Written to bridge the gap between foundational quantitative finance and market practice, this book goes beyond the basics covered in most textbooks by presenting content concerning actual industry norms, thus resulting in a clearer picture of the field for the readers. These include, for instance, the practitioner's perspective of how local versus stochastic volatility affects forward smile, or the implications of mean reversion on forward volatility.Key considerations for modelling in rates, equities and foreign exchange are presented from the perspective of common themes across various assets, as well as their individual characteristics.The discussion on models emphasizes the key aspects that are relevant to the pricing of different types of financial derivatives, so that the reader can observe how an appropriate choice of models is essential in reflecting the risk profile and hedging considerations for different products.With the knowledge gleaned from this book, readers will attain a more comprehensive understanding of market practice in derivatives modelling.
Chia Tan's book provides a refreshing introduction to concepts of quantitative finance applied to real world financial markets. He intuitively explains and guides the reader to tackle problems in financial engineering with practical solutions in mind, and is mindful to point out which issues each model can address and also the problems and limitations. Whereas mathematical elegance often overshadowed important issues prior to the financial crisis of 2008, this is one of the first books with a chapter explaining, in simple terms, such issues as counterparty risk, balance sheet and funding costs, and basis risk that have become important topics to many financial institutions these days. This book will be a valuable resource for hedge fund managers and buy-side institutions who plan to use over-the-counter derivative products, and also as a refresher for the sell-side dealers who trade them. -- David Ha "Interest Rates Trader, Goldman Sachs Japan"
Audience: Tertiary; University or College
Number Of Pages: 200
Published: 31st May 2012
Dimensions (cm): 22.9 x 15.5 x 2.8
Weight (kg): 0.748