Dynamic hedging: managing vanilla and exotic options
Dynamic Hedging is the definitive source on derivatives risk. It provides a real-world methodology for managing portfolios containing any nonlinear security. It presents risks from the vantage point of the option market maker and arbitrage operator. The only book about derivatives risk written by an...
Gespeichert in:
| 1. Verfasser: | |
|---|---|
| Format: | Buch |
| Sprache: | English |
| Veröffentlicht: |
New York [u.a.]
Wiley
1997
|
| Schriftenreihe: | Wiley series in financial engineering
|
| Schlagworte: | |
| Online-Zugang: | Inhaltsverzeichnis |
| Zusammenfassung: | Dynamic Hedging is the definitive source on derivatives risk. It provides a real-world methodology for managing portfolios containing any nonlinear security. It presents risks from the vantage point of the option market maker and arbitrage operator. The only book about derivatives risk written by an experienced trader with theoretical training, it remolds option theory to fit the practitioner's environment. As a larger share of market exposure cannot be properly captured by mathematical models, noted option arbitrageur Nassim Taleb uniquely covers both on-model and off-model derivatives risks. The author discusses, in plain English, vital issues, including: The generalized option, which encompasses all instruments with convex payoff, including a trader's potential bonus. The techniques for trading exotic options, including binary, barrier, multiasset, and Asian options, as well as methods to take into account the wrinkles of actual, non-bellshaped distributions. Market dynamics viewed from the practitioner's vantage point, including liquidity holes, portfolio insurance, squeezes, fat tails, volatility surface, GARCH, curve evolution, static option replication, correlation instability, Pareto-Levy, regime shifts, autocorrelation of price changes, and the severe flaws in the value at risk method. New tools to detect risks, such as higher moment analysis, topography exposure, and nonparametric techniques. The path dependence of all options hedged dynamically Dynamic Hedging is replete with helpful tools, market anecdotes, at-a-glance risk management rules distilling years of market lore, and important definitions. The book contains modules in which the fundamental mathematics of derivatives, such as the Brownian motion, Ito's lemma, the numeraire paradox, the Girsanov change of measure, and the Feynman-Kac solution are presented in intuitive practitioner's language. |
| Beschreibung: | XX, 506 S. graph. Darst. |
| ISBN: | 0471152803 |
Internformat
MARC
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| 245 | 1 | 0 | |a Dynamic hedging |b managing vanilla and exotic options |c Nassim Taleb |
| 264 | 1 | |a New York [u.a.] |b Wiley |c 1997 | |
| 300 | |a XX, 506 S. |b graph. Darst. | ||
| 336 | |b txt |2 rdacontent | ||
| 337 | |b n |2 rdamedia | ||
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| 490 | 0 | |a Wiley series in financial engineering | |
| 520 | 3 | |a Dynamic Hedging is the definitive source on derivatives risk. It provides a real-world methodology for managing portfolios containing any nonlinear security. It presents risks from the vantage point of the option market maker and arbitrage operator. The only book about derivatives risk written by an experienced trader with theoretical training, it remolds option theory to fit the practitioner's environment. As a larger share of market exposure cannot be properly captured by mathematical models, noted option arbitrageur Nassim Taleb uniquely covers both on-model and off-model derivatives risks. The author discusses, in plain English, vital issues, including: The generalized option, which encompasses all instruments with convex payoff, including a trader's potential bonus. The techniques for trading exotic options, including binary, barrier, multiasset, and Asian options, as well as methods to take into account the wrinkles of actual, non-bellshaped distributions. Market dynamics viewed from the practitioner's vantage point, including liquidity holes, portfolio insurance, squeezes, fat tails, volatility surface, GARCH, curve evolution, static option replication, correlation instability, Pareto-Levy, regime shifts, autocorrelation of price changes, and the severe flaws in the value at risk method. New tools to detect risks, such as higher moment analysis, topography exposure, and nonparametric techniques. The path dependence of all options hedged dynamically Dynamic Hedging is replete with helpful tools, market anecdotes, at-a-glance risk management rules distilling years of market lore, and important definitions. The book contains modules in which the fundamental mathematics of derivatives, such as the Brownian motion, Ito's lemma, the numeraire paradox, the Girsanov change of measure, and the Feynman-Kac solution are presented in intuitive practitioner's language. | |
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Datensatz im Suchindex
| _version_ | 1804125789661167616 |
|---|---|
| adam_text | Contents
Introduction
Dynamic
Hedging
Principles of Real World Dynamic Hedging
General Risk Management
3
Part I
Markets, Instruments, People
1
Introduction to the Instruments
Derivatives
9
Synthetic Securities
12
Time-Dependent Linear Derivatives
13
Noncontingent
Time-Dependent Nonlinear Derivatives
16
Options and Other Contingent Claims
16
Simple Options
18
Hard and Soft Optionality
20
Basic Rules of Options Equivalence
20
Mirror Image Rule
22
American Options, Early Exercise, and Other Headaches
(Advanced Topic)
24
Soft American Options
24
Hard American Options
25
A Brief Warning about Early Exercise Tests
27
Forwards, Futures, and Forward-Forwards
(Advanced Topic)
29
Credit
30
Marks-to-Market Differences
30
The Correlation between the Future and
the Financing (Advanced Issue)
31
Forward-Forward
32
Core Risk Management: Distinction between Primary and
Secondary Risks
32
Applying the Framework to Specific Instruments
35
xi
xii Contents
2
The Generalized Option
38
Step
1.
The Homogeneity of the Structure
38
Step
2.
The Type of Payoff: Continuous
and Discontinuous
41
Step
3.
Barriers
43
Step
4.
Dimension of the Structure and the Number
of Assets
43
Step
5.
Order of the Options
45
Step
6.
Path Dependence
46
3
Market Making and Market Using
48
Book Runners versus Price Takers
48
Commoditized and
Nonstandard
Products
50
Trading Risks in Commoditized Products
51
Profitability
53
Proprietary Departments
54
Tacit Rules in Market Making
56
Market Making and the Price for Immediacy
57
Market Making and Autocorrelation of Price Changes
58
Market Making and the Illusion of Profitability
58
Adverse Selection, Signaling, and the Risk Management
of Market Makers
60
Value Trading versus the Greater Fool Theory
62
Monkeys on a Typewriter
64
The Statistical Value of Track Records
64
More Modern Methods of Monitoring Traders
65
The Fair Dice and the Dubins-Savage Optimal
Strategy
65
The ArcSine Law of the P/L
66
4
Liquidity and Liquidity Holes
68
Liquidity
68
Liquidity Holes
69
Liquidity and Risk Management
70
Stop Orders and the Path of Illiquidity
70
Barrier Options and the Liquidity Vacuum
72
One-Way Liquidity Traps
73
Holes, Black-Scholes, and the Ills of Memory
73
Limits and Market Failures
74
Reverse Slippage
74
Liquidity and Triple Witching Hour
75
Contents xiii
Portfolio Insurance 75
Liquidity and Option Pricing
77
5
Arbitrage and the Arbitrageurs
80
A Trader s Definition
80
Mechanical versus Behavioral Stability
81
The Deterministic Relationships
82
Passive Arbitrage
83
An Absorbing Barrier Called the Squeeze
84
Duration of the Arbitrage
84
Arbitrage and the Accounting Systems
85
Other
Nonmarket
Forms of Arbitrage
86
Arbitrage and the Variance of Returns
87
6
Volatility and Correlation
88
Calculating Historical Volatility and Correlation
92
Centering around the Mean
92
Introducing Filtering
95
There Is No Such Thing as Constant Volatility and
Correlation
97
The Parkinson Number and the Variance Ratio Method
101
Part II
Measuring Option Risks
The Real World and the Black-Scholes-Merton
Assumptions
109
Black-Scholes-Merton as an Almost Nonparametric
Pricing System
109
7
Adapting Black-Scholes-Merton: The Delta
115
Characteristics of a Delta
116
The Continuous Time Delta Is Not Always a Hedge Ratio
116
Delta as a Measure for Risk
121
Confusion: Delta by the Cash or by the Forward
123
Delta for Linear Instruments
123
Delta for a Forward
123
Delta for a Forward-Forward
125
Delta for a Future
125
Delta and the Barrier Options
126
xiv Contents
Delta
and the Bucketing
127
Delta in
the Value at Risk
127
Delta, Volatility, and Extreme Volatility
127
8
Gamma and Shadow Gamma
132
Simple Gamma
132
Gamma Imperfections for a Book
133
Correction for the Gamma of the Back Month
136
First Adjustment
137
Second Adjustment
138
Shadow Gamma
138
Shadow Gamma and the Skew
142
GARCH Gamma
142
Advanced Shadow Gamma
142
Case Study in Shadow Gamma: The Syldavian Elections
145
9 Vega
and the Volatility Surface
147
Vega
and Modified
Vega 147
Vega
and the Gamma
149
The Modified
Vega 150
How to Compute the Simple Weightings
151
Advanced Method: The Covariance Bucket
Vega 153
Forward Implied Volatilities
154
Computing Forward Implied Volatility
154
Multifactor
Vega 158
Volatility Surface
164
The Method of Squares for Risk Management
164
10
Theta and Minor Greeks
167
Theta and the Modified Theta
167
Modifying the Theta
167
Theta for a Bet
169
Theta, Interest Carry, and Self-Financing Strategies
169
Shadow Theta
170
Weakness of the Theta Measure
171
Minor Greeks
171
Rho, Modified Rho
171
Omega (Option Duration)
174
Alpha
178
Contents xv
Table of Greeks
181
Stealth and Health
182
Convexity, Modified Convexity
183
The Double Bubble
190
11
The Greeks and Their Behavior
191
The Bleed: Gamma and Delta Bleed (Holding
Volatility Constant)
191
Bleed with Changes in Volatility
195
Going into the Expiration of a Vanilla Option
196
Ddeltadvol (Stability Ratio)
200
Test
1
of Stability
200
Test
2
of Stability: The Asymptotic
Vega
Test
201
Moments of an Option Position
202
Ignoring Higher Greeks: The Lock Delta
204
12
Fungibility, Convergence, and Stacking
208
Fungibility
208
Ranking of Fungibility
209
Fungibility and the Term Structure of Prices:
The Cash-and-Carry Line
210
Fungibility and Option Arbitrage
212
Changes in the Rules of the Game
212
Convergence
213
Mapping Convergence
215
Convergence and Convexity
216
Levels of Convergence Trading
216
Volatility and Convergence
216
Convergence and Biased Assets
216
Stacking Techniques
217
Other Stacking Applications
220
13
Some Wrinkles of Option Markets
222
Expiration Pin Risks
222
Sticky Strikes
223
Market Barriers
224
A Currency Band: Is It a Barrier?
225
The Absent Barrier
226
What Flat Means
226
Primary and Secondary Exposures
228
xvi Contents
14
Bucketing and Topography
229
Static Straight Bucketing
229
American and Path-Dependent Options
231
Advanced Topic: The Forward or Forward-Forward
Bucket
231
Topography
232
Strike Topography (or Static Topography)
233
Dynamic Topography (Local Volatility Exposure)
235
Barrier Payoff Topography
237
15
Beware the Distribution
238
The Tails
238
Random Volatility
238
Histograms from the Markets
242
The Skew and Biased Assets
245
Biased Assets
248
Nonparallel
Accounting
249
Value Linked to Price
250
Currencies as Assets
250
Reverse Assets
251
Volatility Regimes
251
Correlation between Interest Rates and Carry
252
More Advanced Put-Call Parity Rules
252
16
Option Trading Concepts
256
Initiation to Volatility Trading:
Vega
versus Gamma
260
Soft versus Hard Deltas
262
Volatility Betting
263
Higher Moment Bets
264
Case Study: Path Dependence of a Regular Option
265
Simple Case Study: The Worst Case Scenario
270
Part HI
Trading and Hedging Exotic Options
17
Binary Options: European Style
273
European Binary Options
273
Hedging with a Vanilla
275
Definition of the Bet: Forward and Spot Bets
278
Contents xvii
Pricing with the Skew
279
A Formal Pricing on the Skew
281
The Skew Paradox
282
Difference between the Binary and the Delta: The Delta
Paradox Revisited
284
First Hedging Consequences
286
The Delta Is a Dirac Delta
286
Gamma for a Bet
287
Conclusion: Statistical Trading versus Dynamic Hedging
289
Case Study in Binary Packages
—
Contingent Premium
Options
290
Recommended Use: Potential Devaluations
291
Case Study: The Betspreads
292
Advanced Case Study: Multiasset Bets
294
18
Binary Options: American Style
295
American Single Binary Options
295
Hedging an American Binary: Fooled by the Greeks
298
Case Study: National
Vega
Bank
298
The Ravages of Time
299
Understanding the
Vega
Convexity
303
Trading Methods
305
Case Study: At-Settlement American Binary Options
306
Other Greeks
307
American Double Binary Options
307
Vegas of the Double Binary
308
Other Applications of American Barriers
309
Credit Risk
311
19
Barrier Options (I)
312
Barrier Options (Regular)
312
Knock-Out Options
312
Knock-In Options
317
Effects of Volatility
319
Adding the Drift: Complexity of the Forward Line
321
Risk Reversals
323
Put/Call Symmetry and the Hedging of Barrier
Options
323
Barrier Decomposition under Skew Environments
331
The Reflection Principle
335
Girsanov
339
Effect of Time on Knock-Out Options
339
xviii Contents
First
Exit Time and Its Risk-Neutral Expectation
340
Issues in Pricing Barrier Options
343
The Single Volatility Fudge
343
A More Accurate Method: The Dupire-Derman-Kani
Technique
344
Additional Pricing Complexity: The Variance Ratios
345
Exercise: Adding the Puts
346
20
Barrier Options (II)
347
Reverse Barrier Options
347
Reverse Knock-Out Options
347
Case Study: The Knock-Out Box
348
Hedging Reverse Knock-Outs: A Graphical
Case Study
356
Double Barrier Options
362
Rebate
363
Exercise: Adding the Knock-In
363
Alternative Barrier Options
363
The Exploding Option
364
Capped Index Option
365
Reading a Risk Management Report
368
Gaps and Gap Reports
374
21
Compound, Choosers, and Higher Order Options
376
Vega
Convexity: The Costs of Dynamic Hedging
378
Uses of Compound Options: Hedging Barrier
Vega 379
Chooser Options
380
A Few Applications of the Higher Order Options
382
22
Multiasset Options
383
Choice between Assets: Rainbow Options
384
Correlated and Uncorrelated Greeks
387
Linear Combinations
390
Basket Options
391
Lognormality
391
Correlation Issues
392
Composite Underlying Securities
395
Quantitative Case Study: Indexed Notes
395
Background
396
Terms of the Note
396
Where Is the Underlying?
397
Triangular Decomposition
398
Contents xix
23
Minor Exotics:
Lookback
and Asian Options
403
Lookback
and Ladder Options
403
The Rollover Option
404
A Footnote on Basket Options: Asian Options
408
Part IV
Modules
Module A Brownian Motion on a Spreadsheet, a Tutorial
415
The Classical One-Asset Random Walk
415
Some Questions
417
A Two-Asset Random Walk: An Introduction to the
Effects of Correlation
420
Extension: A Three-Asset Random Walk
424
Module
В
Risk Neutrality Explained
426
Step
1.
Probabilistic Fairness, the Fair Dice and
the Skew
426
Step
2.
Adding the Real World: The Risk-Neutral
Argument
427
The Drift
427
Module
С
Numeraire Relativity and the Two-Country Paradox
431
Extension: The Two-Country Paradox
433
Conclusion
435
Mathematical Note
436
Conclusion
437
Module
D
Correlation Triangles: A Graphical Case Study
438
Correlation Triangle Rule
441
Calculating an Implied Correlation Curve
444
Module
E
The Value-at-Risk
445
Simplified Examples
446
Example
1.
No Diversification
447
Example
2.
A Cross-Position
447
Example
3.
Two Possible Trades
448
xx Contents
Module
F
Probabilistic
Rankings in Arbitrage
453
Ranking of Securities
453
European Option Rules
453
Calendar Rules
454
Barrier and Digital Rules
454
Correlation Rules
455
Correlation Convexity Rules
457
General Convexity Rules
458
Module
G
Option Pricing
459
Ito s Lemma Explained
459
Ito s Lemma for Two Assets
462
Black-Scholes Equation
463
The Risk-Neutral Argument
463
Stochastic Volatility Model
464
Multiasset Options
466
Rainbow Options
466
Outperformance
Options
467
Spread Options
467
Compound and Chooser Order Options
467
Compound Options
468
Chooser Options
468
Barrier Options
468
The Reflection Principle
469
Girsanov s Theorem
469
Pricing Barriers
470
Numerical Stochastic Integration: A Sample
477
A
Mathematica™
Program
477
Notes
479
Bibliography
490
Index
499
Contents
Preface
vii
Acknowledgments
xiii
Part
1
Accountability
1
Modes of Accountability: Events of Closure, Rites of Repetition
3
2
On Money and the Memory of Loss
33
3
Public Apologies, Dignity, and Performative Redress
48
4
Reconciliation after Ethnic Cleansing:
Listening, Retribution, Affiliation
61
5
The State of War Crimes following the Israeli-Hezbollah War
79
6
Terror, Compassion, and the Limits of Identification: Counter-
Transference and Rites of Commemoration in Lebanon
94
Part
2
Regime Change, Occupation, Democratization
7
Responsibility after Military Intervention:
What Is Regime Change? What Is Occupation?
113
8
Does the United States Want Democratization in Iraq?
Anthropological Reflections on the Export of Political Form
126
9
The External Ascription of Defeat and
Collective Punishment
141
Parł
3
An Anthropology of Democratic Authority
10
What Do Election Rituals Mean? Representation, Sacrifice,
and Cynical Reason
153
11
Politics without a Head: Is the Love Parade a New Form
of Political Identification?
166
12
Is the United States Europe s Other?
189
Notes
201
Bibliography
225
Index
239
|
| any_adam_object | 1 |
| author | Taleb, Nassim Nicholas 1960- |
| author_GND | (DE-588)124120180 |
| author_facet | Taleb, Nassim Nicholas 1960- |
| author_role | aut |
| author_sort | Taleb, Nassim Nicholas 1960- |
| author_variant | n n t nn nnt |
| building | Verbundindex |
| bvnumber | BV011284944 |
| classification_rvk | QK 620 QK 650 |
| ctrlnum | (OCoLC)266178617 (DE-599)BVBBV011284944 |
| dewey-full | 332.645 |
| dewey-hundreds | 300 - Social sciences |
| dewey-ones | 332 - Financial economics |
| dewey-raw | 332.645 |
| dewey-search | 332.645 |
| dewey-sort | 3332.645 |
| dewey-tens | 330 - Economics |
| discipline | Wirtschaftswissenschaften |
| format | Book |
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As a larger share of market exposure cannot be properly captured by mathematical models, noted option arbitrageur Nassim Taleb uniquely covers both on-model and off-model derivatives risks. The author discusses, in plain English, vital issues, including: The generalized option, which encompasses all instruments with convex payoff, including a trader's potential bonus. The techniques for trading exotic options, including binary, barrier, multiasset, and Asian options, as well as methods to take into account the wrinkles of actual, non-bellshaped distributions. Market dynamics viewed from the practitioner's vantage point, including liquidity holes, portfolio insurance, squeezes, fat tails, volatility surface, GARCH, curve evolution, static option replication, correlation instability, Pareto-Levy, regime shifts, autocorrelation of price changes, and the severe flaws in the value at risk method. New tools to detect risks, such as higher moment analysis, topography exposure, and nonparametric techniques. The path dependence of all options hedged dynamically Dynamic Hedging is replete with helpful tools, market anecdotes, at-a-glance risk management rules distilling years of market lore, and important definitions. 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| id | DE-604.BV011284944 |
| illustrated | Illustrated |
| indexdate | 2024-07-09T18:07:09Z |
| institution | BVB |
| isbn | 0471152803 |
| language | English |
| oai_aleph_id | oai:aleph.bib-bvb.de:BVB01-007578503 |
| oclc_num | 266178617 |
| open_access_boolean | |
| owner | DE-739 DE-703 DE-573 DE-19 DE-BY-UBM DE-Aug4 DE-473 DE-BY-UBG DE-355 DE-BY-UBR |
| owner_facet | DE-739 DE-703 DE-573 DE-19 DE-BY-UBM DE-Aug4 DE-473 DE-BY-UBG DE-355 DE-BY-UBR |
| physical | XX, 506 S. graph. Darst. |
| publishDate | 1997 |
| publishDateSearch | 1997 |
| publishDateSort | 1997 |
| publisher | Wiley |
| record_format | marc |
| series2 | Wiley series in financial engineering |
| spelling | Taleb, Nassim Nicholas 1960- Verfasser (DE-588)124120180 aut Dynamic hedging managing vanilla and exotic options Nassim Taleb New York [u.a.] Wiley 1997 XX, 506 S. graph. Darst. txt rdacontent n rdamedia nc rdacarrier Wiley series in financial engineering Dynamic Hedging is the definitive source on derivatives risk. It provides a real-world methodology for managing portfolios containing any nonlinear security. It presents risks from the vantage point of the option market maker and arbitrage operator. The only book about derivatives risk written by an experienced trader with theoretical training, it remolds option theory to fit the practitioner's environment. As a larger share of market exposure cannot be properly captured by mathematical models, noted option arbitrageur Nassim Taleb uniquely covers both on-model and off-model derivatives risks. The author discusses, in plain English, vital issues, including: The generalized option, which encompasses all instruments with convex payoff, including a trader's potential bonus. The techniques for trading exotic options, including binary, barrier, multiasset, and Asian options, as well as methods to take into account the wrinkles of actual, non-bellshaped distributions. Market dynamics viewed from the practitioner's vantage point, including liquidity holes, portfolio insurance, squeezes, fat tails, volatility surface, GARCH, curve evolution, static option replication, correlation instability, Pareto-Levy, regime shifts, autocorrelation of price changes, and the severe flaws in the value at risk method. New tools to detect risks, such as higher moment analysis, topography exposure, and nonparametric techniques. The path dependence of all options hedged dynamically Dynamic Hedging is replete with helpful tools, market anecdotes, at-a-glance risk management rules distilling years of market lore, and important definitions. The book contains modules in which the fundamental mathematics of derivatives, such as the Brownian motion, Ito's lemma, the numeraire paradox, the Girsanov change of measure, and the Feynman-Kac solution are presented in intuitive practitioner's language. Exotic options (DE-588)4450269-2 gnd rswk-swf Hedging (DE-588)4123357-8 gnd rswk-swf Optionshandel (DE-588)4126185-9 gnd rswk-swf Optionshandel (DE-588)4126185-9 s DE-604 Exotic options (DE-588)4450269-2 s Hedging (DE-588)4123357-8 s DE-188 Digitalisierung UB Bamberg application/pdf http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&local_base=BVB01&doc_number=007578503&sequence=000002&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA Inhaltsverzeichnis |
| spellingShingle | Taleb, Nassim Nicholas 1960- Dynamic hedging managing vanilla and exotic options Exotic options (DE-588)4450269-2 gnd Hedging (DE-588)4123357-8 gnd Optionshandel (DE-588)4126185-9 gnd |
| subject_GND | (DE-588)4450269-2 (DE-588)4123357-8 (DE-588)4126185-9 |
| title | Dynamic hedging managing vanilla and exotic options |
| title_auth | Dynamic hedging managing vanilla and exotic options |
| title_exact_search | Dynamic hedging managing vanilla and exotic options |
| title_full | Dynamic hedging managing vanilla and exotic options Nassim Taleb |
| title_fullStr | Dynamic hedging managing vanilla and exotic options Nassim Taleb |
| title_full_unstemmed | Dynamic hedging managing vanilla and exotic options Nassim Taleb |
| title_short | Dynamic hedging |
| title_sort | dynamic hedging managing vanilla and exotic options |
| title_sub | managing vanilla and exotic options |
| topic | Exotic options (DE-588)4450269-2 gnd Hedging (DE-588)4123357-8 gnd Optionshandel (DE-588)4126185-9 gnd |
| topic_facet | Exotic options Hedging Optionshandel |
| url | http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&local_base=BVB01&doc_number=007578503&sequence=000002&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA |
| work_keys_str_mv | AT talebnassimnicholas dynamichedgingmanagingvanillaandexoticoptions |