Interest Rate Swaps and Their Derivatives: A Practitioner’s Guide (Wiley Finance)

Posted by admin on November 14, 2011 Comments Off

An up-to-date look at the evolution of interest rate swaps and derivatives

Interest Rate Swaps and Derivatives bridges the gap between the theory of these instruments and their actual use in day-to-day life. This comprehensive guide covers the main “rates” products, including swaps, options (cap/floors, swaptions), CMS products, and Bermudan callables. It also covers the main valuation techniques for the exotics/structured-notes area, which remains one of the most challenging parts of the market.

  • Provides a balance of relevant theory and real-world trading instruments for rate swaps and swap derivatives
  • Uses simple settings and illustrations to reveal key results
  • Written by an experienced trader who has worked with swaps, options, and exotics

With this book, author Amir Sadr shares his valuable insights with practitioners in the field of interest rate derivatives-from traders and marketers to those in operations.
CHECK PRICE NOW!
Read Full Review >>

Best review for Interest Rate Swaps and Their Derivatives: A Practitioner’s Guide (Wiley Finance)

Risk measure and fair valuation of an investment guarantee in life insurance [An article from: Insurance Mathematics and Economics]

Posted by admin on November 12, 2011 Comments Off


This digital document is a journal article from Insurance Mathematics and Economics, published by Elsevier in . The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.

Description:
Investment guarantees are amongst the most important topics in the pricing and management of life insurance. Traditionally, two ways of analyzing the risk are possible: on the one hand, the financial approach based on risk-neutral measure and leading to option pricing and continuous hedging strategy and on the other hand, a more actuarial approach based on ruin probability and distribution of surplus. The purpose of this paper is to try to integrate these two approaches in the management of life insurance contracts with profits. First, we analyze in terms of value at risk and conditional value at risk the effect of putting an investment guarantee. This will be done in an ALM framework, based on different investment strategies of the insurer in terms of risk and matching between assets and liabilities. The liability side will be represented by a guaranteed technical rate; the asset side will be a mix of stocks, cash and bonds in a Gaussian environment with different matching strategies. Consequences of an investment choice in terms of ruin probability and level of solvency will be illustrated. In a second step, fair valuation principles are used in order to compute the market value of the contract and fix the participation rate of the contract.
CHECK PRICE NOW!
Read Full Review >>

Best review for Risk measure and fair valuation of an investment guarantee in life insurance [An article from: Insurance Mathematics and Economics]

Dynamic, nonparametric hedging of European style contingent claims using canonical valuation [An article from: Finance Research Letters]

Posted by admin on November 10, 2011 Comments Off


This digital document is a journal article from Finance Research Letters, published by Elsevier in 2005. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.

Description:
The canonical valuation, proposed by Stutzer [1996. Journal of Finance 51, 1633-1652], is a nonparametric option pricing approach for valuing European-style contingent claims. This paper derives risk-neutral dynamic hedge formulae for European call and put options under canonical valuation that obey put-call parity. Further, the paper documents the error-metrics of the canonical hedge ratio and analyzes the effectiveness of discrete dynamic hedging in a stochastic volatility environment. The results suggest that the nonparametric hedge formula generates hedges that are substantially unbiased and is capable of producing hedging outcomes that are superior to those produced by Black and Scholes [1973. Journal of Political Economy 81, 637-654] delta hedging.
CHECK PRICE NOW!
Read Full Review >>

Best review for Dynamic, nonparametric hedging of European style contingent claims using canonical valuation [An article from: Finance Research Letters]

DCF and Risk-Neutral Valuation: A comparison

Posted by admin on November 8, 2011 Comments Off


The book illustrates an alternative corporate valuation method to the well known DCF. The limitations and drawbacks of the discounting model and especially of the CAPM question its validity for such an important practice for management as corporate valuation. Being based on the option pricing theory and on the concepts of replication and no arbitrage, risk-neutral valuation uses a completely different approach to account for the risk of a cash flow. In fact, the model applies risk-neutral probabilities to adjust the risky future cash flows of the firm to certainty equivalence. The available literature is reviewed and the two valuation approaches are tested by estimating the value for a sample of five companies and comparing the results to the market capitalisation. By analysing the companies ABB, Bâloise, Novartis, UBS and Valora, the empirical test covers different sectors, sizes and degrees of financial stability.
CHECK PRICE NOW!
Read Full Review >>

Best review for DCF and Risk-Neutral Valuation: A comparison

Risk-neutral valuation of participating life insurance contracts [An article from: Insurance Mathematics and Economics]

Posted by admin on November 6, 2011 Comments Off


This digital document is a journal article from Insurance Mathematics and Economics, published by Elsevier in 2006. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.

Description:
The valuation of life insurance contracts using concepts from financial mathematics has recently attracted considerable interest in academia as well as among practitioners. In this paper, we will investigate the valuation of participating contracts, which are characterized by embedded interest rate guarantees and some bonus distribution rules. We will model these under the specific regulatory framework in Germany; however, our analysis can be applied to any insurance market with cliquet-style guarantees. We will present a framework, in which different kinds of guarantees or options can be analyzed separately. Also, the practical implementation of such models is discussed. We use two different numerical approaches to derive fair parameter settings of such contracts and price the embedded options. The sensitivity of the contract value with respect to multiple parameters is studied. In particular, we find that life insurers offer interest rate guarantees below their risk-neutral value. Furthermore, the financial strength of an insurance company considerably affects the value of a contract.
CHECK PRICE NOW!
Read Full Review >>

Best review for Risk-neutral valuation of participating life insurance contracts [An article from: Insurance Mathematics and Economics]

Risk-Neutral Valuation: Pricing and Hedging of Financial Derivatives, 2nd Ed.

Posted by admin on November 5, 2011 Comments Off





Written by Nick Bingham, Chairman and Professor of Statistics at Birkbeck College, and Rüdiger Kiesel, an “up-and-coming” academic, Risk Neutrality will benefit the Springer Finance Series in many ways. It provides a valuable introduction to Mathematical Finance for Graduate Students, and also comprehensive coverage of Financial subjects which should also stimulate practitioners of the subject. Based on a graduate course given to practitioners of Finance, the book identifies a clear gap in the market of Mathematical Finance. The authors approach is simple and designed to accommodate a wide audience. Springer Finance is a new programme of books aimed at students, academics and practitioners working on increasingly technical approaches to the analysis of financial markets. It aims to cover a
CHECK PRICE NOW!
Read Full Review >>

Best review for Risk-Neutral Valuation: Pricing and Hedging of Financial Derivatives, 2nd Ed.

Risk-Neutral Valuation: Pricing and Hedging of Financial Derivatives (Springer Finance)

Posted by admin on November 4, 2011 Comments Off


This second edition – completely up to date with new exercises – provides a comprehensive and self-contained treatment of the probabilistic theory behind the risk-neutral valuation principle and its application to the pricing and hedging of financial derivatives. On the probabilistic side, both discrete- and continuous-time stochastic processes are treated, with special emphasis on martingale theory, stochastic integration and change-of-measure techniques. Based on firm probabilistic foundations, general properties of discrete- and continuous-time financial market models are discussed.


CHECK PRICE NOW!
Read Full Review >>

Best review for Risk-Neutral Valuation: Pricing and Hedging of Financial Derivatives (Springer Finance)