{"product_id":"risk-finance-and-asset-pricing-isbn-9780470549469","title":"Risk Finance and Asset Pricing","description":"\u003cb\u003eA comprehensive guide to financial engineering that stresses real-world applications\u003c\/b\u003e  \u003cp\u003eFinancial engineering expert Charles S. Tapiero has his finger on the pulse of shifts coming to financial engineering and its applications. With an eye toward the future, he has crafted a comprehensive and accessible book for practitioners and students of Financial Engineering that emphasizes an intuitive approach to financial and quantitative foundations in financial and risk engineering. The book covers the theory from a practitioner perspective and applies it to a variety of real-world problems.\u003c\/p\u003e \u003cul\u003e \u003cli\u003eExamines the cornerstone of the explosive growth in markets worldwide\u003c\/li\u003e \u003cli\u003ePresents important financial engineering techniques to price, hedge, and manage risks in general\u003c\/li\u003e \u003cli\u003eAuthor heads the largest financial engineering program in the world\u003cbr\u003e Author Charles Tapiero wrote the seminal work \u003ci\u003eRisk and Financial Management\u003c\/i\u003e.\u003c\/li\u003e \u003c\/ul\u003e  Introduction xv  \u003cp\u003eWho This Book Is For xvi\u003c\/p\u003e \u003cp\u003eHow This Book Is Structured xvii\u003c\/p\u003e \u003cp\u003eWhat's on the Companion Web Site xix\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 1 Risk, Finance, Corporate Management, and Society 1\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eOverview 1\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eRisks Everywhere—A Consequence of Uncertainty 1\u003c\/p\u003e \u003cp\u003eRisk and Finance: Basic Concepts 4\u003c\/p\u003e \u003cp\u003eFinance and Risks 6\u003c\/p\u003e \u003cp\u003eFinancial Instruments 7\u003c\/p\u003e \u003cp\u003eSecurities or Stocks 7\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: An IBM Day-Trades Record 7\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eBonds 9\u003c\/p\u003e \u003cp\u003ePortfolios 10\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Constructing a Portfolio 11\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eDerivatives and Options 12\u003c\/p\u003e \u003cp\u003eReal and Financial Assets 15\u003c\/p\u003e \u003cp\u003eFinancial Markets 16\u003c\/p\u003e \u003cp\u003eOption Contracts 16\u003c\/p\u003e \u003cp\u003e\u003cb\u003eProblem 1.1: Options and Their Prices 17\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eOptions and Specific Needs 18\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Options and The Price of Equity 19\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Management Stock Options 19\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eOptions and Trading in Specialized Markets 20\u003c\/p\u003e \u003cp\u003eTrading the CO2 Index 20\u003c\/p\u003e \u003cp\u003eTrading on Commodities (Metal, Gold, Silver, Corn, Oil) 20\u003c\/p\u003e \u003cp\u003eTrading the Weather and Insurance 21\u003c\/p\u003e \u003cp\u003eSecuritization, Mortgage-Backed Securities, and Credit Derivatives 21\u003c\/p\u003e \u003cp\u003eReal-Life Crises and Finance 22\u003c\/p\u003e \u003cp\u003eThe ARS Crisis 22\u003c\/p\u003e \u003cp\u003eThe Banking–Money System Crisis 23\u003c\/p\u003e \u003cp\u003eThe 2008 Meltdown and Financial Theory 24\u003c\/p\u003e \u003cp\u003eFinance and Ethics 27\u003c\/p\u003e \u003cp\u003eCrime and Punishment 29\u003c\/p\u003e \u003cp\u003eSummary 30\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 2 Applied Finance 35\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eOverview 35\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eFinance and Practice 35\u003c\/p\u003e \u003cp\u003eRisk Finance and Insurance 35\u003c\/p\u003e \u003cp\u003eInfrastructure Finance 36\u003c\/p\u003e \u003cp\u003eFinance, the Environment, and Exchange-Traded Funds Indexes 37\u003c\/p\u003e \u003cp\u003eFinance and Your Pension 38\u003c\/p\u003e \u003cp\u003eContract Pricing and Franchises 39\u003c\/p\u003e \u003cp\u003eCatastrophic Risks, Insurance and Finance 40\u003c\/p\u003e \u003cp\u003eThe Price of Safety 41\u003c\/p\u003e \u003cp\u003eThe Price of Inventories 42\u003c\/p\u003e \u003cp\u003ePricing Reliability and Warranties 42\u003c\/p\u003e \u003cp\u003eThe Price of Quality Claims 43\u003c\/p\u003e \u003cp\u003eFinancial Risk Pricing: A Historical Perspective 44\u003c\/p\u003e \u003cp\u003eEssentials of Financial Risk Management 47\u003c\/p\u003e \u003cp\u003eComprehensive Financial Risk Management 49\u003c\/p\u003e \u003cp\u003eTechnology and Complexity 49\u003c\/p\u003e \u003cp\u003eRetailing and Finance 51\u003c\/p\u003e \u003cp\u003eFinance, Cyber Risks, and Terrorism 52\u003c\/p\u003e \u003cp\u003eIT and Madoff 52\u003c\/p\u003e \u003cp\u003eVirtual Markets 52\u003c\/p\u003e \u003cp\u003eVirtual Products 52\u003c\/p\u003e \u003cp\u003eVirtual Markets Participants 53\u003c\/p\u003e \u003cp\u003eVirtual Economic Universes 53\u003c\/p\u003e \u003cp\u003eMarket Making and Pricing Practice 53\u003c\/p\u003e \u003cp\u003eMarket Makers, Market Liquidity, and Bid-Ask Spreads 55\u003c\/p\u003e \u003cp\u003eAlternative Market Structures 56\u003c\/p\u003e \u003cp\u003eSummary 57\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 3 Risk Measurement and Volatility 63\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eOverview 63\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eRisk, Volatility, and Measurement 63\u003c\/p\u003e \u003cp\u003eMoments and Measures of Volatility 66\u003c\/p\u003e \u003cp\u003eExpectations, Volatility, Skewness, Kurtosis, and the Range 67\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: IBM Returns Statistics 69\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Moments and the CAPM 70\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eProblem 3.1: Calculating the Beta of a Security 72\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eModeling Rates of Return 72\u003c\/p\u003e \u003cp\u003eModels of Rate of Returns 73\u003c\/p\u003e \u003cp\u003eStatistical Estimations 77\u003c\/p\u003e \u003cp\u003eLeast Squares Estimation 77\u003c\/p\u003e \u003cp\u003eMaximum Likelihood 79\u003c\/p\u003e \u003cp\u003eARCH and GARCH Estimators 80\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: The AR(1)-ARCH(1) Model 81\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: A GARCH (1,1) Model 83\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eHigh-Low Estimators of Volatility 83\u003c\/p\u003e \u003cp\u003eExtreme Measures, Volume, and Intraday Prices 84\u003c\/p\u003e \u003cp\u003eStatistical Orders, Volume, and Prices 85\u003c\/p\u003e \u003cp\u003e\u003cb\u003eProblem 3.2: The Probability of the Range 87\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eIntraday Prices and Extreme Distributions 87\u003c\/p\u003e \u003cp\u003eData Transformation 88\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Taylor Series 89\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eValue at Risk and Risk Exposure 90\u003c\/p\u003e \u003cp\u003eVaR and Its Application 92\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: VaR and Shortfall 94\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: VaR, Normal ROR, and Portfolio Design 95\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe Estimation of Gains and Losses 97\u003c\/p\u003e \u003cp\u003eSummary 99\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 4 Risk Finance Modeling and Dependence 109\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eOverview 109\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eIntroduction 109\u003c\/p\u003e \u003cp\u003eDependence and Probability Models 111\u003c\/p\u003e \u003cp\u003eStatistical Dependence 111\u003c\/p\u003e \u003cp\u003eDependence and Quantitative Statistical Probability Models 113\u003c\/p\u003e \u003cp\u003eMany Sources of Normal Risk: Aggregation and Risk Factors Reduction 114\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Risk Factors Aggregation 115\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Principal Component Analysis (PCA) 116\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: A Bivariate Data Matrix and PCA 117\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: A Market Index and PCA 119\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eDependence and Copulas 120\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: The Gumbel Copula, the Highs and the Lows 123\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Copulas and Conditional Dependence 124\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Copulas and the Conditional Distribution 125\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eFinancial Modeling and Intertemporal Models 126\u003c\/p\u003e \u003cp\u003eTime, Memory, and Causal Dependence 127\u003c\/p\u003e \u003cp\u003eQuantitative Time and Change 129\u003c\/p\u003e \u003cp\u003ePersistence and Short-term Memory 130\u003c\/p\u003e \u003cp\u003eThe R\/S Index 133\u003c\/p\u003e \u003cp\u003eSummary 135\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 5 Risk, Value, and Financial Prices 141\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eOverview 141\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eValue and Price 141\u003c\/p\u003e \u003cp\u003eUtility, Risk, and Money 143\u003c\/p\u003e \u003cp\u003eUtility’s Normative Principles: A Historical Perspective 144\u003c\/p\u003e \u003cp\u003ePrelude to Utility and Expected Utility 145\u003c\/p\u003e \u003cp\u003eLotteries and Utility Functions 147\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: The Utility of a Lottery 148\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eQuadratic Utility and Portfolio Pricing 149\u003c\/p\u003e \u003cp\u003eUtility and an Insurance Exchange 150\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: The Power Utility Function 151\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Valuation and the Pricing of Cash Flows 152\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Risk and the Financial Meltdown 153\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eUtility Rational Foundations 155\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe Risk Premium 155\u003c\/p\u003e \u003cp\u003eUtility and Its Behavioral Derivatives 156\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExamples: Specific Utility Functions 159\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe Price and the Utility of Consumption 161\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Kernel Pricing and the Exponential Utility Function 164\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: The Pricing Kernel and the CAPM 165\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Kernel Pricing and the HARA Utility Function 166\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe Price and Demand for Insurance 167\u003c\/p\u003e \u003cp\u003eSummary 170\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 6 Applied Utility Finance 177\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eOverview 177\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eRisk and the Utility of Time 177\u003c\/p\u003e \u003cp\u003eExpected Utility and the Time Utility Price of Money 177\u003c\/p\u003e \u003cp\u003eRisk, Safety, and Reliability 178\u003c\/p\u003e \u003cp\u003eAsset Allocation and Investments 180\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: A Two-Securities Problem 182\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: A Two-Stocks Portfolio 184\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eProblem 6.1: The Efficiency Frontier 185\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eProblem 6.2: A Two-Securities Portfolio 187\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eConditional Kernel Pricing and the Price of Infrastructure Investments 188\u003c\/p\u003e \u003cp\u003eConditional Kernel Pricing and the Pricing of Inventories 191\u003c\/p\u003e \u003cp\u003eAgency and Utility 193\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: A Linear Risk-Sharing Rule 194\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eInformation Asymmetry: Moral Hazard and Adverse Selection 195\u003c\/p\u003e \u003cp\u003eAdverse Selection 196\u003c\/p\u003e \u003cp\u003eThe Moral Hazard Problem 197\u003c\/p\u003e \u003cp\u003eSignaling and Screening 199\u003c\/p\u003e \u003cp\u003eSummary 200\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 7 Derivative Finance and Complete Markets 205\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eOverview 205\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe Arrow-Debreu Fundamental Approach to Asset Pricing 206\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Generalization to\u003c\/b\u003e \u003ci\u003en\u003c\/i\u003e \u003cb\u003eStates 210\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Binomial Option Pricing 212\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eProblem 7.1: The Implied Risk-Neutral Probability 213\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: The Price of a Call Option 213\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: A Generalization to Multiple Periods 215\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eProblem 7.2: Options and Their Prices 218\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003ePut-Call Parity 218\u003c\/p\u003e \u003cp\u003e\u003cb\u003eProblem 7.3: Proving the Put-Call Parity 219\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Put-Call Parity and Dividend Payments 219\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eProblem 7.4: Options Put-Call Parity 220\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe Price Deflator and the Pricing Martingale 220\u003c\/p\u003e \u003cp\u003ePricing and Complete Markets 222\u003c\/p\u003e \u003cp\u003eRisk-Neutral Pricing and Market Completeness 224\u003c\/p\u003e \u003cp\u003eOptions Galore 226\u003c\/p\u003e \u003cp\u003ePackaged and Binary Options 227\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Look-Back Options 227\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Asian Options 227\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Exchange Options 228\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Chooser Options 228\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Barrier and Other Options 228\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Passport Options 229\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eOptions and Their Real Uses 229\u003c\/p\u003e \u003cp\u003eFixed-Income Problems 231\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Pricing a Forward 231\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Pricing a Fixed-Rate Bond 232\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003ePricing a Term Structure of Interest Rates 232\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: The Term Structure of Interest Rates 234\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eProblem 7.5: Annuities and Obligations 235\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eOptions Trading, Speculation, and Risk Management 235\u003c\/p\u003e \u003cp\u003eOption Trading Strategies 237\u003c\/p\u003e \u003cp\u003e\u003cb\u003eProblem 7.6: Portfolio Strategies 240\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eSummary 245\u003c\/p\u003e \u003cp\u003eAppendix A: Martingales 246\u003c\/p\u003e \u003cp\u003eEssentials of Martingales 246\u003c\/p\u003e \u003cp\u003eThe Change of Measures and Martingales 248\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Change of Measure in a Binomial Model 249\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: A Two-Stage Random Walk and the Radon Nikodym Derivative 251\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eAppendix B: Formal Notations, Key Terms, and Definitions 253\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 8 Options Applied 259\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eOverview 259\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eOption Applications 259\u003c\/p\u003e \u003cp\u003eRisk-Free Portfolios and Immunization 260\u003c\/p\u003e \u003cp\u003eSelling Short 261\u003c\/p\u003e \u003cp\u003eFuture Prices 262\u003c\/p\u003e \u003cp\u003e\u003cb\u003eProblem 8.1: Pricing a Multiperiod Forward 264\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003ePricing and New Insurance Business 264\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Options Implied Insurance Pricing 266\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eOption Pricing in a Trinomial Random Walk 267\u003c\/p\u003e \u003cp\u003ePricing and Spread Options 269\u003c\/p\u003e \u003cp\u003eSelf-Financing Strategy 270\u003c\/p\u003e \u003cp\u003eRandom Volatility and Options Pricing 271\u003c\/p\u003e \u003cp\u003eReal Assets and Real Options 273\u003c\/p\u003e \u003cp\u003eThe Option to Acquire the License for a New Technology 275\u003c\/p\u003e \u003cp\u003eThe Black-Scholes Vanilla Option 276\u003c\/p\u003e \u003cp\u003eThe Binomial Process as a Discrete Time Approximation 277\u003c\/p\u003e \u003cp\u003eThe Black-Scholes Model Option Price and Portfolio Replication 278\u003c\/p\u003e \u003cp\u003eRisk-Neutral Pricing and the Pricing Martingale 281\u003c\/p\u003e \u003cp\u003eThe Greeks and Their Applications 284\u003c\/p\u003e \u003cp\u003eSummary 287\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 9 Credit Scoring and the Price of Credit Risk 291\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eOverview 291\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eCredit and Money 291\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCredit and Credit Risk 294\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003ePricing Credit Risk: Principles 296\u003c\/p\u003e \u003cp\u003eCredit Scoring and Granting 299\u003c\/p\u003e \u003cp\u003eWhat Is an Individual Credit Score? 299\u003c\/p\u003e \u003cp\u003eBonds Rating or Scoring Business Enterprises 300\u003c\/p\u003e \u003cp\u003eScoring\/Rating Financial Enterprises and Financial Products 301\u003c\/p\u003e \u003cp\u003eCredit Scoring: Real Approaches 304\u003c\/p\u003e \u003cp\u003eThe Statistical Estimation of Default 305\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: A Separatrix 310\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: The Separatrix and Bayesian Probabilities 311\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eProbability Default Models 312\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: A Bivariate Dependent Default Distribution 314\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: A Portfolio of Default Loans 315\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: A Portfolio of Dependent Default Loans 316\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eProblem 9.1: The Joint Bernoulli Default Distribution 317\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eCredit Granting 317\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Credit Granting and Creditor’s Risks 319\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: A Bayesian Default Model 322\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: A Financial Approach 323\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: An Approximate Solution 326\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eProblem 9.2: The Rate of Return of Loans 327\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe Reduced Form (Financial) Model 327\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Calculating the Spread of a Default Bond 328\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: The Loan Model Again 329\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Pricing Default Bonds 330\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Pricing Default Bonds and the Hazard Rate 331\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eExamples 332\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: The Bank Interest Rate on a House Loan 333\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Buy Insurance to Protect the Portfolio from Loan Defaults 333\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eProblem 9.3: Use the Portfolio as an Underlying and Buy or Sell Derivatives on This Underlying 334\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eProblem 9.4: Lending Rates of Return 334\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eCredit Risk and Collateral Pricing 334\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Hedge Funds Rates of Return 337\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Equity-Linked Life Insurance 338\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Default and the Price of Homes 339\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: A Bank’s Profit from a Loan 341\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eRisk Management and Leverage 342\u003c\/p\u003e \u003cp\u003eSummary 344\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 10 Multi-Name and Structured Credit Risk Portfolios 353\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eOverview 353\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eIntroduction 353\u003c\/p\u003e \u003cp\u003eCredit Default Swaps 357\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Total Return Swaps 359\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003ePricing Credit Default Swaps—The Implied Market Approach 359\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: The CDS Price Spread 360\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eExample: An OTC (Swap) Contract under Risk-Neutral Pricing and Collateral Prices 362\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Pricing a Project Launch 364\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eCredit Derivatives: A Historical Perspective 368\u003c\/p\u003e \u003cp\u003eCredit Derivatives: Historical Modeling 369\u003c\/p\u003e \u003cp\u003eCredit Derivatives and Product Innovation 372\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCDO Example: Collateralized Mortgage Obligations (CMOs) 376\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: The CDO and SPV 377\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eModeling Credit Derivatives 379\u003c\/p\u003e \u003cp\u003eCDO: Quantitative Models 380\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: A CDO with Numbers 380\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: A CDO of Zero Coupon Bonds 382\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: A CDO of Default Coupon-Paying bonds 385\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: A CDO of Rated Bonds 387\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExamples: Default Models for Bonds 391\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eCDO Models and Price Applications 395\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: The KMV Loss Model 396\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eCDOs of Baskets of Various Assets 397\u003c\/p\u003e \u003cp\u003eCredit Risk versus Insurance 398\u003c\/p\u003e \u003cp\u003eSummary 399\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 11 Engineered Implied Volatility and Implied Risk-Neutral Distributions 407\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eOverview 407\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eIntroduction 407\u003c\/p\u003e \u003cp\u003eThe Implied Volatility 409\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: The Implied Volatility in a Lognormal Process 410\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe Dupire Model 411\u003c\/p\u003e \u003cp\u003eThe Implied Risk-Neutral Distribution 412\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: An Implied Binomial Distribution 413\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: Calculating the Implied Risk-Neutral Probability 414\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eImplied Distributions: Parametric Models 417\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: The Generalized Beta of the Second Kind 418\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe A-parametric Approach and the Black-Scholes Model 420\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExample: The Shimko Technique 421\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe Implied Risk Neutral Distribution and Entropy 423\u003c\/p\u003e \u003cp\u003e\u003cb\u003eExamples and Applications 426\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eRisk Attitude, Implied Risk-Neutral Distribution and Entropy 431\u003c\/p\u003e \u003cp\u003eSummary 432\u003c\/p\u003e \u003cp\u003eAppendix: The Implied Volatility—The Dupire Model 433\u003c\/p\u003e \u003cp\u003eAcknowledgments 439\u003c\/p\u003e \u003cp\u003eAbout the Author 441\u003c\/p\u003e \u003cp\u003eIndex 443\u003c\/p\u003e    \u003cp\u003e\u003cb\u003eCHARLES S. TAPIERO\u003c\/b\u003e is the Topfer Distinguished Professor of Financial Engineering and Technology Management at the New York University Polytechnic Institute. He is also Chair and founder of the Department of Finance and Risk Engineering, as well as cofounder and co–Editor in Chief of \u003ci\u003eRisk and Decision Analysis.\u003c\/i\u003e An active researcher and consultant, Professor Tapiero has published over 350 papers and thirteen books on a broad range of issues spanning risk analysis, actuarial and financial risk engineering, and management, including \u003ci\u003eRisk and Financial Management: Mathematical and Computational Methods,\u003c\/i\u003e also by Wiley.    \u003c\/p\u003e\u003cp\u003eOver the past two decades, financial firms, companies, and governments have shifted greater attention to financial manipulations in which they capitalized on leverage and short-term returns. These actually resulted in an explosive and global growth in financial activity. A financial Pandora's box had been opened, and countries and blue chip corporations believing in perpetual growth and once thought too big to fail, found themselves strangled with a debt they were not able to bear. \t \u003c\/p\u003e\u003cp\u003eThe recent market melt-down and credit liquidity crisis created full realization that complex financial products—when misunderstood and misused—can have devastating effects. \u003ci\u003eRisk Finance and Asset Pricing: Value, Measurements, and Markets \u003c\/i\u003eis a comprehensive introduction to financial engineering that presents the foundations of asset pricing and risk management, while stressing real-world applications. \u003c\/p\u003e\u003cp\u003eWritten for both beginning and practicing financial engineers, author Charles Tapiero—the Topfer Distinguished Professor of Financial Engineering and Technology Management at the NYU Polytechnic Institute—provides: \t \u003c\/p\u003e\u003cul\u003e \u003cli\u003eA non-quantitative introduction to the business of finance, risk, and their many applications\u003c\/li\u003e \u003cli\u003eAn overview of the statistical approaches for measuring risk\u003c\/li\u003e \u003cli\u003eAn introduction to the concept of utility and financial risk management\u003c\/li\u003e \u003cli\u003eAn outline of the Arrow-Debreu framework in discrete states and time for assets and derivatives (options) pricing\u003c\/li\u003e \u003cli\u003eAn outline of credit risk, scoring, and complex structured financial products such as credit derivatives, their models, their demystification, pricing, and finally, a cursory view of technical approaches to implied pricing\u003c\/li\u003e \u003c\/ul\u003e \t \u003cp\u003eEach chapter includes a summary of the techniques described, and concludes with a series of problems so readers can test what they've learned. \u003c\/p\u003e\u003cp\u003eFinancial engineering, despite its challenges and opportunities, when misunderstood, has the potential to wreak havoc on world economies and individual portfolios. \u003ci\u003eRisk Finance and Asset Pricing\u003c\/i\u003e presents a new direction in financial engineering education that combines reality and theory so that risk finance might again work as intended.\u003c\/p\u003e","brand":"Wiley","offers":[{"title":"Default Title","offer_id":47989966635237,"sku":"NP9780470549469","price":95.0,"currency_code":"USD","in_stock":false}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/1842\/7735\/files\/9780470549469.jpg?v=1761786060","url":"https:\/\/k12savings.com\/es\/products\/risk-finance-and-asset-pricing-isbn-9780470549469","provider":"K12savings","version":"1.0","type":"link"}