Financial Engineering

This text provides a thorough treatment of futures, 'plain vanilla' options and swaps as well as the use of exotic derivatives and interest rate options for speculation and hedging. Pricing of options using numerical methods such as lattices (BOPM), Mone Carlo simulation and finite difference methods, in additon to solutions using continuous time mathematics, are also covered. Real options theory and its use in investment appraisal and in valuing internet and biotechnology companies provide cutting edge practical applications.
Practical risk management issues are examined in depth. Alternative models for calculating Value at Risk (market risk) and credit risk provide the throretical basis for a practical and timely overview of these areas of regulatory policy.
This book is designed for courses in derivatives and risk management taken by specialist MBA, MSc Finance students or final year undergraduates, either as a stand-alone text or as a follow-on to Investments: Spot and Derivatives Markets by the same authors.
The authors adopt a real-world emphasis throughout, and include features such as:
* topic boxes, worked examples and learning objectives
* Financial Times and Wall Street Journal newspaper extracts and analysis of real world cases
* supporting web site including Lecturer's Resource Pack and Student Centre with interactive Excel and GAUSS softwareEine verstandliche Einfuhrung in Riskmanagement und derivative Finanzprodukte. Futures, Routine-Swaps, exotische Optionen und Zinsoptionen im Spekulationsgeschaft und beim Hedging werden detailliert behandelt; ebenso die Optionspreisbildung mit Hilfe numerischer Methoden. Daruber hinaus wird die Optionstheorie und ihre Einsatzmoglichkeiten bei der Bewertung von Internet- und Biotechnologiewerten diskutiert, woraus sich topaktuelle Anwendungen fur die Praxis ergeben. Mit Ausschnitten aus der Financial Times und dem Wall Street Journal, zahlreichen numerischen Beispielen und einer begleitenden Website mit Excel Spreadsheets. Ein Lehrbuch, das erlautert, WIE Derivate zum Riskmanagement eingesetzt werden, und zwar marktorientiert und in einem breiter gefa?ten Kontext.

Preface xvii

Part 1: Derivatives: An Overview

Part 2: Forwards and Futures

Part 3: Options and Swaps

Part 4: Advanced Derivatives and Stochastic Processes

Part 5: Risk and Regulation

Glossary 735

List of Symbols 753

List of ‘Topic Boxes’ 759

Internet Sites 761

References 765

Author Index 769

Subject Index 771

KEITH CUTHBERTSON is Professor of Finance at the Management School, Imperial College. He has been an advisor to the Bank of England and UK Treasury and a visitor at the Federal Reserve. He has held chairs at the University of Newcastle and City University Business School, as well as undertaking consultancy with financial institutions.
DIRK NITSCHE is a lecturer in Finance at the Management School, Imperial College. He is also a Visiting Lecturer at City university Business School. This text provides a thorough treatment of futures, 'plain vanilla' options and swaps as well as the use of exotic derivatives and interest rate options for speculation and hedging. Pricing of options using numerical methods such as lattices (BOPM), Mone Carlo simulation and finite difference methods, in additon to solutions using continuous time mathematics, are also covered. Real options theory and its use in investment appraisal and in valuing internet and biotechnology companies provide cutting edge practical applications.
Practical risk management issues are examined in depth. Alternative models for calculating Value at Risk (market risk) and credit risk provide the throretical basis for a practical and timely overview of these areas of regulatory policy.
This book is designed for courses in derivatives and risk management taken by specialist MBA, MSc Finance students or final year undergraduates, either as a stand-alone text or as a follow-on to Investments: Spot and Derivatives Markets by the same authors.
The authors adopt a real-world emphasis throughout, and include features such as:
* topic boxes, worked examples and learning objectives
* Financial Times and Wall Street Journal newspaper extracts and analysis of real world cases
* supporting web site including Lecturer's Resource Pack and Student Centre with interactive Excel and GAUSS software