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Derivatives Models on Models takes a theoretical and
practical look at some of the latest and most important ideas
behind derivatives pricing models. In each chapter the author
highlights the latest thinking and trends in the area. A wide range
of topics are covered, including valuation methods on stocks paying
discrete dividend, Asian options, American barrier options, Complex
barrier options, reset options, and electricity derivatives.
The book also discusses the latest ideas surrounding finance
like the robustness of dynamic delta hedging, option hedging,
negative probabilities and space-time finance. The accompanying
CD-ROM with additional Excel sheets includes the mathematical
models covered in the book.
The book also includes interviews with some of the world's
top names in the industry, and an insight into the history behind
some of the greatest discoveries in quantitative finance.
Interviewees include:
Clive Granger, Nobel Prize winner in Economics 2003, on
Cointegration
Nassim Taleb on Black Swans
Stephen Ross on Arbitrage Pricing Theory
Emanuel Derman the Wall Street Quant
Edward Thorp on Gambling and Trading
Peter Carr the Wall Street Wizard of Option Symmetry and
Volatility
Aaron Brown on Gambling, Poker and Trading
David Bates on Crash and Jumps
Andrei Khrennikov on Negative Probabilities
Elie Ayache on Option Trading and Modeling
Peter Jaeckel on Monte Carlo Simulation
Alan Lewis on Stochastic Volatility and Jumps
Paul Wilmott on Paul Wilmott
Knut Aase on Catastrophes and Financial Economics
Eduardo Schwartz the Yoga Master of Quantitative Finance
Bruno Dupire on Local and Stochastic Volatility Models
Auteur
Dr Espen Gaarder Haug has more than 15 years of experience
in Derivatives research and trading, and has worked for more than
20 years as a trader. Until recently he worked as a proprietary
trader in J.P. Morgan New York, and as a derivatives trader for two
multi-billion dollar hedge funds; Amaranth Investor and Paloma
Partners, located in Greenwich Connecticut. Before that he worked
for Tempus Financial Engineering, Chase Manhattan Bank (now J.P.
Morgan Chase) and Den Norske Bank.
He is the author of The Complete Guide of Option Pricing
Formulas, which has become a reference manual among Wall Street
professionals. He has a PhD from the Norwegian University of
Science and Technology where he specialized in Option Valuation and
Trading and has published extensively in practitioner and academic
journals. He is currently considering setting up his own investment
company - possibly the first Anti-Hedge fund!
Résumé
Derivatives Models on Models takes a theoretical and practical look at some of the latest and most important ideas behind derivatives pricing models. In each chapter the author highlights the latest thinking and trends in the area. A wide range of topics are covered, including valuation methods on stocks paying discrete dividend, Asian options, American barrier options, Complex barrier options, reset options, and electricity derivatives.
The book also discusses the latest ideas surrounding finance like the robustness of dynamic delta hedging, option hedging, negative probabilities and space-time finance. The accompanying CD-ROM with additional Excel sheets includes the mathematical models covered in the book.
The book also includes interviews with some of the world's top names in the industry, and an insight into the history behind some of the greatest discoveries in quantitative finance. Interviewees include:
Contenu
Author's Disclaimer ix
Introduction x
Derivatives Models on Models xv
Nassim Taleb on Black Swans 1
Chapter 1 The Discovery of Fat-Tails in Price Data 17
Edward Thorp on Gambling and Trading 27
Chapter 2 Option Pricing and Hedging from Theory to Practice: Know Your Weapon III 33
1 The Partly Ignored and Forgotten History 34
2 Discrete Dynamic Delta Hedging under Geometric Brownian Motion 44
3 Dynamic Delta Hedging Under Jump-Diffusion 50
4 Equilibrium Models 54
5 Portfolio Construction and Options Against Options 55
6 Conclusions 63
Alan Lewis on Stochastic Volatility and Jumps 71
**Chapter 3 Back to Basics: A New Approach to the Discrete Dividend Problem 79
*Together with *Jørgen Haug and Alan Lewis
1 Introduction 79
2 General Solution 82
3 Dividend Models 87
4 Applications 89
Emanuel Derman the Wall Street Quant 101
Chapter 4 Closed Form Valuation of American Barrier Options 115
1 Analytical Valuation of American Barrier Options 115
2 Numerical Comparison 116
3 Conclusion 118
Peter Carr, The Wall Street Wizard of Option Symmetry and Volatility 121
Chapter 5 Valuation of Complex Barrier Options Using Barrier Symmetry 129
1 Plain Vanilla PutCall Symmetry 129
2 Barrier PutCall Symmetry 130
3 Simple, Intuitive and Accurate Valuation of Double Barrier Options 132
4 Static Hedging in the Real World 137
5 Conclusion 138
Granger on Cointegration 141
**Chapter 6 Knock-in/out Margrabe 145
*with *Jørgen Haug
1 Margrabe Options 145
2 Knock-in/out Margrabe Options 146
3 Applications 147
Stephen Ross on APT 153
**Chapter 7 Resetting Strikes, Barriers and Time 157
*with *Jørgen Haug
1 Introduction 157
2 Reset Strike Barrier Options 160
3 Reset Barrier Options 161
4 Resetting Time 162
5 Conclusion 163
Bruno Dupire the Stochastic Wall Street Quant 167
**Chapter 8 Asian Pyramid Power 177
*with *Jørgen Haug and William Margrabe
1 Celia in Derivativesland 177
2 Calibrating to the Term Structure of Volatility 180
3 From Geometric to Arithmetic 184
4 The Dollars 185
Eduardo Schwartz: the Yoga Master of Mathematical Finance 191
Chapter 9 Practical Valuation of Power Derivatives 197
1 Introduction 197
2 Energy Swaps/Forwards 199
3 Power Options 202
4 Still, What About Fat-Tails? 209
Aaron Brown on Gambling, Poker and Trading 211
Chapter 10 A Look in the Antimatter Mirror 223
1 Garbage in, Garbage Out? 223
2 Conclusion 227
Knut Aase on Catastrophes and Financial Economics 231
**Chapter 11 Negative Volatility and the Survival of the Western Financial Markets 239
**Knut K. Aase
1 Introduction 239
2 Negative Volatility A Direct Approach 240
3 The Value of a European Call Option for any Value Positive or Negative of the Volatility 240
4 Negative Volatility The Haug interpretation 242
5 Chaotic Behavior from Deterministic Dynamics 242
6 Conclusions 243
Elie Ayache on Option Trading and Modeling 247
Chapter 12 Frozen Time Arbitrage 267
1 Time Measure Arbitrage 268
2 Time Travel Arbitrage 269
3 Conclusion 273
Haug on Wilmott and Wilmott on Wilmott 277
Chapter 13 Space-time Finance The Relativity Theory's Implications for Mathematical Finance 287
1 Introduction 287 2 Time dilation 290</p&...