QUANTITATIVE MODELING OF DERIVATIVES SECURITIES AVELLANEDA M. Księgarnia

Quantitative Modeling of Derivative Securities

Introduction

This book originated in lecture notes for the courses Mathematics of Finance I and //, which I have taught at the Courant Institute since the fall of 1993. As the material evolved and the possibility of writing a book became more real, I joined forces with Peter Laurence, of the University of Rome, who provided the scholarship and technical expertise needed to develop these notes and shape them into a coherent text. Quantitative Modeling of Derivative Securities is the fruit of more than 2 years of close collaboration between us.

Our motivation for writing this book can be traced to the early 1990s when there was an increasing interest on the part of Wall Street firms in the so-called structured financial products or "second-generation derivatives." At that time, it had become commonplace for top-bracket investment banks to market new financial products with tailor-made payoffs.1 The capability of designing these new financial derivatives, to bring them to the market and to manage their risk using financial engineering, is still seen as a competitive advantage. Another important aspect of quantitative analysis that developed strongly in the 1990s is the management of derivatives at the portfolio level using multifactor models. This "aggregate" approach to risk-management went far beyond the single-asset Black-Scholes model. For example, the 1990s saw U.S. dollar interest-rate derivatives markets reach their maturity. Quantitative models of the term-structure of interest rates until then the realm of econometricians and Fed watchers enabled Wall Street traders to warehouse and manage thousands of derivatives simultaneously. Asset pricing theory was a hammer that found its nail. This book is strongly influenced by the following two aspects of modeling derivatives: (1) pricing new financial products and measuring their market risk and (2) developing multifactor models that deal with several underlying securities particularly in the realm of fixed-income derivatives.

This is a textbook on the theory behind modeling derivatives and their risk-management. The more theoretical portions of the book were drawn from several sources, among them Darrell Duffle's Dynamic Asset Pricing Theory, which provides a superb road map to the financial markets and asset-pricing, and the papers of Cox, Ingersoll, and Ross. Other sources included many readings in quantitative models, our own research on option volatility and risk-management and, last but not least, 2 years' experience in Wall Street: first at Banque Indosuez' foreign-exchange options department and later at Morgan Stanley Dean Witter's Derivative Products Group in the area of fixed-income derivatives.

322 pages

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czy wybrany tytuł polskojęzyczny lub anglojęzyczny jest aktualnie na półce księgarni.