Foreign Exchange Option Pricing: A Practitioner's Guide - Rilegato

Clark, Iain J.

Rilegato

ISBN 10: 0470683686 ISBN 13: 9780470683682

Casa editrice: John Wiley & Sons Inc, 2010

Riassunto

This book covers foreign exchange options from the point of view of the finance practitioner. It contains everything a quant or trader working in a bank or hedge fund would need to know about the mathematics of foreign exchange—not just the theoretical mathematics covered in other books but also comprehensive coverage of implementation, pricing and calibration.

With content developed with input from traders and with examples using real-world data, this book introduces many of the more commonly requested products from FX options trading desks, together with the models that capture the risk characteristics necessary to price these products accurately. Crucially, this book describes the numerical methods required for calibration of these models – an area often neglected in the literature, which is nevertheless of paramount importance in practice. Thorough treatment is given in one unified text to the following features:

• Correct market conventions for FX volatility surface construction
• Adjustment for settlement and delayed delivery of options
• Pricing of vanillas and barrier options under the volatility smile
• Barrier bending for limiting barrier discontinuity risk near expiry
• Industry strength partial differential equations in one and several spatial variables using finite differences on nonuniform grids
• Fourier transform methods for pricing European options using characteristic functions
• Stochastic and local volatility models, and a mixed stochastic/local volatility model
• Three-factor long-dated FX model
• Numerical calibration techniques for all the models in this work
• The augmented state variable approach for pricing strongly path-dependent options using either partial differential equations or Monte Carlo simulation

Connecting mathematically rigorous theory with practice, this is the essential guide to foreign exchange options in the context of the real financial marketplace.

Table of Contents

Mathematical Preliminaries

Deltas and Market Conventions

Volatility Surface Construction

Local Volatility and Implied Volatility

Stochastic Volatility

Numerical Methods for Pricing and Calibration

First Generation Exotics – Binary and Barrier Options

Second Generation Exotics

Multicurrency Options

Long-dated FX Options

Su questo libro

L'autore

Dr Iain J. Clark is Head of Foreign Exchange and Commodities Quantitative Analysis at the London office of Standard Bank. He has over 12 years experience as a foreign exchange quant, having started his career at JP Morgan, and has also worked for BNP Paribas, Lehman Brothers, and Dresdner Kleinwort. He holds a PhD in applied mathematics, on the application of partial differential equations to quantum waveguides, and an MSc in financial mathematics.

Product Description

Book by Clark Iain

Dettagli dell?edizione

• Editore: John Wiley & Sons Inc
• Data di pubblicazione: 2010
• ISBN 10: 0470683686
• ISBN 13: 9780470683682
• Rilegatura: Copertina rigida
• Lingua: Inglese
• Numero edizione: 1
• Numero di pagine: 280