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- Product code: 16448
- ISBN: 0273661965,
ISBN13: 9780273661962,
408 pages, hardback
Published by FT Prentice Hall on 2003
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Description of Financial Geometry |
The past thirty years have seen explosive growth in the use of financial deritivatives along with the development of an elegant mathematical theory for their valuation. The theory, based on stochastic calculus, provides a conceptual framework for valuation as well as efficient computational tools. As derivative markets have matured, much of the focus has shifted from the valuation of individual financial instruments to the problems of hedging and risk management of large financial portfolios. The challenge here is to understand the behaviour of a complex set of instruments that may depend on hundreds or thousands of underlying risk factors. "Financial Geometry" will help you to do so. Mathematical yet accessible, "Financial Geometry" provides intuitive geometric metaphors and powerful computational machinery for describing the complex risks of the modern financial world. Topics covered include: *marking to market *valuation techniques and models *risk-factor definition *sensitivity and scenario analysis *interest rate calculations *hedge calculations *Value at Risk *risk-factor mapping *volatility curves and surfaces *time effects
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Contents of Financial Geometry |
Contents
Preface
Acknowledgements
1. Black–Scholes "Greeks"
1.1 Equities
1.2 Foreign Exchange
1.3 Interest Rates
2. Sensitivities for Equity and FX Models
2.1 Bachelier Model
2.2 Nuisance Parameters
2.3 Reconciling Deltas
2.4 Reconciling Vegas
3. Sensitivities for Interest Rate Models
3.1 Duration
3.1.1 Tradition Definition of Duration
3.1.2 Option-Adjusted Duration
3.1.3 Key-Rate Duration
3.2 Convexity and Multivariate Gamma
3.3 Interest Rate Hedging
3.3.1 Cashflow hedging
3.3.2 Duration hedging
3.3.3 "Curve" hedging
3.3.4 Perturbation hedging
3.4 Cap and Swaption Deltas
3.4.1 Sensitivities to LIBOR Rates
3.4.2 Sensitivities to Swap Rates
3.4.3 Reconciling IR Deltas
3.5 Cap and Swaption Vegas
3.5.1 Sensitivities to LIBOR Volatilities
3.5.2 Sensitivities to Swap Rate Volatilities
3.5.3 Relationship between Vegas with respect to LIBOR and Swap Rates
3.5.4 Using BGM/J as a Base Model
4. Sensitivities for Variance/Covariance Analyses
4.1 General Remarks on Risk Factors
4.2 Homogeneous Coordinate Representation of FX Rates
4.3 Change the Base Currency of Sensitivities
4.4 Asset-Flow Values
4.5 Delta-Equivalent Cashflows
4.6 Present-Value Exposures
4.7 Numerical Methods
5. Multivariate Vega Analysis
5.1 Black–Scholes Volatility Surface
5.2 Local Volatility Surface
5.3 Implied Probability Distribution
6. Geometry of Variance/Covariance Analyses
6.1 RiskMetrics Methodology for Value at Risk
6.2 Risk Decomposition
6.3 Minimum VaR Hedging
6.4 Benchmarking
6.4.1 Composite Indices
Appendix A. Malliavin Calculus
Appendix B. Differentiation of Stochastic Functions
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About Alvin Kuric |
Alvin Kuruc is a Director at Credit Suisse First Boston in London, while he looks after the core architecture for Derivatives IT globally. He was previously Managing Director, Risk Systems at NumeriX and Senior Vice President and Head of Financial Engineering at SunGard Trading and Risk Systems. He holds an SB in Interdisciplinary Science and a PhD in Pure Mathematics from the Massachusetts Institute of Technology and an MD from Yale Medical School.
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