Introduction.

Derivatives Models on Models.

Nassim Taleb on Black Swans.

Chapter 1 The Discovery of Fat-Tails in Price Data.

Edward Thorp on Gambling and Trading.

Chapter 2 Option Pricing and Hedging from Theory to Practice: Know Your Weapon III.

1 The Partly Ignored and Forgotten History.

2 Discrete Dynamic Delta Hedging under Geometric Brownian Motion.

3 Dynamic Delta Hedging Under Jump-Diffusion.

4 Equilibrium Models.

5 Portfolio Construction and Options Against Options.

6 Conclusions.

Alan Lewis on Stochastic Volatility and Jumps.

Chapter 3 Back to Basics: A New Approach to the Discrete Dividend Problem Together with Jørgen Haug and Alan Lewis.

1 Introduction.

2 General Solution.

3 Dividend Models.

4 Applications.

Emanuel Derman the Wall Street Quant.

Chapter 4 Closed Form Valuation of American Barrier Options.

1 Analytical Valuation of American Barrier Options.

2 Numerical Comparison.

3 Conclusion.

Peter Carr, The Wall Street Wizard of Option Symmetry and Volatility.

Chapter 5 Valuation of Complex Barrier Options Using Barrier Symmetry.

1 Plain Vanilla Put–Call Symmetry.

2 Barrier Put–Call Symmetry.

3 Simple, Intuitive and Accurate Valuation of Double Barrier Options.

4 Static Hedging in the Real World.

5 Conclusion.

Granger on Cointegration.

Chapter 6 Knock-in/out Margrabe with Jørgen Haug.

1 Margrabe Options.

2 Knock-in/out Margrabe Options.

3 Applications.

Stephen Ross on APT.

Chapter 7 Resetting Strikes, Barriers and Time with Jørgen Haug.

1 Introduction.

2 Reset Strike Barrier Options.

3 Reset Barrier Options.

4 Resetting Time.

5 Conclusion.

Bruno Dupire the Stochastic Wall Street Quant.

Chapter 8 Asian Pyramid Power with Jørgen Haug and William Margrabe.

1 Celia in Derivativesland.

2 Calibrating to the Term Structure of Volatility.

3 From Geometric to Arithmetic.

4 The Dollars.

Eduardo Schwartz: the Yoga Master of Mathematical Finance.

Chapter 9 Practical Valuation of Power Derivatives.

1 Introduction.

2 Energy Swaps/Forwards.

3 Power Options.

4 Still, What About Fat-Tails?

Aaron Brown on Gambling, Poker and Trading.

Chapter 10 A Look in the Antimatter Mirror.

1 Garbage in, Garbage Out?

2 Conclusion.

Knut Aase on Catastrophes and Financial Economics.

Chapter 11 Negative Volatility and the Survival of the Western Financial Markets Knut K. Aase.

1 Introduction.

2 Negative Volatility – A Direct Approach.

3 The Value of a European Call Option for any Value – Positive or Negative – of the Volatility.

4 Negative Volatility – The Haug interpretation.

5 Chaotic Behavior from Deterministic Dynamics.

6 Conclusions.

Elie Ayache on Option Trading and Modeling.

Chapter 12 Frozen Time Arbitrage.

1 Time Measure Arbitrage.

2 Time Travel Arbitrage.

3 Conclusion.

Haug on Wilmott and Wilmott on Wilmott.

Chapter 13 Space-time Finance The Relativity Theory’s Implications for Mathematical Finance.

1 Introduction.

2 Time dilation.

3 Advanced stage of Space-time Finance.

4 Space-time Uncertainty.

5 Is High Speed Velocity Possible?

6 Black-Scholes in Special Relativity.

7 Relativity and Fat-Tailed Distributions.

8 General Relativity and Space-time Finance.

9 Was Einstein Right?

10 Traveling Back in Time Using Wormholes.

11 Conclusion.

Andrei Khrennikov on Negative Probabilities.

Chapter 14 Why so Negative about Negative Probabilities?

1 The History of Negative Probability.

2 Negative Probabilities in Quantitative Finance.

3 Getting the Negative Probabilities to Really Work in Your Favor.

4 Hidden Variables in Finance.

5 The Future of Negative Probabilities in Quantitative Finance.

6 Appendix: Negative Probabilities in CRR Equivalent Trinomial Tree.

David Bates on Crash and Jumps.

Chapter 15 Hidden Conditions and Coin Flip Blow Up’s.

1 Blowing Up.

2 Coin Flip Blow Up’s.

Peter J¨ackel on Monte Carlo Simulation.

Index.