Applied Quantitative Finance for Equity Derivatives: Fourth Edition

By Jherek Healy

Book Overview

In its fourth edition, this book presents the most significant equity derivatives models used these days. It is not a book around esoteric or cutting-edge models, but rather a book on relatively simple and standard models, viewed from the angle of a practitioner. A few key subjects explained in this book are: cash dividends for European, American, or exotic options issues of the Dupire local volatility model and possible fixes; finite difference techniques for American options and exotics Non-parametric regression for American options in Monte-Carlo, randomized simulations the particle method for stochastic-local-volatility model with quasi-random numbers; numerical methods for the variance and volatility swaps quadratures for options under stochastic volatility models VIX options and dividend derivatives backward/forward representation of exotics. The September 2023 fourth edition all in color brings the following updates: vanilla option pricing under the spot piecewise-lognormal model has been reworked and now include newer approximations. The pricing of American options under negative or varying rates include the latest developments of Andersen and Lake. The sections on the finite difference method have been significantly updated, especially around grid stretching , payoff smoothing, the solution of the linear complementary problem under negative rates, and explicit super-time-stepping schemes. A variety of arbitrage-free representations for implied volatilities has been added, as well as an in-depth comparison of the various techniques on a set of concrete market data. Finally the chapter on stochastic volatility now includes simulation and calibration of rough volatility models. More minor changes include the addition of the SABR approximation for basket option prices along with new details on the Black-Scholes approximations, a more careful summation for Monte-Carlo, the Jacobian based Vega for stochastic volatility models, fixing typos around the pricing of variance swaps, which also now includes more challenging examples.

• Format: Paperback
• Language: English
• ISBN: B0CNK2LVMJ
• ISBN13: 9798867836382
• Release Date: November 2023
• Publisher: Independently published
• Length: 524 Pages
• Weight: 2.46 lbs.
• Dimensions: 10.0" x 1.2" x 7.0"