Advanced Derivatives Pricing and Risk Management

Advanced Derivatives Pricing and Risk Management : Theory, Tools, and Hands-On Programming Applications

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Description

Advanced Derivatives Pricing and Risk Management covers the most important and cutting-edge topics in financial derivatives pricing and risk management, striking a fine balance between theory and practice. The book contains a wide spectrum of problems, worked-out solutions, detailed methodologies, and applied mathematical techniques for which anyone planning to make a serious career in quantitative finance must master.

In fact, core portions of the book's material originated and evolved after years of classroom lectures and computer laboratory courses taught in a world-renowned professional Master's program in mathematical finance.

The book is designed for students in finance programs, particularly financial engineering.
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Product details

  • Hardback | 426 pages
  • 177.8 x 254 x 30.5mm | 1,088.63g
  • Academic Press Inc
  • San Diego, United States
  • English
  • 0120476827
  • 9780120476824
  • 2,135,421

Review quote

"Albanese and Campolieti carefully select the most important and relevant topics in financial derivatives pricing and risk management. Their work strikes a fine balance between theory and financial practice. A dozen carefully designed numerical projects are included that serve to introduce students to actual implementation issues in pricing and risk management. The book is succinctly written, with clear and insightful descriptions of state-of-the-art financial models. The style of presentation demonstrates the authors' unique pedagogical exposition of the quantitative and financial concepts in derivative pricing and risk management. Advanced Derivatives Pricing and Risk Management is destined to be a valuable text and reference for students and practitioners in the field of financial engineering."
- Yue Kuen Kwok, Associate Professor, Department of Mathematics, Hong Kong University of Science and Technology

"The set of projects on the accompanying CDROM give students and professors the opportunity to work in a simulated environment and can be used, as is the goal here, to train students in building software modules for pricing, hedging, etc. The projects enhance the understanding of the material and extend the book's usefulness by enabling students to tackle other situations not explicitly addressed in the modules provided. VBA is easy to learn and can facilitate rapid developments of real applications. In addition, the choice of Excel as the Graphic User Interface (GUI) is very appropriate. Furthermore, the existence of a built-in visual basic editor allows users to see the code, modify it to suit different needs and to experiment with it. Hence these features facilitate student learning to produce software themselves."
- Eliezer Prisman, Nigel Martin Chair in Finance, Director of the Financial Engineering Collaborative Diploma, Schulich School of Business, York University, Toronto

"...provides a combination of theoretical and practical tools from which any advanced undergraduate and graduate student, professional quant and researcher will benefit. It differs from existing books in quantitative finance from the ready-to-use software and accessible theoretical tools provided as a complete package. As a bonus, the book also gives a detailed exposition on cutting-edge theoretical techniques published here for the first time."
- Technical Analysis of Stocks & Commodities
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About Claudio Albanese

By Claudio Albanese and Guiseppe Campolieti
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Table of contents

I Pricing Theory and Risk Management 11
1 Pricing Theory 13
2 Fixed Income Instruments 135
3 Advanced Topics in Pricing Theory: Exotic Options and State Dependent
Models 175
4 Numerical Methods for Value-at-Risk 275
II Numerical Projects in Pricing and Risk Management 353
5 Project: Arbitrage Theory 355
6 Project: The Black-Scholes (Lognormal) Model 361
7 Project: Quantile-quantile plots 367
8 Project: Monte Carlo Pricer 371
9 Project: The Binomial Lattice Model 377
10 Project: The Trinomial Lattice Model 383
11 Project: Crank-Nicolson option pricer 393
12 Project: Static Hedging of Barrier Options 399
13 Project: Variance Swaps 409
14 Project: Monte Carlo VaR for Delta-Gamma Portfolios 415
15 Project: Covariance estimation and scenario generation in VaR 421
16 Project: Interest Rate Trees: Calibration and Pricing 425
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Review Text

Albanese and Campolieti carefully select the most important and relevant topics in financial derivatives pricing and risk management. Their work strikes a fine balance between theory and financial practice. A dozen carefully designed numerical projects are included that serve to introduce students to actual implementation issues in pricing and risk management. The book is succinctly written, with clear and insightful descriptions of state-of-the-art financial models. The style of presentation demonstrates the authors' unique pedagogical exposition of the quantitative and financial concepts in derivative pricing and risk management. Advanced Derivatives Pricing and Risk Management is destined to be a valuable text and reference for students and practitioners in the field of financial engineering.
Yue Kuen Kwok, Associate Professor, Department of Mathematics, Hong Kong University of Science and Technology

The set of projects on the accompanying CDROM give students and professors the opportunity to work in a simulated environment and can be used, as is the goal here, to train students in building software modules for pricing, hedging, etc. The projects enhance the understanding of the material and extend the book's usefulness by enabling students to tackle other situations not explicitly addressed in the modules provided. VBA is easy to learn and can facilitate rapid developments of real applications. In addition, the choice of Excel as the Graphic User Interface (GUI) is very appropriate. Furthermore, the existence of a built-in visual basic editor allows users to see the code, modify it to suit different needs and to experiment with it. Hence these features facilitate student learning to produce software themselves.
Eliezer Prisman, NigelMartin Chair in Finance, Director of the Financial Engineering Collaborative Diploma, Schulich School of Business, York University, Toronto

"...provides a combination of theoretical and practical tools from which any advanced undergraduate and graduate student, professional quant and researcher will benefit. It differs from existing books in quantitative finance from the ready-to-use software and accessible theoretical tools provided as a complete package. As a bonus, the book also gives a detailed exposition on cutting-edge theoretical techniques published here for the first time."
- Technical Analysis of Stocks&Commodities "Albanese and Campolieti carefully select the most important and relevant topics in financial derivatives pricing and risk management. Their work strikes a fine balance between theory and financial practice. A dozen carefully designed numerical projects are included that serve to introduce students to actual implementation issues in pricing and risk management. The book is succinctly written, with clear and insightful descriptions of state-of-the-art financial models. The style of presentation demonstrates the authors' unique pedagogical exposition of the quantitative and financial concepts in derivative pricing and risk management. Advanced Derivatives Pricing and Risk Management is destined to be a valuable text and reference for students and practitioners in the field of financial engineering.
- Yue Kuen Kwok, Associate Professor, Department of Mathematics, Hong Kong University of Science and Technology

"The set of projects on the accompanying CDROM give students and professors the opportunity to work in a simulated environment and can be used, as is the goal here, to train students in building software modules for pricing, hedging, etc. The projects enhance the understanding of the material and extend the book's usefulness by enabling students to tackle other situations not explicitly addressed in the modules provided. VBA is easy to learn and can facilitate rapid developments of real applications. In addition, the choice of Excel as the Graphic User Interface (GUI) is very appropriate. Furthermore, the existence of a built-in visual basic editor allows users to see the code, modify it to suit different needs and to experiment with it. Hence these features facilitate student learning to produce software themselves.
- Eliezer Prisman, Nigel Martin Chair in Finance, Director of the Financial Engineering Collaborative Diploma, Schulich School of Business, York University, Toronto

"...provides a combination of theoretical and practical tools from which any advanced undergraduate and graduate student, professional quant and researcher will benefit. It differs from existing books in quantitative finance from the ready-to-use software and accessible theoretical tools provided as a complete package. As a bonus, the book also gives a detailed exposition on cutting-edge theoretical techniques published here for the first time."
- Technical Analysis of Stocks & Commodities "Albanese and Campolieti carefully select the most important and relevant topics in financial derivatives pricing and risk management. Their work strikes a fine balance between theory and financial practice. A dozen carefully designed numerical projects are included that serve to introduce students to actual implementation issues in pricing and risk management. The book is succinctly written, with clear and insightful descriptions of state-of-the-art financial models. The style of presentation demonstrates the authors' unique pedagogical exposition of the quantitative and financial concepts in derivative pricing and risk management. Advanced Derivatives Pricing and Risk Management is destined to be a valuable text and reference for students and practitioners in the field of financial engineering.
- Yue Kuen Kwok, Associate Professor, Department of Mathematics, Hong Kong University of Science and Technology

"The set of projects on the accompanying CDROM give students and professors the opportunity to work in a simulated environment and can be used, as is the goal here, to train students in building software modules for pricing, hedging, etc. The projects enhance the understanding of the material and extend the book's usefulness by enabling students to tackle other situations not explicitly addressed in the modules provided. VBA is easy to learn and can facilitate rapid developments of real applications. In addition, the choice of Excel as the Graphic User Interface (GUI) is very appropriate. Furthermore, the existence of a built-in visual basic editor allows users to see the code, modify it to suit different needs and to experiment with it. Hence these features facilitate student learning to produce software themselves.
- Eliezer Prisman, Nigel Martin Chair in Finance, Director of the Financial Engineering Collaborative Diploma, Schulich School of Business, York University, Toronto

"...provides a combination of theoretical and practical tools from which any advanced undergraduate and graduate student, professional quant and researcher will benefit. It differs from existing books in quantitative finance from the ready-to-use software and accessible theoretical tools provided as a complete package. As a bonus, the book also gives a detailed exposition on cutting-edge theoretical techniques published here for the first time."
- Technical Analysis of Stocks & Commodities
show more