Derivatives and Internal Models / Edition 3

by H. Deutsch

Overview

This book is a comprehensive introduction to the common methods of modern market risk management, including variance, co-variance, historical simulation, Monte Carlo, "Greek" ratios, volatility and correlation. All the important modern derivatives and their pricing methods (present value, Black Scholes, binomial trees, Monte Carlo) are presented and guidelines are given as to exactly which method can be used for which instruments.

Author Biography: Hans-Peter Deutsch is Head of Financial Risk Consulting at Arthur Andersen, Germany.

Product Details

ISBN-13:	9781403921505
Publisher:	Palgrave Macmillan UK
Publication date:	09/04/2004
Series:	Finance and Capital Markets Series
Edition description:	3rd ed. 2004
Pages:	698
Product dimensions:	6.10(w) x 9.25(h) x 0.07(d)

About the Author

HANS-PETERDEUTSCH is Founder and Managing Director of d-fine, one of the leading financial services consulting firms in Europe. He was formerly a Partner at Arthur Andersen and Head of Financial Risk Consulting in Germany. Dr Deutsch holds a Ph.D. in theoretical physics and is author of many publications in the area of quantitative finance. He is also Guest Lecturer for Mathematical Finance at Oxford University, UK, and Chairman of the Advisory Board of the MathFinance Institute at Goethe University in Frankfurt, Germany.

Table of Contents

PART I: FUNDAMENTALS Introduction Fundamental Risk Factors of Financial Markets Financial Instruments: A System of Derivatives and Underlyings PART II: METHODS Overview of the Assumptions Present Value Methods, Yields and Traditional Risk Measures Arbitrage The Black-Scholes Differential Equation Integral Forms and Analytic Solutions in the Black-Scholes World Numerical SolutionsUsing Finite Differences Binomial and Trinomial Trees Monte-Carlo Simulations Hedging Martingales and Numeraires Interest Rates and Term Structure Models PART III: INSTRUMENTS Spot Transactions on Interest Instruments Forward Transactions on Interest Rates Plain Vanilla Options Exotic Options PART IV: RISK Fundamentals The Variance-Covariance Method Simulation Methods Interest Rate Risk and Cash Flows Example VaR-Computation Backtesting: Checking the Applied Methods PART V: Portfolios Classical Portfolio Management Attributes and their Characteristic Portfolios Active Management and Benchmarking PART VI: MARKET DATA Interest Rate Term Structures Volatility Market Parameter from Historical Time Series Time Series Modelling Forecasting with Time Series Models Principle Component Analysis Pre-Treatment of Time Series and Assesment of Models Probabiltiy and Statistics

Editorial Reviews

Praise for previous edition:

'Whether you are looking for a standard reference or a stand-alone learning guide, Derivatives and Internal Models deserves a place on your bookshelf.'

-Risk

From the Publisher