Derivatives

by Sundaram, Rangarajan; Das, Sanjiv

• ISBN13: 9780072949315
• ISBN10: 0072949317
• Format: Hardcover
• Copyright: 2010-03-11
• Publisher: McGraw-Hill Education

Summary

The first edition of Derivatives is spent with a lot of effort throughout the book explaining what lies behind the formal mathematics of pricing and hedging. Questions ranging from 'how are forward prices determined?' to 'why does the Black-Scholes formula have the form it does?' are answered throughout the text. The authors of this first edition use verbal and pictorial expositions, and sometimes simple mathematical models, to explain the underlying principles before proceeding to a formal analysis. Extensive uses of numerical examples for illustrative purposes are used throughout to supplement the intuitive and formal presentations.The main body of this book is divided into six parts. Parts 1-3 cover, respectively, futures and forwards; options; and swaps. Part 4 examines term-structure modeling and the pricing of interest-rate derivatives, while Part 5 is concerned with credit derivatives and the modeling of credit risk. Part 6 discusses computational issues.

Table of Contents

Introduction

Futures and Forwards

Futures Markets

Pricing Forwards and Futures I: The Basic Theory

Pricing Forwards and Futures II

Hedging with Futures & Forwards

Interest-Rate Forwards & Futures

Equity Derivatives

Options Markets

Options: Payoffs & Trading Strategies

No-Arbitrage Restrictions on Option Prices

Early Exercise and Put-Call Parity

Option Pricing: An Introduction

Binomial Option Pricing

Implementing the Binomial Model

The Black-Scholes Model

The Mathematics of Black-Scholes

Options Modeling: Beyond Black-Scholes

Sensitivity Analysis: The Option “Greeks”

Exotic Options I: Path-Independent Options

Exotic Options II: Path-Dependent Options

Value-at-Risk

Convertible Bonds

Real Options

Swaps

Interest-Rate Swaps and Floating Rate Products

Equity Swaps

Currency Swaps

Interest Rate Modeling

The Term Structure of Interest Rates: Concepts

Estimating the Yield Curve

Modeling Term Structure Movements

Factor Models of the Term Structure

The Heath-Jarrow-Morton and Libor Market Models

Credit Derivative Products

Credit Derivative Products

Structural Models of Default Risk

Reduced Form Models of Default Risk

Modeling Correlated Default

Computation

Derivative Pricing with Finite Differencing

Derivative Pricing with Monte Carol Simulation

Using Octave

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