Applied Math for derivatives offers a guide to the economics and valuation of financial derivative instruments which does not require a math degree to understand. It is deliberately targeted at those practitioners and students who wish to move beyond the algebra to the actual implementation of pricing and valuation models - often the difficult part of any derivative modelling exercise. Detailed coverage is provided for forwards, futures, swaps and options across interest rate, currency and equity markets.The book provides a hands on guide to the deconstruction of derivative instruments into their underlying building books based on the fundamental principals of valuation: the law of equivalent value; the time value of money; and modelling uncertainty.The book develops more than eighty operational derivative valuation models from first principals covering forwards, swaps and options.
A disk accompanies the book, which provides working spreadsheet models for all of the major instruments as well as addressing risk management issues such as delta hedge effectiveness and new issue arbitrage. In addition to the detailed information on valuation, the book also provides insights into the drivers behind the development of derivative markets and handy hints on the construction of valuation models.
Applied Math for derivatives offers a guide to the economics and valuation of financial derivative instruments which does not require a math degree to understand. It is deliberately targeted at those practitioners and students who wish to move beyond the algebra to the actual implementation of pricing and valuation models - often the difficult part of any derivative modelling exercise. Detailed coverage is provided for forwards, futures, swaps and options across interest rate, currency and equity markets.The book provides a hands on guide to the deconstruction of derivative instruments into their underlying building books based on the fundamental principals of valuation: the law of equivalent value; the time value of money; and modelling uncertainty.The book develops more than eighty operational derivative valuation models from first principals covering forwards, swaps and options.
A disk accompanies the book, which provides working spreadsheet models for all of the major instruments as well as addressing risk management issues such as delta hedge effectiveness and new issue arbitrage. In addition to the detailed information on valuation, the book also provides insights into the drivers behind the development of derivative markets and handy hints on the construction of valuation models.
Acknowledgments. Preface. GETTING STARTED. Introduction. Fundamentals of Derivative Valuation. A Review of Financial Math. FORWARDS AND FUTURES. The Role of Forwards Market. Interest Rate Forwards. Foreign Exchange Forwards. Equity Forwards. SWAPS. Swap Fundamentals. Interest Rate Swaps. Cross Currency Swaps. Equity Swaps. OPTIONS. Option Fundamentals. Equity Options. Interest Rate Options. Currency Options.
John Martin is the partner responsible for PricewaterhouseCoopers Australian/NZ Financial Risk Management practice. He has been extensively involved in the development of the risk management and derivatives industry in Australia and has written numerous publications in the areas of risk management, derivatives, real options, deregulation of the electricity industry and performance measurement. John has undertaken consultancy assignments with major corporations and Government instrumentalities in the Asia Pacific region. John has also been a pioneer in the development and implementation of 'at risk' measurement methodologies for non-financial corporations.Before joining PwC, John has held positions with the Reserve Bank of Australia, Commonwealth Bank, TNT Limited, Sydney Futures Exchange, Oakvale Capital. These roles have varied from economist, derivatives trader, risk manager, quantitative analyst to consultant.John has a Bachelor of Economics with Honors and has held positions as a National Council member of the Finance and Treasury Association, Chair of the Securities Institute Financial Risk Management Masters Program and Lecturer at the University of NSW School of Banking & Finance, Master of Finance Program.
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