- 出版社: JOHN WILEY & SONS INC; 1 (2011年2月1日)
- 丛书名: The Wiley Finance Series
- 精装: 304页
- 语种： 英语
- ISBN: 0470683686
- 条形码: 9780470683682
- 商品尺寸: 17.5 x 2.3 x 25.1 cm
- 商品重量: 676 g
- ASIN: 0470683686
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Foreign Exchange Option Pricing: A Practitioners Guide (英语) 精装 – 2011年2月1日
Dr Iain J. Clark, (London, UK), is Head of Foreign Exchange Quantitative Analysis at Dresdner Kleinwort in London, where he set up and runs the team responsible for developing pricing libraries for the front office. Previously, he was Director of the Quantitative Research Group in Lehman Brothers, Fixed Income Quantitative Analyst at BNP Paribas and has also worked in FX Commodities Derivatives research at JP Morgan. He holds an MSc in Mathematics from the University of Edinburgh, and a PhD in Applied Mathematics from the University of Queensland, Australia. Dr Clark is a regular speaker at key finance events, and has presented at London Imperial College, The Bachelier Society Annual Conference, London Imperial College, world business Strategies annual Conference, Risk events, Marcus Evans events and many more.
List of Tables.
List of Figures.
1.1 A Gentle Introduction to FX Markets.
1.2 Quotation Styles.
1.3 Risk Considerations.
1.4 Spot Settlement Rules.
1.5 Expiry and Delivery Rules.
1.6 Cutoff Times.
2 Mathematical Preliminaries.
2.1 The Black–Scholes Model.
2.2 Risk Neutrality.
2.3 Derivation of the Black–Scholes equation.
2.4 Integrating the SDE for ST.
2.5 Black–Scholes PDEs Expressed in Logspot.
2.6 Feynman–Kac and Risk-Neutral Expectation.
2.7 Risk Neutrality and the Presumption of Drift.
2.8 Valuation of European Options.
2.9 The Law of One Price.
2.10 The Black–Scholes Term Structure Model.
2.11 Breeden–Litzenberger Analysis.
2.12 European Digitals.
2.13 Settlement Adjustments.
2.14 Delayed Delivery Adjustments.
2.15 Pricing using Fourier Methods.
2.16 Leptokurtosis – More than Fat Tails.
3 Deltas and Market Conventions.
3.1 Quote Style Conversions.
3.2 The Law of Many Deltas.
3.3 FX Delta Conventions.
3.4 Market Volatility Surfaces.
3.6 Market Strangle.
3.7 Smile Strangle and Risk Reversal.
3.8 Visualisation of Strangles.
3.9 Smile Interpolation – Polynomial in Delta.
3.10 Smile Interpolation – SABR.
3.11 Concluding Remarks.
4 Volatility Surface Construction.
4.1 Volatility Backbone – Flat Forward Interpolation.
4.2 Volatility Surface Temporal Interpolation.
4.3 Volatility Surface Temporal Interpolation – Holidays and Weekends.
4.4 Volatility Surface Temporal Interpolation – Intraday Effects.
5 Local Volatility and Implied Volatility.
5.2 The Fokker–Planck Equation.
5.3 Dupire's Construction of Local Volatility.
5.4 Implied Volatility and Relationship to Local Volatility.
5.5 Local Volatility as Conditional Expectation.
5.6 Local Volatility for FX Markets.
5.7 Diffusion and PDE for Local Volatility.
5.8 The CEV Model.
6 Stochastic Volatility.
6.2 Uncertain Volatility.
6.3 Stochastic Volatility Models.
6.4 Uncorrelated Stochastic Volatility.
6.5 Stochastic Volatility Correlated with Spot.
6.6 The Fokker–Planck PDE Approach.
6.7 The Feynman–Kac PDE Approach.
6.8 Local Stochastic Volatility (LSV) Models.
7 Numerical Methods for Pricing and Calibration.
7.1 One-Dimensional Root Finding – Implied Volatility Calculation.
7.2 Nonlinear Least Squares Minimisation.
7.3 Monte Carlo Simulation.
7.4 Convection–Diffusion PDEs in Finance.
7.5 Numerical Methods for PDEs.
7.6 Explicit Finite Difference Scheme.
7.7 Explicit Finite Difference on Nonuniform Meshes.
7.8 Implicit Finite Difference Scheme.
7.9 The Crank–Nicolson Scheme.
7.10 Numerical Schemes for Multidimensional PDEs.
7.11 Practical Nonuniform Grid Generation Schemes.
7.12 Further Reading.
8 First Generation Exotics – Binary and Barrier Options.
8.1 The Reflection Principle.
8.2 European Barriers and Binaries.
8.3 Continuously Monitored Binaries and Barriers.
8.4 Double Barrier Products.
8.5 Sensitivity to Local and Stochastic Volatility.
8.6 Barrier Bending.
8.7 Value Monitoring.
9 Second Generation Exotics.
9.1 Chooser Options.
9.2 Range Accrual Options.
9.3 Forward Start Options.
9.4 Lookback Options.
9.5 Asian Options.
9.6 Target Redemption Notes.
9.7 Volatility and Variance Swaps.
10 Multicurrency Options.
10.1 Correlations, Triangulation and Absence of Arbitrage.
10.2 Exchange Options.
10.4 Best-ofs and Worst-ofs.
10.5 Basket Options.
10.6 Numerical Methods.
10.7 A Note on Multicurrency Greeks.
10.8 Quantoing Untradeable Factors.
10.9 Further Reading.
11 Longdated FX.
11.1 Currency Swaps.
11.2 Basis Risk.
11.3 Forward Measure.
11.4 LIBOR in Arrears.
11.5 Typical Longdated FX Products.
11.6 The Three-Factor Model.
11.7 Interest Rate Calibration of the Three-Factor Model.
11.8 Spot FX Calibration of the Three-Factor Model.
Different delta conventions
Market strangles, and how to fit your interpolating function to the traded strikes
Realistic interpolations for volatility surface construction
Local volatility in FX
Local Stochastic Volatility Models
Longdated FX Options
Also covered are the different issues and approaches of implementing the models, like Monte Carlo and PDEs; and a good discussion of barrier bending and exotics.
The focus is on presenting the methods and formulas, not proving theorems; even so, traders should not treat it as only a formula depository, there's real depth behind it.
Highly recommended for anyone trading or modelling FX options.
Thoughtful, clear and rigorous, this book offers an in depth, unified treatment of fx options pricing. It will be a great reference for a quant and also potential traders. Not only does ian bridge the gap about volatility surface, but how one applies these models to the fx. I would recommend having read a prior book in stochastic calculus prior to coming to this book....Although you don't really need an indepth knowledge about stochastic calculus prior to reading this book. Say, a book by ubbo wiersema brownian motion calculus should do the trick or perhaps even shreve (i've read ubbo's book completely and have only read about 7-8 chapters in shreve).
apart from that...a course in numerical linear algebra would also help. although most of the numerical stuff in this book is very self-contained. in short...buy it...The mathematical tootls you will learn from this book can very well be applied in other areas of options pricing.
Some of the most useful topics are:
Concept of many deltas and decent treatment of ATM and Delta conventions
Correctness of FX vol surface construction in the light of 1-vol Butterfly convention
Most relevant fitting methods
good details about models and practical mention of the LSV model -
entire section on practical aspects of the numerical methods
Really like the comparison with Heat equation.
Barrier options have been treated very well. I was able to do a comparative analysis of different skew based models - LV, SV LSV through Moustache graphs for OneTouch and DNTs.
Since Iain was heading desk activities, I would have really liked for him to also cover a few more things like:
- practical aspects of curve building given FX market is so convoluted with conventions - which ccys use LIBOR/OIS curve and which ones use FX Forward implied curves
- How is the model used practically for hedging activities - a little more intuition besides the math
- FX Volatility products in the light of FX models - calibrating SV model parameters to variance swaps.
overall a great book and definitely recommend reading it for desk activities