{"product_id":"exotic-options-and-hybrids-isbn-9780470688038","title":"Exotic Options and Hybrids","description":"The recent financial crisis brought to light many of the misunderstandings and misuses of exotic derivatives. With market participants on both the buy and sell-side having been found guilty of not understanding the products they were dealing with, never before has there been a greater need for clarification and explanation.  \u003cp\u003e\u003ci\u003eExotic Options and Hybrids\u003c\/i\u003e is a practical guide to structuring, pricing and hedging complex exotic options and hybrid derivatives that will serve readers through the recent crisis, the road to recovery, the next bull market and beyond. Written by experienced practitioners, it focuses on the three main parts of a derivative’s life: the structuring of a product, its pricing and its hedging.\u003c\/p\u003e \u003cp\u003eDivided into four parts, the book covers a multitude of structures, encompassing many of the most up-to-date and promising products from exotic equity derivatives and structured notes to hybrid derivatives and dynamic strategies. Based on a realistic setting from the heart of the business, inside a derivatives operation, the practical and intuitive discussions of these aspects make these exotic concepts truly accessible.\u003c\/p\u003e \u003cp\u003eAdoptions of real trades are examined in detail, and all of the numerous examples are carefully selected so as to highlight interesting and significant aspects of the business. The introduction of payoff structures is accompanied by scenario analysis, diagrams and lifelike sample term sheets. Readers learn how to spot where the risks lie to pave the way for sound valuation and hedging of such products. There are also questions and accompanying discussions dispersed in the text, each exploited to illustrate one or more concepts from the context in which they are set.\u003c\/p\u003e \u003cp\u003eThe applications, the strengths and the limitations of various models are highlighted, in relevance to the products and their risks, rather than the model implementations. Models are de-mystified in separately dedicated sections, but their implications are alluded to throughout the book in an intuitive and non-mathematical manner.\u003c\/p\u003e \u003cp\u003eBy discussing exotic options and hybrids in a practical, non-mathematical and highly intuitive setting, this book will blast through the misunderstanding of exotic derivatives, enabling practitioners to fully understand and correctly structure, price and hedge theses products effectively, and stand strong as the only book in its class to make these “exotic” concepts truly accessible.\u003c\/p\u003e \u003cp\u003eList of Symbols and Abbreviations xvii\u003c\/p\u003e \u003cp\u003ePreface xix\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePart I Foundations 1\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003e1 Basic Instruments 3\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e1.1 Introduction 3\u003c\/p\u003e \u003cp\u003e1.2 Interest Rates 3\u003c\/p\u003e \u003cp\u003e1.2.1 LIBOR vs Treasury Rates 4\u003c\/p\u003e \u003cp\u003e1.2.2 Yield Curves 4\u003c\/p\u003e \u003cp\u003e1.2.3 Time Value of Money 5\u003c\/p\u003e \u003cp\u003e1.2.4 Bonds 6\u003c\/p\u003e \u003cp\u003e1.2.5 Zero Coupon Bonds 7\u003c\/p\u003e \u003cp\u003e1.3 Equities and Currencies 8\u003c\/p\u003e \u003cp\u003e1.3.1 Stocks 8\u003c\/p\u003e \u003cp\u003e1.3.2 Foreign Exchange 10\u003c\/p\u003e \u003cp\u003e1.3.3 Indices 10\u003c\/p\u003e \u003cp\u003e1.3.4 Exchange-traded Funds 11\u003c\/p\u003e \u003cp\u003e1.3.5 Forward Contracts 11\u003c\/p\u003e \u003cp\u003e1.3.6 Futures 12\u003c\/p\u003e \u003cp\u003e1.4 Swaps 13\u003c\/p\u003e \u003cp\u003e1.4.1 Interest Rate Swaps 13\u003c\/p\u003e \u003cp\u003e1.4.2 Cross-currency Swaps 14\u003c\/p\u003e \u003cp\u003e1.4.3 Total Return Swaps 16\u003c\/p\u003e \u003cp\u003e1.4.4 Asset Swaps 16\u003c\/p\u003e \u003cp\u003e1.4.5 Dividend Swaps 16\u003c\/p\u003e \u003cp\u003e\u003cb\u003e2 The World of Structured Products 19\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e2.1 The Products 19\u003c\/p\u003e \u003cp\u003e2.1.1 The Birth of Structured Products 19\u003c\/p\u003e \u003cp\u003e2.1.2 Structured Product Wrappers 20\u003c\/p\u003e \u003cp\u003e2.1.3 The Structured Note 20\u003c\/p\u003e \u003cp\u003e2.2 The Sell Side 21\u003c\/p\u003e \u003cp\u003e2.2.1 Sales and Marketing 21\u003c\/p\u003e \u003cp\u003e2.2.2 Traders and Structurers 22\u003c\/p\u003e \u003cp\u003e2.3 The Buy Side 23\u003c\/p\u003e \u003cp\u003e2.3.1 Retail Investors 23\u003c\/p\u003e \u003cp\u003e2.3.2 Institutional Investors 24\u003c\/p\u003e \u003cp\u003e2.3.3 Bullish vs Bearish, the Economic Cycle 24\u003c\/p\u003e \u003cp\u003e2.3.4 Credit Risk and Collateralized Lines 25\u003c\/p\u003e \u003cp\u003e2.4 The Market 26\u003c\/p\u003e \u003cp\u003e2.4.1 Issuing a Structured Product 26\u003c\/p\u003e \u003cp\u003e2.4.2 Liquidity and a Two-way Market 27\u003c\/p\u003e \u003cp\u003e2.5 Example of an Equity Linked Note 28\u003c\/p\u003e \u003cp\u003e\u003cb\u003e3 Vanilla Options 31\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e3.1 General Features of Options 31\u003c\/p\u003e \u003cp\u003e3.2 Call and Put Option Payoffs 32\u003c\/p\u003e \u003cp\u003e3.3 Put–call Parity and Synthetic Options 34\u003c\/p\u003e \u003cp\u003e3.4 Black–Scholes Model Assumptions 35\u003c\/p\u003e \u003cp\u003e3.4.1 Risk-neutral Pricing 36\u003c\/p\u003e \u003cp\u003e3.5 Pricing a European Call Option 37\u003c\/p\u003e \u003cp\u003e3.6 Pricing a European Put Option 38\u003c\/p\u003e \u003cp\u003e3.7 The Cost of Hedging 40\u003c\/p\u003e \u003cp\u003e3.8 American Options 42\u003c\/p\u003e \u003cp\u003e3.9 Asian Options 43\u003c\/p\u003e \u003cp\u003e3.10 An Example of the Structuring Process 44\u003c\/p\u003e \u003cp\u003e3.10.1 Capital Protection and Equity Participation 44\u003c\/p\u003e \u003cp\u003e3.10.2 Capital at Risk and Higher Participation 46\u003c\/p\u003e \u003cp\u003e\u003cb\u003e4 Volatility, Skew and Term Structure 49\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e4.1 Volatility 49\u003c\/p\u003e \u003cp\u003e4.1.1 Realized Volatility 49\u003c\/p\u003e \u003cp\u003e4.1.2 Implied Volatility 51\u003c\/p\u003e \u003cp\u003e4.2 The Volatility Surface 52\u003c\/p\u003e \u003cp\u003e4.2.1 The Implied Volatility Skew 52\u003c\/p\u003e \u003cp\u003e4.2.2 Term Structure of Volatilities 56\u003c\/p\u003e \u003cp\u003e4.3 Volatility Models 57\u003c\/p\u003e \u003cp\u003e4.3.1 Model Choice and Model Risk 57\u003c\/p\u003e \u003cp\u003e4.3.2 Black–Scholes or Flat Volatility 58\u003c\/p\u003e \u003cp\u003e4.3.3 Local Volatility 60\u003c\/p\u003e \u003cp\u003e4.3.4 Stochastic Volatility 62\u003c\/p\u003e \u003cp\u003e\u003cb\u003e5 Option Sensitivities: Greeks 65\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e5.1 Delta 66\u003c\/p\u003e \u003cp\u003e5.2 Gamma 72\u003c\/p\u003e \u003cp\u003e5.3 Vega 74\u003c\/p\u003e \u003cp\u003e5.4 Theta 76\u003c\/p\u003e \u003cp\u003e5.5 Rho 77\u003c\/p\u003e \u003cp\u003e5.6 Relationships between the Greeks 78\u003c\/p\u003e \u003cp\u003e5.7 Volga and Vanna 80\u003c\/p\u003e \u003cp\u003e5.7.1 Vega–Gamma (Volga) 80\u003c\/p\u003e \u003cp\u003e5.7.2 Vanna 81\u003c\/p\u003e \u003cp\u003e5.8 Multi-asset Sensitivities 81\u003c\/p\u003e \u003cp\u003e5.9 Approximations to Black–Scholes and Greeks 82\u003c\/p\u003e \u003cp\u003e\u003cb\u003e6 Strategies Involving Options 87\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e6.1 Traditional Hedging Strategies 87\u003c\/p\u003e \u003cp\u003e6.1.1 Protective Puts 87\u003c\/p\u003e \u003cp\u003e6.1.2 Covered Calls 89\u003c\/p\u003e \u003cp\u003e6.2 Vertical Spreads 90\u003c\/p\u003e \u003cp\u003e6.2.1 Bull Spreads 90\u003c\/p\u003e \u003cp\u003e6.2.2 Bear Spreads 93\u003c\/p\u003e \u003cp\u003e6.3 Other Spreads 96\u003c\/p\u003e \u003cp\u003e6.3.1 Butterfly Spreads 96\u003c\/p\u003e \u003cp\u003e6.3.2 Condor Spreads 98\u003c\/p\u003e \u003cp\u003e6.3.3 Ratio Spreads 99\u003c\/p\u003e \u003cp\u003e6.3.4 Calendar Spreads 99\u003c\/p\u003e \u003cp\u003e6.4 Option Combinations 100\u003c\/p\u003e \u003cp\u003e6.4.1 Straddles 100\u003c\/p\u003e \u003cp\u003e6.4.2 Strangles 101\u003c\/p\u003e \u003cp\u003e6.5 Arbitrage Freedom of the Implied Volatility Surface 102\u003c\/p\u003e \u003cp\u003e\u003cb\u003e7 Correlation 105\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e7.1 Multi-asset Options 105\u003c\/p\u003e \u003cp\u003e7.2 Correlation: Measurements and Interpretation 106\u003c\/p\u003e \u003cp\u003e7.2.1 Realized Correlation 106\u003c\/p\u003e \u003cp\u003e7.2.2 Correlation Matrices 109\u003c\/p\u003e \u003cp\u003e7.2.3 Portfolio Variance 110\u003c\/p\u003e \u003cp\u003e7.2.4 Implied Correlation 111\u003c\/p\u003e \u003cp\u003e7.2.5 Correlation Skew 113\u003c\/p\u003e \u003cp\u003e7.3 Basket Options 114\u003c\/p\u003e \u003cp\u003e7.4 Quantity Adjusting Options: “Quantos” 116\u003c\/p\u003e \u003cp\u003e7.4.1 Quanto Payoffs 116\u003c\/p\u003e \u003cp\u003e7.4.2 Quanto Correlation and Quanto Option Pricing 116\u003c\/p\u003e \u003cp\u003e7.4.3 Hedging Quanto Risk 117\u003c\/p\u003e \u003cp\u003e7.5 Trading Correlation 118\u003c\/p\u003e \u003cp\u003e7.5.1 Straddles: Index versus Constituents 118\u003c\/p\u003e \u003cp\u003e7.5.2 Correlation Swaps 118\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePart II Exotic Derivatives and Structured Products 121\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003e8 Dispersion 123\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e8.1 Measures of Dispersion and Interpretations 123\u003c\/p\u003e \u003cp\u003e8.2 Worst-of Options 125\u003c\/p\u003e \u003cp\u003e8.2.1 Worst-of Call 125\u003c\/p\u003e \u003cp\u003e8.2.2 Worst-of Put 127\u003c\/p\u003e \u003cp\u003e8.2.3 Market Trends in Worst-of Options 128\u003c\/p\u003e \u003cp\u003e8.3 Best-of options 129\u003c\/p\u003e \u003cp\u003e8.3.1 Best-of Call 129\u003c\/p\u003e \u003cp\u003e8.3.2 Best-of Put 131\u003c\/p\u003e \u003cp\u003e8.3.3 Market Trends in Best-of Options 132\u003c\/p\u003e \u003cp\u003e\u003cb\u003e9 Dispersion Options 135\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e9.1 Rainbow Options 135\u003c\/p\u003e \u003cp\u003e9.1.1 Payoff Mechanism 135\u003c\/p\u003e \u003cp\u003e9.1.2 Risk Analysis 136\u003c\/p\u003e \u003cp\u003e9.2 Individually Capped Basket Call (ICBC) 137\u003c\/p\u003e \u003cp\u003e9.2.1 Payoff Mechanism 137\u003c\/p\u003e \u003cp\u003e9.2.2 Risk Analysis 138\u003c\/p\u003e \u003cp\u003e9.3 Outperformance Options 141\u003c\/p\u003e \u003cp\u003e9.3.1 Payoff Mechanism 141\u003c\/p\u003e \u003cp\u003e9.3.2 Risk Analysis 142\u003c\/p\u003e \u003cp\u003e9.4 Volatility Models 143\u003c\/p\u003e \u003cp\u003e\u003cb\u003e10 Barrier Options 145\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e10.1 Barrier Option Payoffs 145\u003c\/p\u003e \u003cp\u003e10.1.1 Knock-out Options 145\u003c\/p\u003e \u003cp\u003e10.1.2 Knock-in Options 148\u003c\/p\u003e \u003cp\u003e10.1.3 Summary 150\u003c\/p\u003e \u003cp\u003e10.2 Black–Scholes Valuation 151\u003c\/p\u003e \u003cp\u003e10.2.1 Parity Relationships 151\u003c\/p\u003e \u003cp\u003e10.2.2 Closed Formulas for Continuously Monitored Barriers 151\u003c\/p\u003e \u003cp\u003e10.2.3 Adjusting for Discrete Barriers 154\u003c\/p\u003e \u003cp\u003e10.3 Hedging Down-and-in Puts 155\u003c\/p\u003e \u003cp\u003e10.3.1 Monitoring the Barrier 155\u003c\/p\u003e \u003cp\u003e10.3.2 Volatility and Down-and-in Puts 157\u003c\/p\u003e \u003cp\u003e10.3.3 Dispersion Effect on Worst-of Down-and-in Puts 158\u003c\/p\u003e \u003cp\u003e10.4 Barriers in Structured Products 160\u003c\/p\u003e \u003cp\u003e10.4.1 Multi-asset Shark 160\u003c\/p\u003e \u003cp\u003e10.4.2 Single Asset Reverse Convertible 163\u003c\/p\u003e \u003cp\u003e10.4.3 Worst-of Reverse Convertible 164\u003c\/p\u003e \u003cp\u003e\u003cb\u003e11 Digitals 167\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e11.1 European Digitals 167\u003c\/p\u003e \u003cp\u003e11.1.1 Digital Payoffs and Pricing 167\u003c\/p\u003e \u003cp\u003e11.1.2 Replicating a European Digital 169\u003c\/p\u003e \u003cp\u003e11.1.3 Hedging a Digital 169\u003c\/p\u003e \u003cp\u003e11.2 American Digitals 172\u003c\/p\u003e \u003cp\u003e11.3 Risk Analysis 174\u003c\/p\u003e \u003cp\u003e11.3.1 Single Asset Digitals 174\u003c\/p\u003e \u003cp\u003e11.3.2 Digital Options with Dispersion 176\u003c\/p\u003e \u003cp\u003e11.3.3 Volatility Models for Digitals 177\u003c\/p\u003e \u003cp\u003e11.4 Structured Products Involving European Digitals 178\u003c\/p\u003e \u003cp\u003e11.4.1 Strip of Digitals Note 178\u003c\/p\u003e \u003cp\u003e11.4.2 Growth and Income 179\u003c\/p\u003e \u003cp\u003e11.4.3 Bonus Steps Certificate 181\u003c\/p\u003e \u003cp\u003e11.5 Structured Products Involving American Digitals 183\u003c\/p\u003e \u003cp\u003e11.5.1 Wedding Cake 183\u003c\/p\u003e \u003cp\u003e11.5.2 Range Accrual 184\u003c\/p\u003e \u003cp\u003e11.6 Outperformance Digital 185\u003c\/p\u003e \u003cp\u003e11.6.1 Payoff Mechanism 185\u003c\/p\u003e \u003cp\u003e11.6.2 Correlation Skew and Other Risks 186\u003c\/p\u003e \u003cp\u003e\u003cb\u003e12 Autocallable Structures 187\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e12.1 Single Asset Autocallables 187\u003c\/p\u003e \u003cp\u003e12.1.1 General Features 187\u003c\/p\u003e \u003cp\u003e12.1.2 Interest Rate\/Equity Correlation 190\u003c\/p\u003e \u003cp\u003e12.2 Autocallable Participating Note 192\u003c\/p\u003e \u003cp\u003e12.3 Autocallables with Down-and-in Puts 194\u003c\/p\u003e \u003cp\u003e12.3.1 Adding the Put Feature 194\u003c\/p\u003e \u003cp\u003e12.3.2 Twin-Wins 194\u003c\/p\u003e \u003cp\u003e12.3.3 Autocallables with Bonus Coupons 196\u003c\/p\u003e \u003cp\u003e12.4 Multi-asset Autocallables 198\u003c\/p\u003e \u003cp\u003e12.4.1 Worst-of Autocallables 198\u003c\/p\u003e \u003cp\u003e12.4.2 Snowball Effect and Worst-of put Feature 200\u003c\/p\u003e \u003cp\u003e12.4.3 Outperformance Autocallables 202\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePart III More on Exotic Structures 205\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003e13 The Cliquet Family 207\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e13.1 Forward Starting Options 207\u003c\/p\u003e \u003cp\u003e13.2 Cliquets with Local Floors and Caps 208\u003c\/p\u003e \u003cp\u003e13.2.1 Payoff Mechanism 209\u003c\/p\u003e \u003cp\u003e13.2.2 Forward Skew and Other Risks 210\u003c\/p\u003e \u003cp\u003e13.3 Cliquets with Global Floors and Caps 210\u003c\/p\u003e \u003cp\u003e13.3.1 Vega Convexity 213\u003c\/p\u003e \u003cp\u003e13.3.2 Levels of These Risks 215\u003c\/p\u003e \u003cp\u003e13.4 Reverse Cliquets 217\u003c\/p\u003e \u003cp\u003e\u003cb\u003e14 More Cliquets and Related Structures 219\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e14.1 Other Cliquets 219\u003c\/p\u003e \u003cp\u003e14.1.1 Digital Cliquets 219\u003c\/p\u003e \u003cp\u003e14.1.2 Bearish Cliquets 220\u003c\/p\u003e \u003cp\u003e14.1.3 Variable Cap Cliquets 221\u003c\/p\u003e \u003cp\u003e14.1.4 Accumulators\/Lock-in Cliquets 222\u003c\/p\u003e \u003cp\u003e14.1.5 Replacement Cliquets 222\u003c\/p\u003e \u003cp\u003e14.2 Multi-asset Cliquets 224\u003c\/p\u003e \u003cp\u003e14.2.1 Multi-asset Cliquet Payoffs 224\u003c\/p\u003e \u003cp\u003e14.2.2 Multi-asset Cliquet Risks 225\u003c\/p\u003e \u003cp\u003e14.3 Napoleons 226\u003c\/p\u003e \u003cp\u003e14.3.1 The Napoleon Structure 226\u003c\/p\u003e \u003cp\u003e14.3.2 The Bearish Napoleon 227\u003c\/p\u003e \u003cp\u003e14.4 Lookback Options 227\u003c\/p\u003e \u003cp\u003e14.4.1 The Various Lookback Payoffs 227\u003c\/p\u003e \u003cp\u003e14.4.2 Hedging Lookbacks 228\u003c\/p\u003e \u003cp\u003e14.4.3 Sticky Strike and Sticky Delta 229\u003c\/p\u003e \u003cp\u003e14.4.4 Skew Risk in Lookbacks 229\u003c\/p\u003e \u003cp\u003e\u003cb\u003e15 Mountain Range Options 231\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e15.1 Altiplano 231\u003c\/p\u003e \u003cp\u003e15.2 Himalaya 233\u003c\/p\u003e \u003cp\u003e15.3 Everest 235\u003c\/p\u003e \u003cp\u003e15.4 Kilimanjaro Select 236\u003c\/p\u003e \u003cp\u003e15.5 Atlas 238\u003c\/p\u003e \u003cp\u003e15.6 Pricing Mountain Range Products 239\u003c\/p\u003e \u003cp\u003e\u003cb\u003e16 Volatility Derivatives 243\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e16.1 The Need for Volatility Derivatives 243\u003c\/p\u003e \u003cp\u003e16.2 Traditional Methods for Trading Volatility 243\u003c\/p\u003e \u003cp\u003e16.3 Variance Swaps 244\u003c\/p\u003e \u003cp\u003e16.3.1 Payoff Description 245\u003c\/p\u003e \u003cp\u003e16.3.2 Variance vs Volatility Swaps 246\u003c\/p\u003e \u003cp\u003e16.3.3 Replication and Pricing of Variance Swaps 246\u003c\/p\u003e \u003cp\u003e16.3.4 Capped Variance Swaps 248\u003c\/p\u003e \u003cp\u003e16.3.5 Forward Starting Variance Swaps 249\u003c\/p\u003e \u003cp\u003e16.3.6 Variance Swap Greeks 249\u003c\/p\u003e \u003cp\u003e16.4 Variations on Variance Swaps 250\u003c\/p\u003e \u003cp\u003e16.4.1 Corridor Variance Swaps 250\u003c\/p\u003e \u003cp\u003e16.4.2 Conditional Variance Swaps 251\u003c\/p\u003e \u003cp\u003e16.4.3 Gamma Swaps 253\u003c\/p\u003e \u003cp\u003e16.5 Options on Realized Variance 254\u003c\/p\u003e \u003cp\u003e16.6 The VIX: Volatility Indices 254\u003c\/p\u003e \u003cp\u003e16.6.1 Options on the VIX 255\u003c\/p\u003e \u003cp\u003e16.6.2 Combining Equity and Volatility Indices 256\u003c\/p\u003e \u003cp\u003e16.7 Variance Dispersion 256\u003c\/p\u003e \u003cp\u003e\u003cb\u003ePart IV Hybrid Derivatives and Dynamic Strategies 259\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003e17 Asset Classes (I) 261\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e17.1 Interest Rates 262\u003c\/p\u003e \u003cp\u003e17.1.1 Forward Rate Agreements 262\u003c\/p\u003e \u003cp\u003e17.1.2 Constant Maturity Swaps 263\u003c\/p\u003e \u003cp\u003e17.1.3 Bonds 264\u003c\/p\u003e \u003cp\u003e17.1.4 Yield Curves 265\u003c\/p\u003e \u003cp\u003e17.1.5 Zero Coupon, LIBOR and Swap Rates 267\u003c\/p\u003e \u003cp\u003e17.1.6 Interest Rate Swaptions 268\u003c\/p\u003e \u003cp\u003e17.1.7 Interest Rate Caps and Floors 269\u003c\/p\u003e \u003cp\u003e17.1.8 The SABR Model 270\u003c\/p\u003e \u003cp\u003e17.1.9 Exotic Interest Rate Structures 271\u003c\/p\u003e \u003cp\u003e17.2 Commodities 272\u003c\/p\u003e \u003cp\u003e17.2.1 Forward and Futures Curves, Contango and Backwardation 273\u003c\/p\u003e \u003cp\u003e17.2.2 Commodity Vanillas and Skew 276\u003c\/p\u003e \u003cp\u003e\u003cb\u003e18 Asset Classes (II) 279\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e18.1 Foreign Exchange 279\u003c\/p\u003e \u003cp\u003e18.1.1 Forward and Futures Curves 279\u003c\/p\u003e \u003cp\u003e18.1.2 FX Vanillas and Volatility Smiles 281\u003c\/p\u003e \u003cp\u003e18.1.3 FX Implied Correlations 287\u003c\/p\u003e \u003cp\u003e18.1.4 FX Exotics 287\u003c\/p\u003e \u003cp\u003e18.2 Inflation 288\u003c\/p\u003e \u003cp\u003e18.2.1 Inflation and the Need for Inflation Products 289\u003c\/p\u003e \u003cp\u003e18.2.2 Inflation Swaps 289\u003c\/p\u003e \u003cp\u003e18.2.3 Inflation Bonds 290\u003c\/p\u003e \u003cp\u003e18.2.4 Inflation Derivatives 290\u003c\/p\u003e \u003cp\u003e18.3 Credit 291\u003c\/p\u003e \u003cp\u003e18.3.1 Bonds and Default Risk 292\u003c\/p\u003e \u003cp\u003e18.3.2 Credit Default Swaps 293\u003c\/p\u003e \u003cp\u003e\u003cb\u003e19 Structuring Hybrid Derivatives 295\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e19.1 Diversification 295\u003c\/p\u003e \u003cp\u003e19.1.1 Multi-asset Class Basket Options 296\u003c\/p\u003e \u003cp\u003e19.1.2 Multi-asset Class Himalaya 297\u003c\/p\u003e \u003cp\u003e19.2 Yield Enhancement 297\u003c\/p\u003e \u003cp\u003e19.2.1 Rainbows 298\u003c\/p\u003e \u003cp\u003e19.2.2 In- and Out-barriers 299\u003c\/p\u003e \u003cp\u003e19.2.3 Multi-asset Class Digitals 299\u003c\/p\u003e \u003cp\u003e19.2.4 Multi-asset Range Accruals 300\u003c\/p\u003e \u003cp\u003e19.3 Multi-asset Class Views 301\u003c\/p\u003e \u003cp\u003e19.4 Multi-asset Class Risk Hedging 303\u003c\/p\u003e \u003cp\u003e\u003cb\u003e20 Pricing Hybrid Derivatives 305\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e20.1 Additional Asset Class Models 305\u003c\/p\u003e \u003cp\u003e20.1.1 Interest Rate Modelling 305\u003c\/p\u003e \u003cp\u003e20.1.2 Commodity Modelling 309\u003c\/p\u003e \u003cp\u003e20.1.3 FX Modelling 310\u003c\/p\u003e \u003cp\u003e20.2 Copulas 312\u003c\/p\u003e \u003cp\u003e20.2.1 Some Copula Theory 313\u003c\/p\u003e \u003cp\u003e20.2.2 Modelling Dependencies in Copulas 314\u003c\/p\u003e \u003cp\u003e20.2.3 Gaussian Copula 315\u003c\/p\u003e \u003cp\u003e20.2.4 Pricing with Copulas 318\u003c\/p\u003e \u003cp\u003e\u003cb\u003e21 Dynamic Strategies and Thematic Indices 321\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e21.1 Portfolio Management Concepts 321\u003c\/p\u003e \u003cp\u003e21.1.1 Mean–variance Analysis 321\u003c\/p\u003e \u003cp\u003e21.1.2 Minimum-variance Frontier and Efficient Portfolios 322\u003c\/p\u003e \u003cp\u003e21.1.3 Capital Asset Pricing Model 326\u003c\/p\u003e \u003cp\u003e21.1.4 Sharpe Ratio 327\u003c\/p\u003e \u003cp\u003e21.1.5 Portfolio Rebalancing 328\u003c\/p\u003e \u003cp\u003e21.2 Dynamic Strategies 329\u003c\/p\u003e \u003cp\u003e21.2.1 Why Dynamic Strategies? 329\u003c\/p\u003e \u003cp\u003e21.2.2 Choosing the Assets 330\u003c\/p\u003e \u003cp\u003e21.2.3 Building the Dynamic Strategy 330\u003c\/p\u003e \u003cp\u003e21.3 Thematic Products 332\u003c\/p\u003e \u003cp\u003e21.3.1 Demand for Thematic Products 333\u003c\/p\u003e \u003cp\u003e21.3.2 Structuring a Thematic Index 334\u003c\/p\u003e \u003cp\u003e21.3.3 Structured Products on Thematic Indices 335\u003c\/p\u003e \u003cp\u003e21.3.4 Pricing Options on Thematic Indices 335\u003c\/p\u003e \u003cp\u003e\u003cb\u003eAppendices 339\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eA Models 341\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eA.1 Black–Scholes 341\u003c\/p\u003e \u003cp\u003eA.1.1 Black–Scholes SDE 341\u003c\/p\u003e \u003cp\u003eA.1.2 Black–Scholes PDE 341\u003c\/p\u003e \u003cp\u003eA.2 Local Volatility Models 342\u003c\/p\u003e \u003cp\u003eA.3 Stochastic Volatility 343\u003c\/p\u003e \u003cp\u003eA.3.1 Heston’s Model 343\u003c\/p\u003e \u003cp\u003eA.3.2 The SABR Model 345\u003c\/p\u003e \u003cp\u003eA.4 Jump Models 346\u003c\/p\u003e \u003cp\u003eA.5 Hull–White Interest Rate Model and Extensions 346\u003c\/p\u003e \u003cp\u003e\u003cb\u003eB Approximations 349\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eB.1 Approximations for Vanilla Prices and Greeks 349\u003c\/p\u003e \u003cp\u003eB.2 Basket Price Approximation 351\u003c\/p\u003e \u003cp\u003eB.3 ICBC\/CBC Inequality 351\u003c\/p\u003e \u003cp\u003eB.4 Digitals: Vega and the Position of the Forward 352\u003c\/p\u003e \u003cp\u003ePostscript 355\u003c\/p\u003e \u003cp\u003eBibliography 357\u003c\/p\u003e \u003cp\u003eIndex 361\u003c\/p\u003e  \u003cb\u003eMOHAMED BOUZOUBAA\u003c\/b\u003e is an experienced practitioner in the world of derivatives, and is currently Head of Derivatives Trading and Structuring at CDG Capital. His professional expertise spans the spectrum of topics in exotic options and hybrids having held positions in Equity Derivatives Sales at Société Générale in Paris, as a Risk and Fund Management expert at Sophis specializing in the risks involved in equity, credit and fixed income derivatives, and as a derivatives structurer at Bear Stearns\/JP Morgan Chase in London and Equity Structured Products Manager at First Gulf Bank in Dubai. Mohamed holds masters degrees in Financial Engineering and in Applied Mathematics.  \u003cp\u003e\u003cb\u003eADEL OSSEIRAN\u003c\/b\u003e is a mathematician by training. His work as a financial practitioner in derivative pricing includes working in front office roles as a quantitative analyst and as a derivatives structurer in London. He studied Mathematics at the University of Oxford and to PhD level in Financial Mathematics at Imperial College London.\u003c\/p\u003e  \"An intermediate to advanced comprehensive treatment of derivative products, from the simplest options to the most complex ones. It provides a good theoretical grounding and some practical insights as well as very relevant examples. This book will become a reference for practitioners.\"\u003cbr\u003e —\u003cb\u003eStephane Junod, ex-Head of Hybrids Trading and Structuring at Citigroup in London, Head of the Global Hedging Units, Zurich Insurance, Zurich\u003c\/b\u003e  \u003cp\u003e\"Striking an outstanding balance between theory and (good) practice, this comprehensive book is very informative, smart and useful. From vanilla option pricing and hedging to exotic options, complex structured products and sophisticated dynamic strategies, readers will learn and enjoy most of what is required of an option-oriented financial engineer. A valuable addition to an already well stocked pack.\"\u003cbr\u003e —\u003cb\u003eProfessor Patrice Poncet, Sorbonne University and ESSEC Business School\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\"This is a new and different book about structured products. Readers get detailed coverage of all major types of structured notes across all types of assets. This guide is a practical reference and a great complement to anybodys financial library.\u003cbr\u003e —\u003cb\u003eMimoun Nadir, Head of Exotic Equity Derivatives, Calyon, Paris\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\"\u003ci\u003eExotic Options and Hybrids\u003c\/i\u003e is a refreshing book about getting the reader familiar with modern structured products and the rational behind their creation. More importantly, the emphasis on revealing the embedded risks will be well appreciated by anyone interested in structuring, pricing or trading these products.\"\u003cbr\u003e —\u003cb\u003eAbdelkerim Karim, Head of Equity Structured Products, Nomura, London\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\"Mohamed Bouzoubaa and Adel Osseiran, highly regarded senior structurers, have come up with a thorough study of exotic options and hybrids, covering the subject from all possible structuring, pricing and trading angles, both from theoretical and practical standpoints. An essential and exciting read for financial professionals and students.\"\u003cbr\u003e —\u003cb\u003eBruno Pannetier, former Head of Structured Products at CIC, former Senior Managing Director and Co-Global Head of Equity and Hybrid Structuring at Bear Stearns, Division Director and Head of Structuring at Macquarie Bank\u003c\/b\u003e\u003c\/p\u003e  The recent financial crisis brought to light many of the misunderstandings and misuses of exotic derivatives. With market participants on both the buy and sell-side having been found guilty of not understanding the products they were dealing with, never before has there been a greater need for clarification and explanation.  \u003cp\u003e\u003ci\u003eExotic Options and Hybrids\u003c\/i\u003e is a practical guide to structuring, pricing and hedging complex exotic options and hybrid derivatives that will serve readers through the recent crisis, the road to recovery, the next bull market and beyond. Written by experienced practitioners, it focuses on the three main parts of a derivative’s life: the structuring of a product, its pricing and its hedging.\u003c\/p\u003e \u003cp\u003eDivided into four parts, the book covers a multitude of structures, encompassing many of the most up-to-date and promising products from exotic equity derivatives and structured notes to hybrid derivatives and dynamic strategies. Based on a realistic setting from the heart of the business, inside a derivatives operation, the practical and intuitive discussions of these aspects make these exotic concepts truly accessible.\u003c\/p\u003e \u003cp\u003eAdoptions of real trades are examined in detail, and all of the numerous examples are carefully selected so as to highlight interesting and significant aspects of the business. The introduction of payoff structures is accompanied by scenario analysis, diagrams and lifelike sample term sheets. Readers learn how to spot where the risks lie to pave the way for sound valuation and hedging of such products. There are also questions and accompanying discussions dispersed in the text, each exploited to illustrate one or more concepts from the context in which they are set.\u003c\/p\u003e \u003cp\u003eThe applications, the strengths and the limitations of various models are highlighted, in relevance to the products and their risks, rather than the model implementations. Models are de-mystified in separately dedicated sections, but their implications are alluded to throughout the book in an intuitive and non-mathematical manner.\u003c\/p\u003e \u003cp\u003eBy discussing exotic options and hybrids in a practical, non-mathematical and highly intuitive setting, this book will blast through the misunderstanding of exotic derivatives, enabling practitioners to fully understand and correctly structure, price and hedge theses products effectively, and stand strong as the only book in its class to make these “exotic” concepts truly accessible.\u003c\/p\u003e","brand":"Wiley","offers":[{"title":"Default Title","offer_id":47989185020133,"sku":"NP9780470688038","price":119.0,"currency_code":"USD","in_stock":false}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/1842\/7735\/files\/9780470688038.jpg?v=1761783129","url":"https:\/\/k12savings.com\/es\/products\/exotic-options-and-hybrids-isbn-9780470688038","provider":"K12savings","version":"1.0","type":"link"}