This book is written by a trader who prices and risk manages exotic options as part of his everyday job and knows where the risks of these options lie. Theory alone is not enough to understand the full complexity and practical implications of exotic options and an understanding the theory and mathematical derivation is a prerequisite for dealing with them on a day-to-day basis. This book explains these practical implications and how it affects the price. The necessary mathematical derivations and tools are also explained to give the reader a full understanding of every aspect of each exotic option. This powerful balance will take away a lot of the mystique surrounding exotic options and provide the reader with a useable tool for dealing with exotic options in practice. A non-mathematical, risk-focused approach, this book will assume prior knowledge which can be found in An Introduction to Options Trading, by the same author.
Book Details:
- Author: Frans de Weert
- ISBN: 9780470756317
- Year Published: 2008
- Pages: 212
- BISAC: BUS027000, BUSINESS & ECONOMICS/Finance
About the Book and Topic:
This book is written by a trader who prices and risk manages exotic options as part of his everyday job and knows where the risks of these options lie. Theory alone is not enough to understand the full complexity and practical implications of exotic options and an understanding the theory and mathematical derivation is a prerequisite for dealing with them on a day-to-day basis. This book explains these practical implications and how it affects the price. The necessary mathematical derivations and tools are also explained to give the reader a full understanding of every aspect of each exotic option. This powerful balance will take away a lot of the mystique surrounding exotic options and provide the reader with a useable tool for dealing with exotic options in practice. A non-mathematical, risk-focused approach, this book will assume prior knowledge which can be found in An Introduction to Options Trading, by the same author.
The style or family of an option is usually defined by the dates on which the option may be exercised. The vast majority of options are either European or American (style) options, also known as vanilla options. An Exotic Option is a type of option that differs from common American or European options in terms of the underlying asset or the calculation of how or when the investor receives a certain payoff. These options are more complex than options that trade on an exchange, and generally trade over the counter. Types of exotic options include: chooser options, barrier options, Asian options, digital options and compound options, among others. Exotic options can pose challenging problems in valuation and hedging. It is not, however, the mathematics that make exotic options interesting but understanding the risks of an exotic option. Pricing an exotic option begins with understanding where the risks lie. Then, considering the risks, one needs to determine whether an exotic option should be priced using its own characteristics or using an estimate of more simple options, which typically makes an exotic option more risk manageable. Once this has been determined the pricing is usually nothing more than a Monte Carlo process.
GLOBAL APPEAL OF TOPIC: Exotic options can pose challenging problems in valuation and hedging. Since the markets were opened there has been a huge demand for these products, and there is a massive gap in the market for THE book on the subject. CLEAR AND CONCISE STYLE: Explains difficult concepts in simple terms in a non-mathematical, risk-focused book AUTHOR: Frans is the author of one of the best-selling titles on the Securities and Investment Institute series An Introduction to Options, he is well known within the industry for his practical work on options.
About the Author
Frans de Weert New York, USA. Frans de Weert is mathematician by training who is currently working as an equity derivatives trader at Barclays Capital, New York. After obtaining his masters in Mathematics, specializing in probability theory and financial mathematics at the University of Utrecht, he went on to do a research degree, M.Phil, in probability theory at the University of Manchester. After his academic career he started working as trader for Barclays Capital in London. In this role he gained experience in trading many different derivative products on European and American equities. After two and half years in London, he moved to New York to start trading derivatives on both Latin American as well as US underlyings. Frans currently lives in New York city.