Written by a highly respected academic/practitioner author team, the second edition of Finance and Derivatives covers all of the fundamentals of quantitative finance clearly and concisely without going into unnecessary technical detail. It is designed for both new practitioners and students. No prior background in finance is required – there are 12 chapters of gradual difficulty, starting with basic notions on interest rate and discounting, and ending with advanced concepts on derivatives, volatility trading and exotic products. Each chapter includes numerous exercises accompanied by the relevant financial theory, covering key topics that include: present value, arbitrage pricing, portfolio theory, derivates pricing, deltahedging and the BlackScholes model. The authors have an excellent knowledge of both the academic environment and the finance industry, making the book well balanced between theory and practice. Supplementary material for readers and lecturers is provided on an accompanying website.
Book Details:
- Author: Sebastien Bossu
- ISBN: 9781118673522
- Year Published: 2013
- Pages: 248
- BISAC: BUS027000, BUSINESS & ECONOMICS/Finance
About the Book and Topic:
Written by a highly respected academic/practitioner author team, the second edition of Finance and Derivatives covers all of the fundamentals of quantitative finance clearly and concisely without going into unnecessary technical detail. It is designed for both new practitioners and students. No prior background in finance is required – there are 12 chapters of gradual difficulty, starting with basic notions on interest rate and discounting, and ending with advanced concepts on derivatives, volatility trading and exotic products. Each chapter includes numerous exercises accompanied by the relevant financial theory, covering key topics that include: present value, arbitrage pricing, portfolio theory, derivates pricing, deltahedging and the BlackScholes model. The authors have an excellent knowledge of both the academic environment and the finance industry, making the book well balanced between theory and practice. Supplementary material for readers and lecturers is provided on an accompanying website.
Derivatives are a way of allowing traders to hedge their bets. ‘Hedging’ is a good thing. It can protect companies and banks against unexpected developments, for example sudden falls or rises in the value of currencies or commodities. In the 1980s, financial futures began to dominate trading. This involves buying and selling futures or options on shares, bonds or currencies. Swaps and options have become the next most common form of derivative trading after the original futures. Options were invented because people liked the security of knowing they could buy or sell at a certain price, but wanted the chance to profit if the market price suited them better at the time of delivery. Swaps are, as the name suggests, an exchange of something. They are generally done on interest rates or currencies. For example a firm may want to swap a floating interest rate for fixed interest rate to minimise uncertainty. There are derivatives on almost all types of asset which are traded – the main four being bonds (which vary in price according to interest rates), currencies, shares and what can broadly be described as goods (metals, energy sources, agricultural produce etc.). New ones are even being developed on catastrophes, such as earthquakes, and even on the creditworthiness of investors. The image of derivatives as highly risky investments stems from the fact that contracts which may be worth millions if the market moves in a certain way cost only a fraction of that value. Usually the market will not move that much and the contract will be settled or sold to somebody else for a small gain or loss. However if it does shift significantly big losses can be incurred. On exchanges, traders have to pay any losses incurred on their position at the end of each day in order to prevent risks getting out of hand. Banks have complex computer programmes to tell them how much they could lose if the market moves by a certain amount. Regulations require them to put money aside to protect against possible losses.
ENDORSED BY PAUL WILMOTT: Finance and Derivatives teaches all of the fundamentals of quantitative finance clearly and concisely without going into unnecessary technicalities. Youll pick up the most important theoretical concepts, tools and vocabulary without getting bogged down in arcane derivations or enigmatic theoretical considerations. FULLY REVISED AND UPDATED: Two new chapters covering cutting-edge concepts: volatility trading and exotic products. Revised text with yet more accessible content as well as additional examples and illustrations. Additional problems whose solutions will be made available to instructors only.
About the Author
Sebastien Bossu (New York, USA) is currently a Research Fellow of the Center for Financial Engineering at Columbia University. He has eight years of experience in the financial industry, lastly as Director of Equity Financial Engineering for an investment bank in London. A graduate from Columbia University, The University of Chicago, HEC Paris and Université Pierre et Marie Curie, he also worked for J.P. Morgan as an exotic derivatives structurer. Philippe Henrotte (Paris, France) is currently a Director of a hedge fund specialized in emerging markets where he brings broad knowledge in structuring, distribution, risk management and direct investments. He received his Ph.D. in Finance from Stanford University in 1993 and is a graduate of Ecole Polytechnique, Paris. Dr. Henrotte was a professor of Finance at HEC from 1993 to 2008 and is also a founding director of Ito33, a company which designs sophisticated derivatives pricing software for hedge funds and financial institutions.