This book provides an introduction to the valuation of financial instruments on equity markets.
Written from the perspective of trading risk management and quantitative research functions
and written by a practitioner with many years' experience in markets and in academia it
provides a valuable learning tool for students and new entrants to these markets. Coverage
includes: ·Trading and sources of risk including credit and counterparty risk market and
model risks settlement and Herstatt risks. ·Numerical methods including discrete-time methods
finite different methods binomial models and Monte Carlo simulations. ·Probability theory and
stochastic processes from the financial modeling perspective including probability spaces
sigma algebras measures and filtrations. ·Continuous time models such as Black-Scholes-Merton
Delta-hedging and Delta-Gamma-hedging general diffusion models and how to solve Partial
Differential Equation using the Feynmann-Kac representation. ·The trading structuring and
hedging several kinds of exotic options including: Binary Digital options Barrier options
Lookbacks Asian options Chooses Forward options Ratchets Compounded options Basket
options Exchange and Currency-linked options Pay later options and Quantos. ·A detailed
explanation of how to construct synthetic instruments and strategies for different market
conditions discussing more than 30 different option strategies. With source code for many of
the models featured in the book provided and extensive examples and illustrations throughout
this book provides a comprehensive introduction to this topic and will prove an invaluable
learning tool and reference for anyone studying or working in this field.
