Pricing Financial Instruments

The Finite Difference Method

Author: Domingo Tavella,Curt Randall

Publisher: John Wiley & Sons

ISBN: 9780471197607

Category: Business & Economics

Page: 256

View: 4255

Pricing Financial Instruments Numerical methods for the solution of financial instrument pricing equations are fast becoming essential for practitioners of modern quantitative finance. Among the most promising of these new computational finance techniques is the finite difference method-yet, to date, no single resource has presented a quality, comprehensive overview of this revolutionary quantitative approach to risk management. Pricing Financial Instruments, researched and written by Domingo Tavella and Curt Randall, two of the chief proponents of the finite difference method, presents a logical framework for applying the method of finite difference to the pricing of financial derivatives. Detailing the algorithmic and numerical procedures that are the foundation of both modern mathematical finance and the creation of financial products-while purposely keeping mathematical complexity to a minimum-this long-awaited book demonstrates how the techniques described can be used to accurately price simple and complex derivative structures. From a summary of stochastic pricing processes and arbitrage pricing arguments, through the analysis of numerical schemes and the implications of discretization-and ending with case studies that are simple yet detailed enough to demonstrate the capabilities of the methodology-Pricing Financial Instruments explores areas that include: * Pricing equations and the relationship between European and American derivatives * Detailed analyses of different stability analysis approaches * Continuous and discrete sampling models for path dependent options * One-dimensional and multi-dimensional coordinate transformations * Numerical examples of barrier options, Asian options, forward swaps, and more With an emphasis on how numerical solutions work and how the approximations involved affect the accuracy of the solutions, Pricing Financial Instruments takes us through doors opened wide by Black, Scholes, and Merton-and the arbitrage pricing principles they introduced in the early 1970s-to provide a step-by-step outline for sensibly interpreting the output of standard numerical schemes. It covers the understanding and application of today's finite difference method, and takes the reader to the next level of pricing financial instruments and managing financial risk.

Computational Finance

Numerical Methods for Pricing Financial Instruments

Author: George Levy

Publisher: Butterworth-Heinemann

ISBN: 9780750657228

Category: Business & Economics

Page: 443

View: 9445

Accompanying CD-ROM contains ... "working computer code, demonstration applications, and also PDF versions of several research articles that are referred to in the book." -- d.j.

Financial Instrument Pricing Using C++

Author: Daniel J. Duffy

Publisher: John Wiley & Sons

ISBN: 1118856473

Category: Business & Economics

Page: 432

View: 3158

One of the best languages for the development of financial engineering and instrument pricing applications is C++. This book has several features that allow developers to write robust, flexible and extensible software systems. The book is an ANSI/ISO standard, fully object-oriented and interfaces with many third-party applications. It has support for templates and generic programming, massive reusability using templates (?write once?) and support for legacy C applications. In this book, author Daniel J. Duffy brings C++ to the next level by applying it to the design and implementation of classes, libraries and applications for option and derivative pricing models. He employs modern software engineering techniques to produce industrial-strength applications: Using the Standard Template Library (STL) in finance Creating your own template classes and functions Reusable data structures for vectors, matrices and tensors Classes for numerical analysis (numerical linear algebra ?) Solving the Black Scholes equations, exact and approximate solutions Implementing the Finite Difference Method in C++ Integration with the ?Gang of Four? Design Patterns Interfacing with Excel (output and Add-Ins) Financial engineering and XML Cash flow and yield curves Included with the book is a CD containing the source code in the Datasim Financial Toolkit. You can use this to get up to speed with your C++ applications by reusing existing classes and libraries. 'Unique... Let's all give a warm welcome to modern pricing tools.' -- Paul Wilmott, mathematician, author and fund manager

International Financial Reporting Standards (IFRS) 2011

Author: Wiley-VCH

Publisher: John Wiley & Sons

ISBN: 3527505881

Category: Business & Economics

Page: 1296

View: 7273

This compact book contains all the official International Financial Reporting Standards (IFRS), International Accounting Standards (IAS) and Interpretations (SICs, IFRICs), approved by the EU and thus mandatory for companies operating in capital markets. The standards are listed synoptically in English and German, allowing a comparison with the English original, which is important in questions of interpretation. A handy reference for accountants, tax advisors, IFRS consultants, and companies applying IFRS.

Market Risk Analysis, Pricing, Hedging and Trading Financial Instruments

Author: Carol Alexander

Publisher: John Wiley & Sons

ISBN: 0470772816

Category: Business & Economics

Page: 416

View: 5155

Written by leading market risk academic, Professor Carol Alexander, Pricing, Hedging and Trading Financial Instruments forms part three of the Market Risk Analysis four volume set. This book is an in-depth, practical and accessible guide to the models that are used for pricing and the strategies that are used for hedging financial instruments, and to the markets in which they trade. It provides a comprehensive, rigorous and accessible introduction to bonds, swaps, futures and forwards and options, including variance swaps, volatility indices and their futures and options, to stochastic volatility models and to modelling the implied and local volatility surfaces. All together, the Market Risk Analysis four volume set illustrates virtually every concept or formula with a practical, numerical example or a longer, empirical case study. Across all four volumes there are approximately 300 numerical and empirical examples, 400 graphs and figures and 30 case studies many of which are contained in interactive Excel spreadsheets available from the the accompanying CD-ROM . Empirical examples and case studies specific to this volume include: Duration-Convexity approximation to bond portfolios, and portfolio immunization; Pricing floaters and vanilla, basis and variance swaps; Coupon stripping and yield curve fitting; Proxy hedging, and hedging international securities and energy futures portfolios; Pricing models for European exotics, including barriers, Asians, look-backs, choosers, capped, contingent, power, quanto, compo, exchange, ‘best-of’ and spread options; Libor model calibration; Dynamic models for implied volatility based on principal component analysis; Calibration of stochastic volatility models (Matlab code); Simulations from stochastic volatility and jump models; Duration, PV01 and volatility invariant cash flow mappings; Delta-gamma-theta-vega mappings for options portfolios; Volatility beta mapping to volatility indices.

The Mathematics of Finance

Modeling and Hedging

Author: Victor Goodman,Joseph Gail Stampfli

Publisher: American Mathematical Soc.

ISBN: 9780821847930

Category: Business & Economics

Page: 250

View: 1490

This book is ideally suited for an introductory undergraduate course on financial engineering. It explains the basic concepts of financial derivatives, including put and call options, as well as more complex derivatives such as barrier options and options on futures contracts. Both discrete and continuous models of market behavior are developed in this book. In particular, the analysis of option prices developed by Black and Scholes is explained in a self-contained way, using both the probabilistic Brownian Motion method and the analytical differential equations method. The book begins with binomial stock price models, moves on to multistage models, then to the Cox-Ross-Rubinstein option pricing process, and then to the Black-Scholes formula. Other topics presented include Zero Coupon Bonds, forward rates, the yield curve, and several bond price models. The book continues with foreign exchange models and the Keynes Interest Rate Parity Formula, and concludes with the study of country risk, a topic not inappropriate for the times. In addition to theoretical results, numerical models are presented in much detail. Each of the eleven chapters includes a variety of exercises.

Financial Modelling in Python

Author: Shayne Fletcher,Christopher Gardner

Publisher: John Wiley & Sons

ISBN: 0470747897

Category: Business & Economics

Page: 244

View: 8107

"Fletcher and Gardner have created a comprehensive resource that will be of interest not only to those working in the field of finance, but also to those using numerical methods in other fields such as engineering, physics, and actuarial mathematics. By showing how to combine the high-level elegance, accessibility, and flexibility of Python, with the low-level computational efficiency of C++, in the context of interesting financial modeling problems, they have provided an implementation template which will be useful to others seeking to jointly optimize the use of computational and human resources. They document all the necessary technical details required in order to make external numerical libraries available from within Python, and they contribute a useful library of their own, which will significantly reduce the start-up costs involved in building financial models. This book is a must read for all those with a need to apply numerical methods in the valuation of financial claims." –David Louton, Professor of Finance, Bryant University This book is directed at both industry practitioners and students interested in designing a pricing and risk management framework for financial derivatives using the Python programming language. It is a practical book complete with working, tested code that guides the reader through the process of building a flexible, extensible pricing framework in Python. The pricing frameworks' loosely coupled fundamental components have been designed to facilitate the quick development of new models. Concrete applications to real-world pricing problems are also provided. Topics are introduced gradually, each building on the last. They include basic mathematical algorithms, common algorithms from numerical analysis, trade, market and event data model representations, lattice and simulation based pricing, and model development. The mathematics presented is kept simple and to the point. The book also provides a host of information on practical technical topics such as C++/Python hybrid development (embedding and extending) and techniques for integrating Python based programs with Microsoft Excel.

Financial Instruments Standards

A Guide on IAS 32, IAS 39 and IFRS 7

Author: Gupta

Publisher: Tata McGraw-Hill Education

ISBN: 0070657033

Category: Accounting

Page: N.A

View: 4932

Over the last couple of years, companies around the world switched from national accounting standards to International Financial Reporting Standards (IFRS). India too would adopt IFRS directly or align the national standards with IFRS from 2011. While this has been welcomed by investors and other stakeholders, practitioners continue to grapple with interpretations and practices that are emerging in areas where the standards are not explicit.Financial Instruments Standards guides the reader through rules and supplements the application guidance with interpretation and analyses. It deals with all aspects of hedge accounting, as well as embedded derivatives and de-recognition of financial instruments. It also includes numerous worked out examples pertaining to complex calculations and disclosures.

Anteilsbasierte Vergütung nach IFRS 2

Kommentierung der Share-based Payments

Author: Oliver Köster

Publisher: Springer-Verlag

ISBN: 3658015519

Category: Business & Economics

Page: 65

View: 3151

Mit Verbreitung des Shareholder-Value-Ansatzes ist auch in der deutschen Unternehmenspraxis die Bedeutung anteilsbasierter Vergütungsformen nach IFRS 2 gestiegen. Lange Zeit wurden Rechnungslegungsfragen kontrovers diskutiert und nicht zuletzt durch die Finanzmarktkrise sind diese Vergütungsmodelle in den Blickpunkt der Öffentlichkeit geraten. Der IFRS 2 trägt der zunehmenden Verbreitung aktienbasierter Vergütungen Rechnung und schafft erhöhte Transparenz und eine bilanzielle Erfassung. Trotz vielfältiger neuer Regelungen und den teilweise damit verbundenen Einschränkungen bei der Gestaltung anteilsbasierter Vergütungsprogramme, dürfte diese Vergütungskomponente auch in Zukunft eine hohe Bedeutung haben. In Anlehnung an den IFRS-Kommentar (Buschhüter/Striegel) führt das Werk zunächst den englischen Originaltext an und ermöglicht damit einen ganzheitlichen Blick auf die aktuelle Gesetzeslage. Detailliert und überschauend werden bilanzielle Aspekte vergütungshalber gewährter Eigenkapitalinstrumenten beleuchtet.

Discrete-time Asset Pricing Models in Applied Stochastic Finance

Author: P. C. G. Vassiliou

Publisher: John Wiley & Sons

ISBN: 1118618661

Category: Mathematics

Page: 416

View: 8668

Stochastic finance and financial engineering have been rapidlyexpanding fields of science over the past four decades, mainly dueto the success of sophisticated quantitative methodologies inhelping professionals manage financial risks. In recent years, wehave witnessed a tremendous acceleration in research efforts aimedat better comprehending, modeling and hedging this kind ofrisk. These two volumes aim to provide a foundation course on appliedstochastic finance. They are designed for three groups of readers:firstly, students of various backgrounds seeking a core knowledgeon the subject of stochastic finance; secondly financial analystsand practitioners in the investment, banking and insuranceindustries; and finally other professionals who are interested inlearning advanced mathematical and stochastic methods, which arebasic knowledge in many areas, through finance. Volume 1 starts with the introduction of the basic financialinstruments and the fundamental principles of financial modelingand arbitrage valuation of derivatives. Next, we use thediscrete-time binomial model to introduce all relevant concepts.The mathematical simplicity of the binomial model also provides uswith the opportunity to introduce and discuss in depth conceptssuch as conditional expectations and martingales in discrete time.However, we do not expand beyond the needs of the stochasticfinance framework. Numerous examples, each highlighted and isolatedfrom the text for easy reference and identification, areincluded. The book concludes with the use of the binomial model tointroduce interest rate models and the use of the Markov chainmodel to introduce credit risk. This volume is designed in such away that, among other uses, makes it useful as an undergraduatecourse.

Credit Risk Pricing Models

Theory and Practice

Author: Bernd Schmid

Publisher: Springer Science & Business Media

ISBN: 3540247165

Category: Business & Economics

Page: 383

View: 3668

Credit Risk Pricing Models - now in its second edition - gives a deep insight into the latest basic and advanced credit risk modelling techniques covering not only the standard structural, reduced form and hybrid approaches but also showing how these methods can be applied to practice. The text covers a broad range of financial instruments, including all kinds of defaultable fixed and floating rate debt, credit derivatives and collateralised debt obligations.This volume will be a valuable source for the financial community involved in pricing credit linked financial instruments. In addition, the book can be used by students and academics for a comprehensive overview of the most important credit risk modelling issues.

Interest-Rate Management

Author: Rudi Zagst

Publisher: Springer Science & Business Media

ISBN: 9783540675945

Category: Business & Economics

Page: 341

View: 6629

This book combines a rigorous overview of the mathematics of financial markets with an insight into the practical application of these models to the risk and portfolio management of interest-rate derivatives. It can also serve as a valuable textbook on financial markets for graduate and PhD students in mathematics. Interesting and comprehensive case studies illustrate the theoretical concepts.

Risk Finance and Asset Pricing

Value, Measurements, and Markets

Author: Charles S. Tapiero

Publisher: John Wiley & Sons

ISBN: 9780470892381

Category: Business & Economics

Page: 456

View: 599

A comprehensive guide to financial engineering that stresses real-world applications Financial engineering expert Charles S. Tapiero has his finger on the pulse of shifts coming to financial engineering and its applications. With an eye toward the future, he has crafted a comprehensive and accessible book for practitioners and students of Financial Engineering that emphasizes an intuitive approach to financial and quantitative foundations in financial and risk engineering. The book covers the theory from a practitioner perspective and applies it to a variety of real-world problems. Examines the cornerstone of the explosive growth in markets worldwide Presents important financial engineering techniques to price, hedge, and manage risks in general Author heads the largest financial engineering program in the world Author Charles Tapiero wrote the seminal work Risk and Financial Management.

Liquidity and Asset Prices

Author: Yakov Amihud,Haim Mendelson,Lasse Heje Pedersen

Publisher: Now Publishers Inc

ISBN: 1933019123

Category: Business & Economics

Page: 96

View: 1584

Liquidity and Asset Prices reviews the literature that studies the relationship between liquidity and asset prices. The authors review the theoretical literature that predicts how liquidity affects a security's required return and discuss the empirical connection between the two. Liquidity and Asset Prices surveys the theory of liquidity-based asset pricing followed by the empirical evidence. The theory section proceeds from basic models with exogenous holding periods to those that incorporate additional elements of risk and endogenous holding periods. The empirical section reviews the evidence on the liquidity premium for stocks, bonds, and other financial assets.

Financial Instruments

Reporting and Accounting (October 2005) : a User's Guide Through the Official Text of IAS 32, IAS 39 and IFRS 7

Author: N.A

Publisher: N.A

ISBN: N.A

Category: Accounting

Page: 540

View: 2642


Derivatives in Islamic Finance

Author: Sherif Ayoub

Publisher: Edinburgh University Press

ISBN: 0748695729

Category: Religion

Page: 224

View: 9034

Shedding light on the way the Islamic finance industry conceptualises the role of financial instruments in a market risk management framework that adheres to the objectives of Islamic jurisprudence, Sherif Ayoub explains the issues surrounding the avoidan

Islamic Capital Markets

Products and Strategies

Author: Kabir Hassan,Michael Mahlknecht

Publisher: John Wiley & Sons

ISBN: 0470689579

Category: Business & Economics

Page: 452

View: 2719

"This book covers all Islamic derivatives and structured products including state of the art Islamic short-selling methods used by hedge funds and gives a comprehensive overview of current Islamic capital markets. It takes a practical approach addressing practical issues in risk management and investing for both Islamic and non-Islamic readers"--Provided by publisher.

Market Risk Analysis, Pricing, Hedging and Trading Financial Instruments

Author: Carol Alexander

Publisher: John Wiley & Sons

ISBN: 9780470997895

Category: Business & Economics

Page: 416

View: 9427

Written by leading market risk academic, Professor Carol Alexander, Pricing, Hedging and Trading Financial Instruments forms part three of the Market Risk Analysis four volume set. This book is an in-depth, practical and accessible guide to the models that are used for pricing and the strategies that are used for hedging financial instruments, and to the markets in which they trade. It provides a comprehensive, rigorous and accessible introduction to bonds, swaps, futures and forwards and options, including variance swaps, volatility indices and their futures and options, to stochastic volatility models and to modelling the implied and local volatility surfaces. All together, the MARKET RISK ANALYSIS four volume set illustrates virtually every concept or formula with a practical, numerical example or a longer, empirical case study. Across all four volumes there are approximately 300 numerical and empirical examples, 400 graphs and figures 30 case studies many of which are contained in interactive Excel spreadsheets available from the accompanying CD-ROM. In this volume alone there are over 200 spreadsheets in 25 workbooks. Here are just some of he illustrative empirical examples and case studies in this volume: Duration-Convexity approximation to bond portfolios, and portfolio immunization; Pricing floaters and vanilla, basis and variance swaps; Coupon stripping and yield curve fitting; Proxy hedging, and hedging international securities and energy futures portfolios; Pricing models for European exotics, including barriers, Asians, look-backs, choosers, capped, contingent, power, quanto, compo, exchange, ‘best-of’ and spread options; Libor model calibration; Dynamic models for implied volatility based on principal component analysis; Calibration of stochastic volatility models (Matlab code); Simulations from stochastic volatility and jump models; Duration, PV01 and volatility invariant cash flow mappings; Delta-gamma-theta-vega mappings for options portfolios; Volatility beta mapping to volatility indices.

Mitigating Vulnerability to High and Volatile Oil Prices

Power Sector Experience in Latin America and the Caribbean

Author: Rigoberto Ariel Yépez-García,Julie Dana

Publisher: World Bank Publications

ISBN: 0821395785

Category: Business & Economics

Page: 178

View: 1620

This book addresses the need of oil-importing countries to mitigate vulnerability to oil price volatility. It offers financial instruments to manage price risk, complemented by structural measures designed to reduce oil consumption.

Computational Methods in Decision-Making, Economics and Finance

Author: Erricos John Kontoghiorghes,B. Rustem,S. Siokos

Publisher: Springer Science & Business Media

ISBN: 9781402008399

Category: Business & Economics

Page: 622

View: 6769

Computing has become essential for the modeling, analysis, and optimization of systems. This book is devoted to algorithms, computational analysis, and decision models. The chapters are organized in two parts: optimization models of decisions and models of pricing and equilibria. Optimization is at the core of rational decision making. Even when the decision maker has more than one goal or there is significant uncertainty in the system, optimization provides a rational framework for efficient decisions. The Markowitz mean-variance formulation is a classical example. The first part of the book is on recent developments in optimization decision models for finance and economics. The first four chapters of this part focus directly on multi-stage problems in finance. Chapters 5-8 involve the use of worst-case robust analysis. Chapters 9-11 are devoted to portfolio optimization. The final four chapters are on transportation-inventory with stochastic demand; optimal investment with CRRA utility; hedging financial contracts; and, automatic differentiation for computational finance. The uncertainty associated with prediction and modeling constantly requires the development of improved methods and models. Similarly, as systems strive towards equilibria, the characterization and computation of equilibria assists analysis and prediction. The second part of the book is devoted to recent research in computational tools and models of equilibria, prediction, and pricing. The first three chapters of this part consider hedging issues in finance. Chapters 19-22 consider prediction and modeling methodologies. Chapters 23-26 focus on auctions and equilibria. Volatility models are investigated in chapters 27-28. The final two chapters investigate risk assessment and product pricing. Audience: Researchers working in computational issues related to economics, finance, and management science.