Certified Chartered Accountant. He is currently Managing Director for the Risk Advisory Practice in a global consulting firm. He advises global banking clients and is in charge of large implementation projects regarding Market and Counterparty Risk Management, ALM, Basel 3 rules implementation, regulatory reports, capital market compliance topics and structural reforms.

Inhalt

1 Introduction: Economics and Organization of Financial Markets.- Part 1 Basic Financial Instruments.- 2 Basic Finance: Interest rates, Discounting, Investments, Loans.- 3 The Money Market and its Interbank Segment.- 4 The Bond Markets.- 5 Introduction to the Analysis of Interest Rate and Credit Risks.- 6 The Term Structure of Interest Rates.- 7 Vanilla Floating Rate Instruments and Swaps.- 8 Stocks, Stock Markets and Stock Indices.- Part 2 Futures and Options.- 9 Futures and Forwards.- 10 Options (I): General Description, Parity Relations, Basic Concepts and Valuation Using the Binomial Model.- 11 Options (II): Continuous-Time Models, Black-Scholes and Extensions.- 12 Option Portfolio Strategies: Tools and Methods.- 13 American Options and Numerical Methods.- 14 Exotic Options.- 15 Futures Markets (2): Contracts on Interest Rates.- 16 Interest Rate Instruments: Valuation with the BSM Model, Hybrids and Structured Products.- 17 Modeling Interest Rates and Options on Interest Rates.- 18 Elements of Stochastic Calculus.- 19 The Mathematical Framework of Financial Markets Theory.- 20 The State Variables Model and the Valuation Partial Differential Equation.- Part 3 Portfolio Theory and Portfolio Management.- 21 Choice Under Uncertainty and Portfolio Optimization in a Static Framework: The Markowitz Model.- 22 The Capital Asset Pricing Model.- 23 Arbitrage Pricing Theory and Multi-Factor Models.- 24 Strategic Portfolio Allocation.- 25 Benchmarking and Tactical Asset Allocation.- Part 4 Risk Management, Credit Risk and Credit Derivatives.- 26 Monte Carlo Simulations.- 27 Value at Risk, Expected Shortfall and Other Risk Measures.- 28 Credit Risk (1) - Credit Risk Assessment: Empirical Analysis and Modeling.- 29 Modeling Credit Risk (2): Credit-VaR and Operational Methods for Credit Risk Management.- 30 Credit Derivatives, Securitization and Introduction to xVA.