Market Risk Analysis, Volume III, Pricing, Hedging and Trading Financial Instruments
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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.