Book description
A comprehensive guide to financial engineering that stresses realworld applications
Financial engineering expert Charles S. Tapiero has his finger on the pulse of shifts coming to financial engineering and its applications. With an eye toward the future, he has crafted a comprehensive and accessible book for practitioners and students of Financial Engineering that emphasizes an intuitive approach to financial and quantitative foundations in financial and risk engineering. The book covers the theory from a practitioner perspective and applies it to a variety of realworld problems.
Examines the cornerstone of the explosive growth in markets worldwide
Presents important financial engineering techniques to price, hedge, and manage risks in general
Author heads the largest financial engineering program in the world
Author Charles Tapiero wrote the seminal work Risk and Financial Management.
Table of contents
 Title Page
 Copyright Page
 Dedication
 Introduction
 CHAPTER 1  Risk, Finance, Corporate Management, and Society
 CHAPTER 2  Applied Finance

CHAPTER 3  Risk Measurement and Volatility
 EXAMPLE: IBM RETURNS STATISTICS
 EXAMPLE: MOMENTS AND THE CAPM
 PROBLEM 3.1: CALCULATING THE BETA OF A SECURITY
 EXAMPLE: THE AR(1)ARCH(1) MODEL
 EXAMPLE: A GARCH (1,1) MODEL
 PROBLEM 3.2: THE PROBABILITY OF THE RANGE
 EXAMPLE: TAYLOR SERIES
 EXAMPLE: VaR AND SHORTFALL
 EXAMPLE*: VaR, NORMAL ROR, AND PORTFOLIO DESIGN
 CHAPTER 4  Risk Finance Modeling and Dependence

CHAPTER 5  Risk, Value, and Financial Prices
 EXAMPLE: THE UTILITY OF A LOTTERY
 EXAMPLE: THE POWER UTILITY FUNCTION
 EXAMPLE: VALUATION AND THE PRICING OF CASH FLOWS
 EXAMPLE: RISK AND THE FINANCIAL MELTDOWN
 EXAMPLES: SPECIFIC UTILITY FUNCTIONS
 EXAMPLE: KERNEL PRICING AND THE EXPONENTIAL UTILITY FUNCTION
 EXAMPLE: THE PRICING KERNEL AND THE CAPM
 EXAMPLE: KERNEL PRICING AND THE HARA UTILITY FUNCTION
 CHAPTER 6  Applied Utility Finance

CHAPTER 7  Derivative Finance and Complete Markets
 EXAMPLE: GENERALIZATION TO n STATES
 EXAMPLE: BINOMIAL OPTION PRICING
 PROBLEM 7.1: THE IMPLIED RISKNEUTRAL PROBABILITY
 EXAMPLE: THE PRICE OF A CALL OPTION
 EXAMPLE: A GENERALIZATION TO MULTIPLE PERIODS
 PROBLEM 7.2 : OPTIONS AND THEIR PRICES
 PROBLEM 7.3: PROVING THE PUTCALL PARITY
 EXAMPLE: PUTCALL PARITY AND DIVIDEND PAYMENTS
 PROBLEM 7.4: OPTIONS PUTCALL PARITY
 EXAMPLE: LOOKBACK OPTIONS
 EXAMPLE: ASIAN OPTIONS
 EXAMPLE: EXCHANGE OPTIONS
 EXAMPLE: CHOOSER OPTIONS
 EXAMPLE: BARRIER AND OTHER OPTIONS
 EXAMPLE: PASSPORT OPTIONS
 EXAMPLE: PRICING A FORWARD
 EXAMPLE: PRICING A FIXEDRATE BOND
 EXAMPLE: THE TERM STRUCTURE OF INTEREST RATES
 PROBLEM 7.5: ANNUITIES AND OBLIGATIONS
 PROBLEM 7.6: PORTFOLIO STRATEGIES
 EXAMPLE: CHANGE OF MEASURE IN A BINOMIAL MODEL
 EXAMPLE: A TWOSTAGE RANDOM WALK AND THE RADON NIKODYM DERIVATIVE
 CHAPTER 8  Options Applied

CHAPTER 9  Credit Scoring and the Price of Credit Risk
 CREDIT AND CREDIT RISK
 EXAMPLE: A SEPARATRIX
 EXAMPLE: THE SEPARATRIX AND BAYESIAN PROBABILITIES
 EXAMPLE: A BIVARIATE DEPENDENT DEFAULT DISTRIBUTION
 EXAMPLE: A PORTFOLIO OF DEFAULT LOANS
 EXAMPLE: A PORTFOLIO OF DEPENDENT DEFAULT LOANS
 PROBLEM 9.1: THE JOINT BERNOULLI DEFAULT DISTRIBUTION
 EXAMPLE: CREDIT GRANTING AND CREDITOR’S RISKS
 EXAMPLE: A BAYESIAN DEFAULT MODEL
 EXAMPLE: A FINANCIAL APPROACH
 EXAMPLE: AN APPROXIMATE SOLUTION
 PROBLEM 9.2: THE RATE OF RETURN OF LOANS
 EXAMPLE: CALCULATING THE SPREAD OF A DEFAULT BOND
 EXAMPLE: THE LOAN MODEL AGAIN
 EXAMPLE: PRICING DEFAULT BONDS
 EXAMPLE: PRICING DEFAULT BONDS AND THE HAZARD RATE
 EXAMPLE: THE BANK INTEREST RATE ON A HOUSE LOAN
 EXAMPLE: BUY INSURANCE TO PROTECT THE PORTFOLIO FROM LOAN DEFAULTS
 PROBLEM 9.3: USE THE PORTFOLIO AS AN UNDERLYING AND BUY OR SELL DERIVATIVES ON ...
 PROBLEM 9.4: LENDING RATES OF RETURN
 EXAMPLE: HEDGE FUNDS RATES OF RETURN
 EXAMPLE: EQUITYLINKED LIFE INSURANCE
 EXAMPLE: DEFAULT AND THE PRICE OF HOMES
 EXAMPLE: A BANK’S PROFIT FROM A LOAN

CHAPTER 10  MultiName and Structured Credit Risk Portfolios
 EXAMPLE: TOTAL RETURN SWAPS
 EXAMPLE: THE CDS PRICE SPREAD
 EXAMPLE: PRICING A PROJECT LAUNCH
 CDO EXAMPLE: COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS)
 EXAMPLE: THE CDO AND SPV
 EXAMPLE: A CDO WITH NUMBERS
 EXAMPLE: A CDO OF ZERO COUPON BONDS
 EXAMPLE: A CDO OF DEFAULT COUPONPAYING BONDS
 EXAMPLE: A CDO OF RATED BONDS
 EXAMPLES: DEFAULT MODELS FOR BONDS
 EXAMPLE: THE KMV LOSS MODEL
 CHAPTER 11  Engineered Implied Volatility and Implied RiskNeutral Distributions
 Acknowledgments
 About the Author
 Index
Product information
 Title: Risk Finance and Asset Pricing: Value, Measurements, and Markets
 Author(s):
 Release date: October 2010
 Publisher(s): Wiley
 ISBN: 9780470549469
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