Exotic Options Trading

Frans de Weert 지음

Wiley 2011년 01월 19일 출간

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Written by an experienced trader and consultant, Frans de Weert-s Exotic Options Trading offers a risk-focused approach to the pricing of exotic options. By giving readers the necessary tools to understand exotic options, this book serves as a manual to equip the reader with the skills to price and risk manage the most common and the most complex exotic options.De Weert begins by explaining the risks associated with trading an exotic option before dissecting these risks through a detailed analysis of the actual economics and Greeks rather than solely stating the mathematical formulae. The book limits the use of mathematics to explain exotic options from an economic and risk perspective by means of real life examples leading to a practical interpretation of the mathematical pricing formulae.The book covers conventional options, digital options, barrier options, cliquets, quanto options, outperformance options and variance swaps, and explains difficult concepts in simple terms, with a practical approach that gives the reader a full understanding of every aspect of each exotic option. The book also discusses structured notes with exotic options embedded in them, such as reverse convertibles, callable and puttable reverse convertibles and autocallables and shows the rationale behind these structures and their associated risks.For each exotic option, the author makes clear why there is an investor demand; explains where the risks lie and how this affects the actual pricing; shows how best to hedge any vega or gamma exposure embedded in the exotic option and discusses the skew exposure.By explaining the practical implications for every exotic option and how it affects the price, in addition to the necessary mathematical derivations and tools for pricing exotic options, Exotic Options Trading removes the mystique surrounding exotic options in order to give the reader a full understanding of every aspect of each exotic option, cre

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ContentsPrefaceAcknowledgements1 Introduction2 Conventional Options, Forwards and Greeks2.1 Call and Put Options and Forwards2.2 Pricing Calls and Puts2.3 Implied Volatility2.4 Determining the Strike of the Forward2.5 Pricing of Stock Options Including Dividends2.6 Pricing Options in Terms of the Forward2.7 Put-Call Parity2.8 Delta2.9 Dynamic Hedging2.10 Gamma2.11 Vega2.12 Theta2.13 Higher Order Derivatives Like Vanna and Vomma2.14 Option&-s Interest Rate Exposure in Terms of Financing the Delta Hedge3 Profit on Gamma and Relation to Theta4 Delta Cash and Gamma Cash4.1 Example Delta and Gamma Cash5 Skew5.1 Reasons for Higher Realised Volatility in Falling Markets5.2 Skew Through Time: &-The Term Structure of Skew&-5.3 Skew and Its Effect on Delta5.4 Skew in FX versus Skew in Equity: &-Smile versus Downward Sloping&-5.5 Pricing Options Using the Skew Curve6 Simple Option Strategies6.1 Call Spread6.2 Put Spread6.3 Collar6.4 Straddle6.5 Strangle7 Monte Carlo Processes7.1 Monte Carlo Process Principle7.2 Binomial Tree versus Monte Carlo Process7.3 Binomial Tree Example7.4 The Workings of the Monte Carlo Process8 Chooser Option8.1 Pricing Example Simple Chooser Option8.2 Rationale Behind Chooser Option Strategies9 Digital Options9.1 Choosing the Strikes9.2 The Call Spread as Proxy for the Digital9.3 Width of the Call Spread versus Gearing10 Barrier Options10.1 Down-and-In Put Option10.2 Delta Change over the Barrier for a Down-and-In Put Option10.3 Factors Influencing the Magnitude of the Barrier Shift10.4 Delta Impact of a Barrier Shift10.5 Situations to Buy Shares in Case of a Barrier Breach of a Long Down-and-In Put10.6 Up-and-Out Call10.7 Up-and-Out Call Option with Rebat

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저자(글) Frans de Weert

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About the authorFRANS DE WEERT is mathematician by training. 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 a 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 works as a strategy consultant at Booz Allen Hamilton and lives in Amsterdam, The Netherlands.