Pricing and Hedging Financial Derivatives: A Guide for Practitioners

Index

American options 51–3, 59–61, 63–4, 77–8, 90–2

analytical solutions 77, 91, 93, 99–102, 114

see also Black–Scholes model

arbitrage 9, 26–35, 39–41, 58–61, 77, 80, 83–4, 90, 93–5, 99–100, 106–7, 118–19, 173, 175–6, 190, 193, 197, 226–7

butterfly spreads 176

commodities 9

exotic derivatives 190, 193, 197

volatility smiles 173, 175–6

Asian (average price) options 179, 190–1, 208

asset classes 1–17, 19–49, 108–12, 114–19, 151–84, 185–91, 209–11, 213–27, 229–43

see also commodities; equities; fixed-income securities; foreign exchange; structured products

introductory background 1–17

modelling underlying asset price behaviours 1–17, 108–12, 114–19, 182–4

prices 1–17, 19–49, 110–12, 151–5, 185–6, 209–11, 214–27, 229–43

asset-backed securities (ABSs) 13, 231

at-the-money options (ATMs) 54–8, 65–75, 77–83, 121–3, 135–6, 145–9, 151–84, 207–8, 231–2, 237–43

auto-callable notes 179, 237–40, 243

autoregressive model, quantitative analysis 4–5, 121

back-to-back (matched book) transactions, swaps 43–4

backwardation, commodities 7–9, 33–4

Bank of America 241–2

Barclays Bank 242

barrier options 148, 179, 182, 183–4, 188–91, 200–8, 235–43

see also down …; knock …; up…

definitions 188–9

the Greeks 202–8

in–out parity 189–90, 192, 200–2

prices 200–8

base currencies, FX concepts 16–17, 29–31

basket auto-callable trades 179

baskets 35, 51, 179, 209–27, 240–3

see also best-of …; worst-of …

correlation risk 209–11, 214–27

definition 209–11

the Greeks 209–11, 214–27, 241

bearish strategies 65, ...