Swaps and Other Derivatives (PDF)

"Richard Flavell has a strong theoretical perspective on swaps with
considerable practical experience in the actual trading of these
instruments. This rare combination makes this welcome updated
second edition a useful reference work for market
practitioners."

--Satyajit Das, author of Swaps and Financial
Derivatives Library and Traders and Guns & Money: Knowns
and Unknowns in the Dazzling World of Derivatives

Fully revised and updated from the first edition, Swaps and
Other Derivatives, Second Edition, provides a practical
explanation of the pricing and evaluation of swaps and interest
rate derivatives.

Based on the author's extensive experience in derivatives
and risk management, working as a financial engineer, consultant
and trainer for a wide range of institutions across the world this
book discusses in detail how many of the wide range of swaps and
other derivatives, such as yield curve, index amortisers,
inflation-linked, cross-market, volatility, diff and quanto diffs,
are priced and hedged. It also describes the modelling of interest
rate curves, and the derivation of implied discount factors from
both interest rate swap curves, and cross-currency adjusted
curves.

There are detailed sections on the risk management of swap and
option portfolios using both traditional approaches and also
Value-at-Risk. Techniques are provided for the construction of
dynamic and robust hedges, using ideas drawn from mathematical
programming.

This second edition has expanded sections on the credit
derivatives market - its mechanics, how credit default swaps
may be priced and hedged, and how default probabilities may be
derived from a market strip. It also prices complex swaps with
embedded options, such as range accruals, Bermudan swaptions and
target accrual redemption notes, by constructing detailed numerical
models such as interest rate trees and LIBOR-based simulation.
There is also increased discussion around the modelling of
volatility smiles and surfaces.

The book is accompanied by a CD-ROM where all the models are
replicated, enabling readers to implement the models in practice
with the minimum of effort.