The Financial Times Handbook of Financial Engineering Using Derivatives to Manage Risk Financial Times Series 3rd Edition by Lawrence Galitz ISBN 027374240X 978-0273742401

The Financial Times Handbook of Financial Engineering Using Derivatives to Manage Risk Financial Times Series  3rd Edition by Lawrence Galitz – Ebook PDF Instant Download/Delivery: 027374240X, 978-0273742401

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Product details:

ISBN 10: 027374240X 

ISBN 13: 978-0273742401

Author: Lawrence Galitz 

The Financial Times Handbook of Financial Engineering clearly explains the tools of financial engineering, showing you the formulas behind the tools, illustrating how they are applied, priced and hedged.
All applications in this book are illustrated with fully-worked practical examples, and recommended tactics and techniques are tested using recent data.

Table of contents: 

PART I: TOOLS

1 Introduction

1.1 Forty years of evolution

1.2 What is financial engineering?

1.3 The nature of risk

1.4 Financial engineering and risk

1.5 Layout of this book

2 The cash markets

2.1 Overview of financial markets

2.2 The foreign exchange market

2.3 The money markets

2.4 The bond markets

2.5 The equities markets

2.6 The commodities markets

2.7 Cash instruments versus derivatives

2.8 Capital adequacy requirements

3 Forward rates

3.1 Forward exchange rates

3.2 Forward interest rates

3.3 Do forward rates predict future spot rates?

3.4 Spot and forward rates in practice

4 FRAs

4.1 What is an FRA?

4.2 Definitions

4.3 Terminology

4.4 The settlement process

4.5 Hedging with FRAs

4.6 Pricing FRAs

4.7 Behaviour of FRA rates

5 Financial futures

5.1 A brief history of futures markets

5.2 What is a financial future?

5.3 Futures trading – from pits to screens

5.4 Buying and selling

5.5 The clearing mechanism

5.6 Futures margins

5.7 Physical delivery versus cash settlement

5.8 Futures and cash markets compared

5.9 The advantages of futures

6 Short-term interest rate futures

6.1 Definitions

6.2 STIR contracts pricing

6.3 Basis

6.4 Convergence

6.5 Behaviour of futures prices

6.6 Basic hedging example

6.7 Short-term futures contracts compared

6.8 Comparisons of futures and FRAs

6.9 Spread positions

7 Bond and stock index futures

7.1 Definition of bond futures contracts

7.2 The cheapest-to-deliver bond

7.3 Cash-and-carry pricing for bond futures

7.4 The implied repo rate

7.5 The delivery mechanism

7.6 Basic hedging with bond futures

7.7 Stock indices and stock index futures

7.8 Definition of stock index futures contracts

7.9 Advantages of using stock index futures

7.10 Cash-and-carry pricing for stock index futures

7.11 Stock index futures prices in practice

7.12 Turning cash into share portfolios and share portfolios into cash

8 Swaps

8.1 Definition of interest rate and cross-currency swaps

8.2 Development of the swap market

8.3 Interest rate swaps

8.4 Non-standard interest rate swaps

8.5 Overnight indexed swaps

8.6 Cross-currency swaps

8.7 Basic applications for swaps

8.8 Asset swaps

8.9 CMS and CMT swaps

8.10 Inflation swaps

8.11 Equity and dividend swaps

8.12 Commodity swaps

8.13 Volatility and variance swaps

8.14 Exotic swaps

8.15 ISDA documentation

8.16 Changes in market infrastructure after the credit crisis

9 Pricing and valuing swaps

9.1 Principles of swap valuation and pricing

9.2 Discount factors and the discount function

9.3 Calculating discount factors from swap and forward rates

9.4 Generating the discount function

9.5 Relationship between zero, swap and forward rates

9.6 Valuation and pricing of interest rate swaps

9.7 Valuation and pricing of currency swaps

9.8 Cancelling a swap

9.9 Hedging swaps with futures

9.10 The convexity correction

9.11 Credit risk of swaps

9.12 Collateralised vs. non-collateralised swaps

9.13 LIBOR-OIS discounting

10 Options – basics and pricing

10.1 Why options are different

10.2 Definitions

10.3 Options terminology

10.4 Value and profit profiles at maturity

10.5 Pricing options

10.6 The behaviour of financial prices

10.7 The Black–Scholes model

10.8 The binomial approach

10.9 The Monte Carlo approach

10.10 Finite difference methods

11 Options – volatility and the Greeks

11.1 Volatility

11.2 Volatility smiles and skews

11.3 The VIX

11.4 Value profiles prior to maturity

11.5 How options behave – the Greeks

11.6 Delta hedging

12 Options – from building blocks to portfolios

12.1 The building block approach

12.2 Option spreads – vertical, horizontal and diagonal

12.3 Volatility structures

12.4 Range structures

12.5 Arbitrage structures

13 Options – interest rate and exotic options

13.1 Why interest rate options are different

13.2 Caps, floors and collars

13.3 Swaptions

13.4 Cancellable and extendible swaps

13.5 Pricing interest rate options

13.6 Compound options

13.7 Exotic options

13.8 Path-dependent options

13.9 Digital options

13.10 Multivariate options

13.11 Other exotic options

13.12 Pricing exotic options

13.13 Price comparisons between exotic options

13.14 Embedded options

14 Introducing credit derivatives

14.1 Development of the credit derivatives market

14.2 Motivations for using credit derivatives

14.3 Introducing credit default swaps (CDS)

14.4 Market conventions

14.5 Credit events and determination committees

14.6 Capital structure, recovery rates, reference and deliverable obligations

14.7 Settlement methods and auctions

14.8 Other aspects of CDS

15 CDS pricing and credit indices

15.1 A simple CDS pricing model

15.2 Obtaining default probabilities

15.3 Developing a multi-period framework

15.4 The ISDA CDS Standard Model

15.5 Bootstrapping default probabilities

15.6 Calculating up-front payments

15.7 Mark-to-market and CDS valuation

15.8 PV01 and SDV01

15.9 How credit indices developed

15.10 The CDX and iTraxx credit indices

15.11 Market quotations and statistics

15.12 Other credit indices

15.13 Index tranches

PART II: TECHNIQUES

16 Applications for financial engineering

16.1 Applications of financial engineering

16.2 Sources of financial risk

16.3 Accounting and economic risk

16.4 Defining hedging objectives

16.5 Measuring hedge efficiency

16.6 The finance division as a profit centre

17 Managing currency risk

17.1 Forwards and futures solutions

17.2 Options are chameleons

17.3 How FX options are different

17.4 The scenario

17.5 Comparing hedging strategies

17.6 Basic option hedges

17.7 Selling options within a hedging programme

17.8 Collars, range-forwards, forward-bands and cylinders

17.9 Spread hedges

17.10 Participating forwards

17.11 Ratio forwards

17.12 Break-forwards, FOXs and forward-reversing options

17.13 Flexi-forwards

17.14 Using exotic options

17.15 Selling options outside a hedging programme

17.16 Dynamic hedging

17.17 Which strategy is best?

18 Managing interest rate risk using FRAs, futures and swaps

18.1 Using FRAs

18.2 Using short-term interest rate futures

18.3 Calculating the hedge ratio

18.4 Stack vs. strip hedges

18.5 Different kinds of basis risk

18.6 Managing the convergence basis

18.7 Interpolated hedges

18.8 Combining the techniques

18.9 FRAs vs. futures

18.10 Using swaps

18.11 Hedging bond and swap portfolios

18.12 Hedging bond portfolios with bond futures

19 Managing interest rate risk – using options and option-based instruments

19.1 Interest rate guarantees

19.2 Using caps and floors

19.3 Collars, participating caps, spread hedges and other variations

19.4 Using captions and swaptions

19.5 Comparison of interest risk management tools

20 Managing equity risk

20.1 Bull and bear strategies

20.2 Return enhancement

20.3 Value protection strategies

20.4 Vertical, horizontal and diagonal spreads

20.5 Other option strategies

20.6 Using stock index futures and options

20.7 Portfolio insurance

20.8 Guaranteed equity funds

20.9 Warrants and convertibles

20.10 Exotic equity derivatives

21 Managing commodity risk

21.1 Commodity risk

21.2 Creating commodity derivatives

21.3 Using commodity derivatives

21.4 Hybrid commodity derivatives

22 Managing credit risk

22.1 Hedging default risk

22.2 Hedging credit risk

22.3 Generating income

22.4 Trading strategies using CDS

22.5 Implementing directional views

22.6 Monetising relative credit views

22.7 Basis trades

22.8 Curve trades

22.9 Index trades

23 Structured products

23.1 Understanding structured products

23.2 How structured products are built

23.3 Features of structured products

23.4 Principal-protected notes

23.5 Buffered and capped notes

23.6 Leveraged structures

23.7 Path-dependent structures

23.8 Digital and range-accrual structures

23.9 Correlation structures

23.10 Redeeming structured products prior to maturity

23.11 Finalé

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