FX Options and Smile Risk / Wiley Finance Series (ePub)
(Sprache: Englisch)
The FX options market represents one of the most liquid and
strongly competitive markets in the world, and features many
technical subtleties that can seriously harm the uninformed and
unaware trader.
This book is a unique guide to running an FX...
strongly competitive markets in the world, and features many
technical subtleties that can seriously harm the uninformed and
unaware trader.
This book is a unique guide to running an FX...
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Produktinformationen zu „FX Options and Smile Risk / Wiley Finance Series (ePub)“
The FX options market represents one of the most liquid and
strongly competitive markets in the world, and features many
technical subtleties that can seriously harm the uninformed and
unaware trader.
This book is a unique guide to running an FX options book from
the market maker perspective. Striking a balance between
mathematical rigour and market practice and written by experienced
practitioner Antonio Castagna, the book shows readers how to
correctly build an entire volatility surface from the market prices
of the main structures.
Starting with the basic conventions related to the main FX deals
and the basic traded structures of FX options, the book gradually
introduces the main tools to cope with the FX volatility risk. It
then goes on to review the main concepts of option pricing theory
and their application within a Black-Scholes economy and a
stochastic volatility environment. The book also introduces models
that can be implemented to price and manage FX options before
examining the effects of volatility on the profits and losses
arising from the hedging activity.
Coverage includes:
* how the Black-Scholes model is used in professional trading
activity
* the most suitable stochastic volatility models
* sources of profit and loss from the Delta and volatility
hedging activity
* fundamental concepts of smile hedging
* major market approaches and variations of the Vanna-Volga
method
* volatility-related Greeks in the Black-Scholes model
* pricing of plain vanilla options, digital options, barrier
options and the less well known exotic options
* tools for monitoring the main risks of an FX options'
book
The book is accompanied by a CD Rom featuring models in VBA,
demonstrating many of the approaches described in the book.
strongly competitive markets in the world, and features many
technical subtleties that can seriously harm the uninformed and
unaware trader.
This book is a unique guide to running an FX options book from
the market maker perspective. Striking a balance between
mathematical rigour and market practice and written by experienced
practitioner Antonio Castagna, the book shows readers how to
correctly build an entire volatility surface from the market prices
of the main structures.
Starting with the basic conventions related to the main FX deals
and the basic traded structures of FX options, the book gradually
introduces the main tools to cope with the FX volatility risk. It
then goes on to review the main concepts of option pricing theory
and their application within a Black-Scholes economy and a
stochastic volatility environment. The book also introduces models
that can be implemented to price and manage FX options before
examining the effects of volatility on the profits and losses
arising from the hedging activity.
Coverage includes:
* how the Black-Scholes model is used in professional trading
activity
* the most suitable stochastic volatility models
* sources of profit and loss from the Delta and volatility
hedging activity
* fundamental concepts of smile hedging
* major market approaches and variations of the Vanna-Volga
method
* volatility-related Greeks in the Black-Scholes model
* pricing of plain vanilla options, digital options, barrier
options and the less well known exotic options
* tools for monitoring the main risks of an FX options'
book
The book is accompanied by a CD Rom featuring models in VBA,
demonstrating many of the approaches described in the book.
Inhaltsverzeichnis zu „FX Options and Smile Risk / Wiley Finance Series (ePub)“
Preface. Notation and Acronyms. 1 The FX Market. 1.1 FX rates and spot contracts. 1.2 Outright and FX swap contracts. 1.3 FX option contracts. 1.4 Main traded FX option structures. 2 Pricing Models for FX Options. 2.1 Principles of option pricing theory. 2.2 The black-scholes model. 2.3 The Heston Model. 2.4 The SABR model. 2.5 The mixture approach. 2.6 Some considerations about the choice of model. 3 Dynamic Hedging and Volatility Trading. 3.1 Preliminary considerations. 3.2 A general framework. 3.3 Hedging with a constant implied volatility. 3.4 Hedging with an updating implied volatility. 3.5 Hedging Vega. 3.6 Hedging Delta, Vega, Vanna and Volga. 3.7 The volatility smile and its phenomenology. 3.8 Local exposures to the volatility smile. 3.9 Scenario hedging and its relationship with Vanna-Volga hedging. 4 The Volatility Surface. 4.1 General definitions. 4.2 Criteria for an efficient and convenient representation of the volatility surface. 4.3 Commonly adopted approaches to building a volatility surface. 4.4 Smile interpolation among strikes: the Vanna-Volga approach. 4.5 Some features of the Vanna-Volga approach. 4.6 An alternative characterization of the Vanna-Volga approach. 4.7 Smile interpolation among expiries: implied volatility term structure. 4.8 Admissible volatility surfaces. 4.9 Taking into account the market butterfly. 4.10 Building the volatility matrix in practice. 5 Plain Vanilla Options. 5.1 Pricing of plain vanilla options. 5.2 Market-making tools. 5.3 Bid/ask spreads for plain vanilla options. 5.4 Cutoff times and spreads. 5.5 Digital options. 5.6 American plain vanilla options. 6 Barrier Options. 6.1 A taxonomy of barrier options. 6.2 Some relationships of barrier option prices. 6.3 Pricing for barrier options in a BS economy. 6.4 Pricing formulae for barrier options. 6.5 One-touch (rebate) and no-touch options. 6.6 Double-barrier options. 6.7 Double-no-touch and double-touch options. 6.8 Probability of hitting a barrier. 6.9 Greek
... mehr
calculation. 6.10 Pricing barrier options in other model settings. 6.11 Pricing barriers with non-standard delivery. 6.12 Market approach to pricing barrier options. 6.13 Bid/ask spreads. 6.14 Monitoring frequency. 7 Other Exotic Options. 7.1 Introduction. 7.2 At-expiry barrier options. 7.3 Window barrier options. 7.4 First-then and knock-in-knock-out barrier options. 7.5 Auto-quanto options. 7.6 Forward start options. 7.7 Variance swaps. 7.8 Compound, asian and lookback options. 8 Risk Management Tools and Analysis. 8.1 Introduction. 8.2 Implementation of the LMUV model. 8.3 Risk monitoring tools. 8.4 Risk analysis of plain vanilla options. 8.5 Risk analysis of digital options. 9 Correlation and FX Options. 9.1 Preliminary considerations. 9.2 Correlation in the BS setting. 9.3 Contracts depending on several FX spot rates. 9.4 Dealing with correlation and volatility smile. 9.5 Linking volatility smiles. References. Index.
... weniger
Autoren-Porträt von Antonio Castagna
Antonio Castagna is currently partner and co-founder of theconsulting company Iason ltd, providing support to financial
institutions for the design of models to price complex derivatives
and to measure a wide range of risks, including credit and
liquidity. Antonio graduated in Finance from LUISS University,
Rome, in 1995 with a thesis on American options and the numerical
procedures for their valuation. He began his career in investment
banking in IMI Bank, Luxemborug, as a financial analyst in the Risk
Control Department before moving to Banca IMI, Milan, first as a
market maker of cap/floors and swaptions, before setting up the FX
options desk and running the book of plain vanilla and exotic
options on the major currencies, whilst also being responsible for
the entire FX volatility trading.
Antonio has written a number of papers on credit derivatives,
managing of exotic options risks and volatility smiles. He is often
invited to academic and post-graduate courses.
Bibliographische Angaben
- Autor: Antonio Castagna
- 2010, 1. Auflage, 330 Seiten, Englisch
- Verlag: John Wiley & Sons
- ISBN-10: 0470684933
- ISBN-13: 9780470684931
- Erscheinungsdatum: 28.01.2010
Abhängig von Bildschirmgröße und eingestellter Schriftgröße kann die Seitenzahl auf Ihrem Lesegerät variieren.
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- Größe: 6.99 MB
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Sprache:
Englisch
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