Financial derivative investments: an introduction to structured products
Gespeichert in:
| 1. Verfasser: | |
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| Format: | Buch |
| Sprache: | English |
| Veröffentlicht: |
London
ICP Imperial College Press
2011
|
| Online-Zugang: | Inhaltsverzeichnis |
| Beschreibung: | XVIII, 355 S. graph. Darst. |
| ISBN: | 9781848167117 1848167113 |
Internformat
MARC
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| 008 | 110722s2011 d||| |||| 00||| eng d | ||
| 020 | |a 9781848167117 |9 978-1-84816-711-7 | ||
| 020 | |a 1848167113 |9 1-84816-711-3 | ||
| 035 | |a (OCoLC)796187026 | ||
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| 049 | |a DE-11 |a DE-1049 |a DE-92 | ||
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| 100 | 1 | |a Bateson, Richard D. |e Verfasser |4 aut | |
| 245 | 1 | 0 | |a Financial derivative investments |b an introduction to structured products |c Richard D. Bateson |
| 264 | 1 | |a London |b ICP Imperial College Press |c 2011 | |
| 300 | |a XVIII, 355 S. |b graph. Darst. | ||
| 336 | |b txt |2 rdacontent | ||
| 337 | |b n |2 rdamedia | ||
| 338 | |b nc |2 rdacarrier | ||
| 856 | 4 | 2 | |m HBZ Datenaustausch |q application/pdf |u http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&local_base=BVB01&doc_number=024172588&sequence=000002&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA |3 Inhaltsverzeichnis |
| 999 | |a oai:aleph.bib-bvb.de:BVB01-024172588 | ||
Datensatz im Suchindex
| _version_ | 1804148000609533952 |
|---|---|
| adam_text | Titel: Financial derivative investments
Autor: Bateson, Richard D.
Jahr: 2011
Contents
Preface...............................................................................................................................v
Guide to Acronyms..........................................................................................................xv
Glossary of Notations....................................................................................................xvii
Chapter 1: Introduction......................................................................................................1
1.1 Introduction.............................................................................................................1
1.2 The Case for Derivative Investments......................................................................2
1.3 Investment Criteria..................................................................................................4
1.4 Types of Investors...................................................................................................6
1.5 Families of Structured Products..............................................................................6
1.5.1 Structured equity products..............................................................................7
1.5.2 Structured interest rate products.....................................................................7
1.5.3 Structured credit products...............................................................................8
1.5.4 Other types of structured investment products...............................................8
1.6 Evolution of Derivatives Technology......................................................................9
1.6.1 Equity derivative technology........................................................................10
1.6.2 Interest rate derivative technology................................................................11
1.6.3 Credit derivative technology........................................................................12
1.7 Introduction to Structuring Investment Products...................................................13
1.8Issuing Structured Notes.......................................................................................16
1.8.1 Financial or corporate issuers.......................................................................16
1.8.2 Special purpose vehicles (SPVs)..................................................................17
1.9 Structured Product Fees ........................................................................................18
Chapter 2: Introduction to Swap Finance.........................................................................21
2.1 Introduction...........................................................................................................21
2.2 Zero Rates and Discount Factors...........................................................................21
2.3 Forward Rates.......................................................................................................23
2.4 Present Valuing Cash-flows and Bonds................................................................24
2.5 Floating Rate Instruments.....................................................................................26
vii
viii Financial Derivative Investments
2.6 Interest Rate Swaps...............................................................................................27
2.7Funding Legs for Structured Swaps......................................................................28
2.8 Forwards and Futures............................................................................................29
2.8.1 Forward contracts.........................................................................................29
2.8.2 Futures contracts..........................................................................................31
2.9 Building Zero Curves............................................................................................32
Chapter 3: Pricing Equity Options...................................................................................35
3.1 Call and Put Options.............................................................................................35
3.2 Modelling Stock Prices.........................................................................................38
3.3 The Black-Scholes Equation.................................................................................39
3.4 The Black-Scholes Option Pricing Equation........................................................42
3.5 Market Implied Volatility......................................................................................44
3.6 Option Price Sensitivities - The Greeks .............................................................46
3.6.1 Delta.............................................................................................................47
3.6.2 Gamma.........................................................................................................48
3.6.3 Vega.............................................................................................................48
3.6.4 Theta.............................................................................................................49
3.6.5 Hedging portfolios using greeks...................................................................49
3.7 Numerical Methods...............................................................................................50
3.7.1 Binomial trees..............................................................................................50
3.7.2 Monte Carlo simulation................................................................................54
3.8 Digitals and Barrier Options..................................................................................56
3.9FX Options and Quantos.......................................................................................58
Chapter 4: Equity Structured Products.............................................................................59
4.1 Introduction...........................................................................................................59
4.2 Reverse Convertibles.............................................................................................60
4.2.1 Structuring reverse convertibles...................................................................63
4.2.2 Discount reverse convertibles.......................................................................65
4.2.3 Knock-in reverse convertibles......................................................................66
4.2.4 Lock-up reverse convertibles........................................................................69
4.2.5 Leveraged reverse convertibles....................................................................69
4.2.6 Auto-callables and extendibles....................................................................73
4.2.7 Contingent coupon reverse convertibles.......................................................74
4.2.8 Reverse convertible summary......................................................................76
4.3 Protected Bull Notes..............................................................................................76
4.3.1 Average protected bull notes........................................................................79
4.3.2 Capped protected bull notes.........................................................................81
4.4 Protected Cliquet Notes.........................................................................................84
4.4.1 Reverse cliquets...........................................................................................86
4.4.2 Scaled cliquet protected notes......................................................................87
Contents ix
4.5 Multi-Barrier Protected Notes...............................................................................89
4.6 Leveraged Bull Notes............................................................................................90
4.7 Summary of Equity Structured Products...............................................................92
Chapter 5: Basket Equity Products..................................................................................95
5.1 Introduction...........................................................................................................95
5.2 Basket Notes.........................................................................................................96
5.3 Protected Basket Bull Notes..................................................................................96
5.3.1 Average protected basket bull notes...........................................................100
5.3.2 Capped protected basket bull notes............................................................102
5.4 Protected Basket Cliquet Notes...........................................................................104
5.5 Basket Reverse Convertibles...............................................................................106
5.6 Protected Multiple Binary Notes.........................................................................107
5.7 Rainbow Notes....................................................................................................110
5.7.1 Protected rainbow notes.............................................................................113
5.8 Worst-of Protected Notes....................................................................................114
5.8.1 Everest protected notes...............................................................................116
5.8.2 Power reverse convertibles.........................................................................118
5.9 Performance Select Protected Notes....................................................................119
5.9.1 Atlas protected notes..................................................................................120
5.9.2 Himalaya protected notes...........................................................................121
5.10 Worst-of Knock-out Notes................................................................................121
5.10.1 Pulsar protected notes...............................................................................121
5.10.2 Altiplano and Neptune protected notes.....................................................126
5.11 Summary...........................................................................................................127
Chapter 6: Pricing Interest Rate Products.....................................................................129
6.1 Introduction.........................................................................................................129
6.2 Approaches to Modelling Interest Rates..............................................................130
6.3 Black s Model.....................................................................................................132
6.3.1 Black s model for forward rates.................................................................133
6.3.2 Black s cap.................................................................................................133
6.4 Market Volatility of Caps and Floors..................................................................135
6.5 The Hull-White Model.......................................................................................136
6.5.1 The Hull-White caplet...............................................................................139
6.6 Swaptions............................................................................................................139
6.7 Black s Model for Swap Rates............................................................................140
6.7.1 Black s model for European swaptions......................................................141
6.8 Hull-White Swaptions........................................................................................142
6.9 Hull-White Model Calibration............................................................................143
6.10 Numerical Methods...........................................................................................144
6.10.1 Hull-White model trinomial trees............................................................145
x Financial Derivative Investments
6.10.2 Hull-White Monte Carlo..........................................................................147
6.11 Other Interest Rate Models...............................................................................148
6.12 Hedging an Interest Rate Derivatives Book......................................................149
Chapter 7: Interest Rate Products..................................................................................151
7.1 Introduction.........................................................................................................151
7.2 Capped/Floored Notes.........................................................................................151
7.2.1 Capped floating rate note............................................................................152
7.2.2 Reverse floating rate note...........................................................................154
7.3 Barrier Notes.......................................................................................................155
7.3.1 Digital barrier note.....................................................................................155
7.3.2 Minimum payoff range note.......................................................................155
7.4 Accrual Notes......................................................................................................157
7.4.1 Digital accrual note....................................................................................158
7.4.2 Barrier accrual floating rate note................................................................159
7.4.3 Minimum payoff range accrual notes.........................................................159
7.5 Chooser Notes.....................................................................................................160
7.6 Range Reset Notes..............................................................................................163
7.7 Ratchet Notes......................................................................................................164
7.8 Callable Notes.....................................................................................................166
7.9 Constant Maturity Notes.....................................................................................167
7.10 Yield Curve Notes.............................................................................................168
7.11 FX Linked Notes...............................................................................................170
Chapter 8: Pricing Credit Derivatives............................................................................173
8.1 Introduction........................................................................................................173
8.2 Market Credit Curves..........................................................................................174
8.3 Capital Structure and Leverage...........................................................................175
8.4 What Happens in a Bankruptcy?.........................................................................176
8.5 Credit Ratings and Rating Agencies....................................................................178
8.5.1 Rating agencies..........................................................................................178
8.5.2 Historical default probabilities...................................................................180
8.5.3 Recovery rates............................................................................................183
8.6 Asset Swaps........................................................................................................184
8.7 Credit Default Swaps (CDS)...............................................................................186
8.8 Basis Packages....................................................................................................189
8.9 Credit Pricing Models.........................................................................................191
8.9.1 Stochastic firm value models......................................................................191
8.9.2 Reduced form models.................................................................................193
8.10 Pricing Credit Default Swaps............................................................................195
8.11 Building Hazard Rate Curves............................................................................197
8.11.1 Recovery rates in credit curve building....................................................198
Contents xi
8.12 Modelling Risky Bonds.................................................................................198
8.13 Digital CDS.......................................................................................................199
8.14 Loan Credit Default Swaps (LCDS).................................................................199
8.15 Counterparty Default Correlation......................................................................200
8.16 Modelling and Trading Default Correlation......................................................201
Chapter 9: Structured Credit Products...........................................................................203
9.1 Introduction.........................................................................................................203
9.2 Credit Linked Notes............................................................................................204
9.2.1 Floating rate credit linked note...................................................................204
9.2.2 Fixed rate credit linked note.......................................................................205
9.2.3 SPV issued credit linked note.....................................................................206
9.2.4 Leveraged credit linked note......................................................................207
9.3 Basket Credit Linked Note..................................................................................209
9.4 Principal Protected Credit Linked Note...............................................................209
9.4.1 Basket principal protected note..................................................................212
9.5 First-to-Default Notes.........................................................................................212
9.5.1 Principal protected first-to-default notes....................................................217
9.6 Collateralised Debt Obligations..........................................................................217
9.6.1 Cash CDOs.................................................................................................219
9.6.2 Synthetic CDOs..........................................................................................222
9.6.3 CDOs of ABS and CDO-squared ............................................................227
9.6.4 Pricing synthetic CDOs..............................................................................230
9.6.5 The rationale for investing in CDOs...........................................................233
Chapter 10: Fund Options and Hybrids........................................................................235
10.1 Introduction.......................................................................................................235
10.2 Fund Linked Notes............................................................................................235
10.3 CPPI Investments..............................................................................................238
10.4 Hybrid Products................................................................................................242
Appendix A: Introduction to Swap Finance...................................................................247
A.1 Discount Factors, Zero Rates and Forward Rates.........................................247
A.2 Day Count Conventions...............................................................................248
A.3 Other Types of Interest Rate Swap...............................................................249
A.4 Convexity in Futures and Floating Rate Contracts.......................................249
A.5 Analytical Convexity Adjustments...............................................................251
A.6 Pricing LIBOR-in-Arrears Swaps................................................................252
A.7 Pricing a CMS Swap....................................................................................252
A.8 Pricing a Diff or Quanto Swap.....................................................................253
xii Financial Derivative Investments
Appendix B: Pricing Equity Options.............................................................................255
B.l Modelling Stock Prices.................................................................................255
B.2 Ito s Lemma.................................................................................................256
B.3 The Black-Scholes Equation........................................................................258
B.4 Some Important Black-Scholes Results.......................................................259
B.5 The Black-Scholes Option Pricing Equation...............................................261
B.6 Black-Scholes with Continuous Dividends..................................................263
B.7 Moment Generating Function and Girsanov s Theorem..............................264
B.8 The Greeks ................................................................................................265
B.8.1 Delta....................................................................................................266
B.8.2 Gamma................................................................................................266
B.8.3Vega....................................................................................................267
B.8.4Theta....................................................................................................267
B.8.5Rho......................................................................................................267
B.9 Binomial Trees.............................................................................................268
B.10 Pricing Convertible Bonds on a Binomial Tree..........................................271
B.ll Three-Dimensional Binomial Trees...........................................................272
B.12 Monte Carlo Simulation.............................................................................273
B.12.1 Monte Carlo simulation of maximum lookback call options.............274
B.12.2 Monte Carlo simulation of average rate call options.........................275
B.13 Finite Difference Methods..........................................................................275
B.14 Alternatives to the Black-Scholes Model...................................................277
B.14.1 The CEV model.................................................................................277
B.14.2 The Merton model.............................................................................277
B.15 Implied Volatility Model............................................................................278
B.16 Stochastic Equity Volatility Models...........................................................279
B.16.1 The Heston model..............................................................................279
B.16.2 The SABR model..............................................................................280
B.17 Effects of Transaction Costs and Discrete Hedging...................................281
B.18 Effect of Realised Volatility and Variance Swaps......................................282
B.19 Pricing FX Options Using Black-Scholes..................................................283
B.20 Quanto Corrections.....................................................................................284
Appendix C: Equity Structured Products.......................................................................287
C.l Reverse Convertibles....................................................................................287
C.2 Discount Reverse Convertibles....................................................................287
C.3 Knock-in Reverse Convertibles....................................................................288
C.4 Lock-up Reverse Convertibles.....................................................................288
C.5 Digital Options.............................................................................................288
C.6 Barrier Options.............................................................................................289
C.7 Leveraged Reverse Convertibles..................................................................290
C.8 Protected Bull Notes.....................................................................................291
Contents xiii
C.9 Average Protected Bull Notes......................................................................291
CIO Pricing Average Rate Options....................................................................291
C.ll Capped Protected Bull Notes......................................................................293
C.12 Protected Cliquet Notes..............................................................................293
C.13 Forward Start and Cliquet Options.............................................................294
C.14 Multi-Barrier Protected Notes....................................................................294
Appendix D: Equity Basket Products............................................................................295
D.l Equity Correlation........................................................................................295
D.2 Protected Basket Notes.................................................................................295
D.3 Basket Pricing^ Using a Single Factor Approximation..................................296
D.4 Basket Monte Carlo Pricing.........................................................................297
D.5 Average Protected Basket Bull Notes..........................................................298
D.6 Protected Basket Cliquet Notes....................................................................298
D.7 Protected Multiple Binary Notes..................................................................298
D. 8 Rainbow Notes.............................................................................................299
D.9Worst-of Protected Notes.............................................................................300
D.10 Best-of and Worst-of Closed Form on Two Assets....................................300
D.ll Everest Protected Notes.............................................................................301
D.12 Power Reverse Convertibles......................................................................301
D.l3 Pulsar Protected Notes...............................................................................302
D. 14 Altiplano and Neptune Protected Notes.....................................................302
Appendix E: Pricing Interest Rate Products...................................................................303
E.l Different Types of Interest Rate Models.......................................................303
E.2 Black s Model for Forward Rates.................................................................303
E.3 Black s Cap..................................................................................................305
E.4 The Hull-White Model.................................................................................306
E.5 The Hull-White Caplet.................................................................................308
E.6 Black s Model for European Swaptions.......................................................310
E.7 Hull-White Swaptions..................................................................................311
E.8 Hull-White Model Trinomial Trees.............................................................312
E.9 The Heath, Jarrow and Morton Model..........................................................317
E. 10 The LIBOR Market Model.........................................................................319
Appendix F: Interest Rate Products...............................................................................323
F.l Capped/Floored Notes..................................................................................323
F.2 Reverse Floating Rate Note..........................................................................324
F.3 Digital Barrier Note......................................................................................324
F.4 Minimum Payoff Range Note.......................................................................325
F.5 Digital Caps and Floors................................................................................325
F.6 Digital Accrual Note.....................................................................................326
xiv Financial Derivative Investments
F.7 Barrier Accrual Floating Rate Note..............................................................327
F.8 Minimum Payoff Range Accrual Notes........................................................327
F.9 Chooser Notes...............................................................................................328
Appendix G: Pricing Credit Derivatives........................................................................329
G.l Par Asset Swap.............................................................................................329
G.2 Market Value Asset Swap............................................................................330
G.3Z-Spread......................................................................................................330
G.4 Stochastic Firm Value Models.....................................................................330
G.4.1 Simple maturity default model............................................................330
G.4.2 CreditGrades model.............................................................................332
G.5 The Reduced Form Model and Poisson Default Processes...........................333
G.6 Pricing Credit Default Swaps (CDS)............................................................334
G.7 Building a Simple Hazard Rate Curve.........................................................335
G.8 Modelling Risky Bonds............................................................................336
G.9 Digital CDS..................................................................................................337
G.10 Correlated Credit Default Swap.................................................................338
G.ll Normal Copula Model for Correlated Default Times.................................338
G.12 Synthetic CDO Valuation...........................................................................339
G.13 Extending the Normal Copula Approach...................................................341
Appendix H: Structured Credit Products........................................................................343
H.1 Fixed Rate Credit Linked Note....................................................................343
H.2 Basket Credit Linked Note...........................................................................343
H.3 Principal Protected Credit Linked Note........................................................344
H.4 Basket Principal Protected Note...................................................................344
H.5 First-to-Default Notes..................................................................................344
Appendix I: Fund Options and Hybrids.........................................................................345
1.1 CPPI Methodology........................................................................................345
1.2 Pricing Hybrids..............................................................................................346
Further Reading.............................................................................................................347
Index..............................................................................................................................351
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| spelling | Bateson, Richard D. Verfasser aut Financial derivative investments an introduction to structured products Richard D. Bateson London ICP Imperial College Press 2011 XVIII, 355 S. graph. Darst. txt rdacontent n rdamedia nc rdacarrier HBZ Datenaustausch application/pdf http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&local_base=BVB01&doc_number=024172588&sequence=000002&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA Inhaltsverzeichnis |
| spellingShingle | Bateson, Richard D. Financial derivative investments an introduction to structured products |
| title | Financial derivative investments an introduction to structured products |
| title_auth | Financial derivative investments an introduction to structured products |
| title_exact_search | Financial derivative investments an introduction to structured products |
| title_full | Financial derivative investments an introduction to structured products Richard D. Bateson |
| title_fullStr | Financial derivative investments an introduction to structured products Richard D. Bateson |
| title_full_unstemmed | Financial derivative investments an introduction to structured products Richard D. Bateson |
| title_short | Financial derivative investments |
| title_sort | financial derivative investments an introduction to structured products |
| title_sub | an introduction to structured products |
| url | http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&local_base=BVB01&doc_number=024172588&sequence=000002&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA |
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