Download Advanced Equity Derivatives: Volatility and Correlation by Sebastien Bossu, Peter Carr PDF

By Sebastien Bossu, Peter Carr

In Advanced fairness Derivatives: Volatility and Correlation, Sébastien Bossu stories and explains the complex options used for pricing and hedging fairness unique derivatives.  Designed for monetary modelers, choice investors and complicated traders, the content material covers an important theoretical and functional extensions of the Black-Scholes model.

Each bankruptcy comprises a number of illustrations and a quick choice of difficulties, masking key subject matters comparable to implied volatility floor types, pricing with implied distributions, neighborhood volatility types, volatility derivatives, correlation measures, correlation buying and selling, neighborhood correlation versions and stochastic correlation.

The writer has a twin specialist and educational heritage, making Advanced fairness Derivatives: Volatility and Correlation the suitable reference for quantitative researchers and mathematically savvy finance pros seeking to gather an in-depth figuring out of fairness unique derivatives pricing and hedging.

Show description

By Sebastien Bossu, Peter Carr

In Advanced fairness Derivatives: Volatility and Correlation, Sébastien Bossu stories and explains the complex options used for pricing and hedging fairness unique derivatives.  Designed for monetary modelers, choice investors and complicated traders, the content material covers an important theoretical and functional extensions of the Black-Scholes model.

Each bankruptcy comprises a number of illustrations and a quick choice of difficulties, masking key subject matters comparable to implied volatility floor types, pricing with implied distributions, neighborhood volatility types, volatility derivatives, correlation measures, correlation buying and selling, neighborhood correlation versions and stochastic correlation.

The writer has a twin specialist and educational heritage, making Advanced fairness Derivatives: Volatility and Correlation the suitable reference for quantitative researchers and mathematically savvy finance pros seeking to gather an in-depth figuring out of fairness unique derivatives pricing and hedging.

Show description

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Extra resources for Advanced Equity Derivatives: Volatility and Correlation

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795, and options maturing in 511 days had the following implied volatilities: Strike (%Spot) 30% 50% 70% 90% 100% 110% 130% 150% 200% Impl. Vol. 81%. (a) Calibrate the SVI model parameters to this data. 024, –1 < ???? < 1, s > 0. (b) Produce the graph of the corresponding implied distribution and compute the price of the “capped quadratic” option with payoff f (ST ) = min(1, (ST ∕S0 )2 ) using the numerical method of your choice. 797. ’s stock price since 1980. Based on this graph, you reckon that the stock price will remain above $14 within the next three years.

Hull, John C. 2012. Option, Futures, and Other Derivatives, 8th ed. New York: Prentice Hall. 1 “Free” Option Consider a European call option on an underlying asset S with strike K and maturity T where “you only pay the premium if you win,” that is, if ST > K. (a) Draw the diagram of the net P&L of this “free” option at maturity. Is it really “free”? (b) Find a replicating portfolio for the “free” option using vanilla and exotic options. (c) Calculate the fair value of the “free” option premium using the BlackScholes model with 20% volatility, S0 = K = $100, one-year maturity, zero interest and dividend rates.

REFERENCES AND BIBLIOGRAPHY Carr, Peter, and Liuren Wu. 2011. ” Working paper, New York University and Baruch College. Derman, Emanuel. 2010. ” Lecture notes, Columbia University. Gatheral, Jim. 2004. ” Proceedings of the Global Derivatives and Risk Management 2004 Madrid conference. Gatheral, Jim. 2005. The Implied Volatility Surface: A Practitioner’s Guide. Hoboken, NJ: John Wiley & Sons. Gatheral, Jim, and Antoine Jacquier. 2011. ” Quantitative Finance 11 (8): 1129–1132. Gurrieri, Sébastien.

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