FX options and smile risk:
Gespeichert in:
| 1. Verfasser: | |
|---|---|
| Format: | Buch |
| Sprache: | English |
| Veröffentlicht: |
Hoboken, N.J.
Wiley
2010
|
| Schlagworte: | |
| Online-Zugang: | Publisher description Contributor biographical information Table of contents only Inhaltsverzeichnis |
| Beschreibung: | Hier auch später erschienene, unveränderte Nachdrucke |
| Beschreibung: | XV, 304 S. graph. Darst. 1 CD-ROM (12 cm) |
| ISBN: | 9780470754191 |
Internformat
MARC
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| 245 | 1 | 0 | |a FX options and smile risk |c Antonio Castagna |
| 264 | 1 | |a Hoboken, N.J. |b Wiley |c 2010 | |
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| 650 | 4 | |a Risk management | |
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| 856 | 4 | |u http://www.loc.gov/catdir/enhancements/fy1005/2009036554-t.html |3 Table of contents only | |
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Datensatz im Suchindex
| _version_ | 1804148017437081600 |
|---|---|
| adam_text | Contents
Preface
ix
Notation
and Acronyms
xiii
1
The FX Market
1
1.1
FX rates and spot contracts
1
1.2
Outright and FX swap contracts
4
1.3
FX option contracts
10
1.3.1
Exercise
11
1.3.2
Expiry date and settlement date
11
1.3.3
Premium
13
1.3.4
Market standard practices for quoting options
14
1.4
Main traded FX option structures
16
Pricing Models for FX Options
21
2.1
Principles of option pricing theory
21
2.1.1
The Black-Scholes economy
21
2.1.2
Stochastic volatility economy
26
2.1.3
Change of numeraire
27
2.2
The black-scholes model
29
2.2.1
The forward price to use in the formula
30
2.2.2
BS greeks
31
2.2.3
Retrieving implied volatility and strike
35
2.2.4
Some relationships of the BS formula
38
2.3
The Heston Model
41
2.3.
1 Time-dependent parameters in the Heston model
42
2.4
The SABR model
44
2.5
The mixture approach
45
2.5.1
The LMLV model
45
2.5.2
The LMUV model
48
vi
Contents
2.5.3 Features
of the LMLV and LMUV models and a comparison
between them
50
2.5.4
Extension of the LMUV model
51
2.6
Some considerations about the choice of model
53
Dynamic Hedging and Volatility Trading
57
3.1
Preliminary considerations
57
3.2
A general framework
59
3.3
Hedging with a constant implied volatility
61
3.4
Hedging with an updating implied volatility
63
3.4.1
A market model for the implied volatility
66
3.5
Hedging
Vega 68
3.6
Hedging Delta,
Vega,
Vanna
and Volga
70
3.6.1
Vanna-
Volga hedging with one implied volatility
71
3.6.2
Vanna-
Volga hedging with different implied volatilities
71
3.7
The volatility smile and its phenomenology
75
3.8
Local exposures to the volatility smile
79
3.8.1
Retrieving the strikes of the main structures
79
3.8.2
ATM straddle exposures
81
3.8.3
Risk reversal exposures
81
3.8.4
Vega-weighted butterfly exposures
83
3.9
Scenario hedging and its relationship with
Vanna-
Volga hedging
84
3.9.1
Scenario hedging with constant Delta options
86
The Volatility Surface
91
4.1
General definitions
91
4.1.1
Arbitrage opportunities under the three different rules
92
4.2
Criteria for an efficient and convenient representation of the
volatility surface
94
4.3
Commonly adopted approaches to building a volatility surface
96
4.4
Smile interpolation among strikes: the
Vanna-
Volga approach
97
4.4.1
The
Vanna-
Volga approach: general setting
97
4.4.2
Computing the
Vanna-
Volga weights and option prices
99
4.4.3
Limit and no-arbitrage conditions
102
4.4.4
Approximating implied volatilities
102
4.5
Some features of the
Vanna-
Volga approach
104
4.5.1
Hedging error for longer expiries
105
4.5.2
The implied risk-neutral density and smile asymptotics
106
4.5.3
Two consistency results
108
4.6
An alternative characterization of the
Vanna-
Volga approach
110
4.7
Smile interpolation among expiries: implied volatility term structure
112
4.8
Admissible volatility surfaces
115
4.9
Taking into account the market butterfly
116
4.10
Building the volatility matrix in practice
120
Contents
vii
Plain Vanilla Options
131
5.1
Pricing of plain vanilla options
131
5.1.1
Delayed settlement date
131
5.1.2
Cash settlement
133
5.2
Market-making tools
134
5.2.1
Inferring the implied volatility for a given strike
134
5.2.2
Inferring the implied volatility for a given Delta
135
5.2.3
Quoting the Vega-weighted butterfly and the risk reversal
136
5.3
Bid/ask spreads for plain vanilla options
139
5.4
Cutoff times and spreads
141
5.5
Digital options
142
5.5.1
Digital options pricing: the static replica approach
143
5.5.2
Digital options pricing in specific model settings
148
5.5.3
Delayed cash settlement date
150
5.5.4
Bid/ask spreads
150
5.5.5
Quotation conventions
152
5.6
American plain vanilla options
152
5.6.1
Valuation of American plain vanilla options in a BS setting
152
5.6.2
Pricing of American plain vanilla options with the volatility smile
153
Barrier Options
155
6.1
A taxonomy of barrier options
155
6.2
Some relationships of barrier option prices
156
6.3
Pricing for barrier options in a BS economy
157
6.3.
1 The diffusion equation under single absorbing boundaries
158
6.3.2
Dealing with a constant barrier
159
6.4
Pricing formulae for barrier options
160
6.5
One-touch (rebate) and no-touch options
162
6.6
Double-barrier options
164
6.6.1
Two absorbing states
164
6.6.2
Pricing formula for double-barrier options
165
6.7
Double-no-touch and double-touch options
167
6.8
Probability of hitting a barrier
167
6.9
Greek calculation
168
6.10
Pricing barrier options in other model settings
169
6.11
Pricing barriers with non-standard delivery
170
6.11.1
Delayed settlement date
170
6.11.2
Cash settlement
170
6.12
Market approach to pricing barrier options
171
6.12.
1 Inclusion of the smile: the
Vanna-
Volga approach for barrier
options
171
6.12.2
The
Vanna-
Volga approach for barrier options: variations on
the theme
177
6.12.3
Slippage at the barrier level
181
6.12.4
Delta-hedging near the barrier level
183
6.12.5
Implicit one-touch and gearing
184
6.12.6
Vega-hedge rebalancing
186
viii Contents
6.13
Bid/ask spreads
188
6.14
Monitoring frequency
191
7
Other Exotic Options
195
7.1
Introduction
195
7.2
At-expiry harrier options
195
7.3
Window barrier options
197
7.4
First-then and knock-in-knock-out barrier options
199
7.5
Auto-quanto
options
202
7.6
Forward start options
204
7.6.1
Including the volatility smile in the pricing
207
7.6.2
Forward implied volatility smiles
210
7.6.3
Forward start barrier and bet options
210
7.6.4
Dealing with notional amounts expressed in numeraire currency
211
7.7
Variance swaps
212
7.8
Compound, Asian and
lookback
options
215
8
Risk Management Tools and Analysis
217
8.1
Introduction
217
8.2
Implementation of the LMUV model
217
8.2.1
The forward volatility surfaces
221
8.2.2
Calculating the sensitivity to the movements of the
volatility surface
223
8.3
Risk monitoring tools
227
8.3.1
FX spot rate-related Greeks
227
8.3.2
Cash-settled options
229
8.3.3
Volatility-related Greeks and sensitivities
229
8.3.4
Barrier implicit one-touch, bets and digitals
231
8.3.5
Interest rate-related Greeks
234
8.4
Risk analysis of plain vanilla options
236
8.4.1
ATM straddle
236
8.4.2
Risk reversal
239
8.4.3
Vega-weighted butterfly
241
8.5
Risk analysis of digital options
244
8.6
Risk analysis of exotic options
249
8.6.1
Barrier options
249
8.6.2
Double barrier options
258
8.6.3
Bet options
262
9
Correlation and FX Options
269
9.1
Preliminary considerations
269
9.2
Correlation in the BS setting
269
9.3
Contracts depending on several FX spot rates
275
9.4
Dealing with correlation and volatility smile
278
9.4.1
Vanna-
Volga extension
278
9.5
Linking volatility smiles
283
References
287
Index
291
|
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| indexdate | 2024-07-10T00:00:27Z |
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| language | English |
| lccn | 2009036554 |
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| spelling | Castagna, Antonio Verfasser aut FX options and smile risk Antonio Castagna Hoboken, N.J. Wiley 2010 XV, 304 S. graph. Darst. 1 CD-ROM (12 cm) txt rdacontent n rdamedia nc rdacarrier Hier auch später erschienene, unveränderte Nachdrucke Foreign exchange options Risk management Optionspreistheorie (DE-588)4135346-8 gnd rswk-swf Optionshandel (DE-588)4126185-9 gnd rswk-swf Optionshandel (DE-588)4126185-9 s Optionspreistheorie (DE-588)4135346-8 s DE-604 http://www.loc.gov/catdir/enhancements/fy0917/2009036554-d.html Publisher description http://www.loc.gov/catdir/enhancements/fy1002/2009036554-b.html Contributor biographical information http://www.loc.gov/catdir/enhancements/fy1005/2009036554-t.html Table of contents only Digitalisierung UB Bamberg - ADAM Catalogue Enrichment application/pdf http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&local_base=BVB01&doc_number=024183498&sequence=000002&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA Inhaltsverzeichnis |
| spellingShingle | Castagna, Antonio FX options and smile risk Foreign exchange options Risk management Optionspreistheorie (DE-588)4135346-8 gnd Optionshandel (DE-588)4126185-9 gnd |
| subject_GND | (DE-588)4135346-8 (DE-588)4126185-9 |
| title | FX options and smile risk |
| title_auth | FX options and smile risk |
| title_exact_search | FX options and smile risk |
| title_full | FX options and smile risk Antonio Castagna |
| title_fullStr | FX options and smile risk Antonio Castagna |
| title_full_unstemmed | FX options and smile risk Antonio Castagna |
| title_short | FX options and smile risk |
| title_sort | fx options and smile risk |
| topic | Foreign exchange options Risk management Optionspreistheorie (DE-588)4135346-8 gnd Optionshandel (DE-588)4126185-9 gnd |
| topic_facet | Foreign exchange options Risk management Optionspreistheorie Optionshandel |
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