{"product_id":"swaps-and-other-derivatives-isbn-9780470721919","title":"Swaps and Other Derivatives","description":"\u003cp\u003e\u003ci\u003e“Richard Flavell has a strong theoretical perspective on swaps with considerable practical experience in the actual trading of these instruments. This rare combination makes this welcome updated second edition a useful reference work for market practitioners.”\u003c\/i\u003e\u003cbr\u003e —\u003cb\u003eSatyajit Das\u003c\/b\u003e, author of \u003ci\u003eSwaps and Financial Derivatives Library \u003c\/i\u003eand \u003ci\u003eTraders and Guns \u0026amp; Money: Knowns and Unknowns in the Dazzling World of Derivatives \u003c\/i\u003e \u003c\/p\u003e\u003cp\u003eFully revised and updated from the first edition, \u003ci\u003eSwaps and Other Derivatives, Second Edition,\u003c\/i\u003e provides a practical explanation of the pricing and evaluation of swaps and interest rate derivatives. \u003c\/p\u003e\u003cp\u003eBased on the author’s extensive experience in derivatives and risk management, working as a financial engineer, consultant and trainer for a wide range of institutions across the world this book discusses in detail how many of the wide range of swaps and other derivatives, such as yield curve, index amortisers, inflation-linked, cross-market, volatility, diff and quanto diffs, are priced and hedged. It also describes the modelling of interest rate curves, and the derivation of implied discount factors from both interest rate swap curves, and cross-currency adjusted curves. \u003c\/p\u003e\u003cp\u003eThere are detailed sections on the risk management of swap and option portfolios using both traditional approaches and also Value-at-Risk. Techniques are provided for the construction of dynamic and robust hedges, using ideas drawn from mathematical programming. \u003c\/p\u003e\u003cp\u003eThis second edition has expanded sections on the credit derivatives market – its mechanics, how credit default swaps may be priced and hedged, and how default probabilities may be derived from a market strip. It also prices complex swaps with embedded options, such as range accruals, Bermudan swaptions and target accrual redemption notes, by constructing detailed numerical models such as interest rate trees and LIBOR-based simulation. There is also increased discussion around the modelling of volatility smiles and surfaces. \u003c\/p\u003e\u003cp\u003eThe book is accompanied by a CD-ROM where all the models are replicated, enabling readers to implement the models in practice with the minimum of effort. \u003c\/p\u003e\u003cp\u003ePreface ix\u003c\/p\u003e \u003cp\u003eList of Worksheets (see the accompanying CD) xv\u003c\/p\u003e \u003cp\u003eList of Abbreviations xxv\u003c\/p\u003e \u003cp\u003e\u003cb\u003e1 Swaps and Other Derivatives 1\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003e1.1 Introduction 1\u003c\/p\u003e \u003cp\u003e1.2 Applications of swaps 3\u003c\/p\u003e \u003cp\u003e1.3 An overview of the swap market 6\u003c\/p\u003e \u003cp\u003e1.4 The evolution of the swap market 8\u003c\/p\u003e \u003cp\u003e1.5 Conclusion 10\u003c\/p\u003e \u003cp\u003e\u003cb\u003e2 Short-term Interest Rate Swaps 13\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eObjective 13\u003c\/p\u003e \u003cp\u003e2.1 Discounting, the time value of money and other matters 13\u003c\/p\u003e \u003cp\u003e2.2 Forward rate agreements (FRAs) and interest rate futures 19\u003c\/p\u003e \u003cp\u003e2.3 Short-term swaps 24\u003c\/p\u003e \u003cp\u003e2.4 Convexity bias in futures 29\u003c\/p\u003e \u003cp\u003e2.5 Forward valuing a swap 31\u003c\/p\u003e \u003cp\u003e\u003cb\u003e3 Generic Interest Rate Swaps 33\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eObjective 33\u003c\/p\u003e \u003cp\u003e3.1 Generic interest rate swaps 33\u003c\/p\u003e \u003cp\u003e3.2 Pricing through comparative advantage 37\u003c\/p\u003e \u003cp\u003e3.3 The relative pricing of generic IRSs 40\u003c\/p\u003e \u003cp\u003e3.4 The relationship between the bond and swap markets 43\u003c\/p\u003e \u003cp\u003e3.5 Implying a discount function 50\u003c\/p\u003e \u003cp\u003e3.6 Building a blended curve 56\u003c\/p\u003e \u003cp\u003e\u003cb\u003e4 The Pricing and Valuation of Non-generic Swaps 59\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eObjective 59\u003c\/p\u003e \u003cp\u003e4.1 The pricing of simple non-generic swaps: forward starts 59\u003c\/p\u003e \u003cp\u003e4.2 Rollercoasters 64\u003c\/p\u003e \u003cp\u003e4.3 Pricing of simple non-generic swaps: a more complex example 66\u003c\/p\u003e \u003cp\u003e4.4 Forward valuing as an alternative to discounting—revisited 68\u003c\/p\u003e \u003cp\u003e4.5 Swap valuation 69\u003c\/p\u003e \u003cp\u003e\u003cb\u003e5 Asset Packaging 73\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eObjective 73\u003c\/p\u003e \u003cp\u003e5.1 Creation and pricing of a par asset swap 74\u003c\/p\u003e \u003cp\u003e5.2 Creation and pricing of a par maturity asset swap 77\u003c\/p\u003e \u003cp\u003e5.3 Discounting, embedded loans and forward valuing 78\u003c\/p\u003e \u003cp\u003e5.4 Further extensions to asset packaging 78\u003c\/p\u003e \u003cp\u003e\u003cb\u003e6 Credit Derivatives 79\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eBackground and objective 79\u003c\/p\u003e \u003cp\u003e6.1 Total return swaps 80\u003c\/p\u003e \u003cp\u003e6.2 Credit default swaps 82\u003c\/p\u003e \u003cp\u003e6.3 Pricing and hedging of generic CDSs 88\u003c\/p\u003e \u003cp\u003e6.4 Modelling a CDS 92\u003c\/p\u003e \u003cp\u003e6.5 Pricing and valuing non-generic CDSs 96\u003c\/p\u003e \u003cp\u003e6.6 Basket and portfolio CDSs 97\u003c\/p\u003e \u003cp\u003e6.7 Credit exposure under swaps 99\u003c\/p\u003e \u003cp\u003e6.8 Appendix: An outline of the credit modelling of portfolios 102\u003c\/p\u003e \u003cp\u003e\u003cb\u003e7 More Complex Swaps 107\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eObjective 107\u003c\/p\u003e \u003cp\u003e7.1 Simple mismatch swaps 107\u003c\/p\u003e \u003cp\u003e7.2 Average rate swaps 108\u003c\/p\u003e \u003cp\u003e7.3 Compound swaps 109\u003c\/p\u003e \u003cp\u003e7.4 Yield curve swaps 110\u003c\/p\u003e \u003cp\u003e7.5 Convexity effects of swaps 112\u003c\/p\u003e \u003cp\u003e7.6 Appendix: Measuring the convexity effect 115\u003c\/p\u003e \u003cp\u003e7.6.1 Two approaches to measuring the convexity effect 115\u003c\/p\u003e \u003cp\u003e7.6.2 A general mismatch swap 120\u003c\/p\u003e \u003cp\u003e7.6.3 Yield curve swaps 123\u003c\/p\u003e \u003cp\u003e\u003cb\u003e8 Cross-market and Other Market Swaps 127\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eObjective 127\u003c\/p\u003e \u003cp\u003e8.1 Overnight indexed swaps 127\u003c\/p\u003e \u003cp\u003e8.2 Cross-market basis swaps 130\u003c\/p\u003e \u003cp\u003e8.3 Equity and commodity swaps 135\u003c\/p\u003e \u003cp\u003e8.3.1Commodity swaps 138\u003c\/p\u003e \u003cp\u003e8.4 Longevity swaps 140\u003c\/p\u003e \u003cp\u003e8.5 Inflation swaps 141\u003c\/p\u003e \u003cp\u003e8.6 Volatility swaps 151\u003c\/p\u003e \u003cp\u003e\u003cb\u003e9 Cross-currency Swaps 159\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eObjective 159\u003c\/p\u003e \u003cp\u003e9.1 Floating–floating cross-currency swaps 159\u003c\/p\u003e \u003cp\u003e9.2 Pricing and hedging of CCBSs 161\u003c\/p\u003e \u003cp\u003e9.3 CCBSs and discounting 166\u003c\/p\u003e \u003cp\u003e9.4 Fixed–floating cross-currency swaps 169\u003c\/p\u003e \u003cp\u003e9.5 Floating–floating swaps continued 171\u003c\/p\u003e \u003cp\u003e9.6 Fixed–fixed cross-currency swaps 174\u003c\/p\u003e \u003cp\u003e9.7 Cross-currency swap valuation 177\u003c\/p\u003e \u003cp\u003e9.8 Dual-currency swaps 179\u003c\/p\u003e \u003cp\u003e9.9 Cross-currency equity swaps 182\u003c\/p\u003e \u003cp\u003e9.10 Conclusion 183\u003c\/p\u003e \u003cp\u003e9.11 Appendix: Quanto adjustments 183\u003c\/p\u003e \u003cp\u003e\u003cb\u003e10 OTC Options 187\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eObjective 187\u003c\/p\u003e \u003cp\u003e10.1 Introduction 187\u003c\/p\u003e \u003cp\u003e10.2 The Black option-pricing model 188\u003c\/p\u003e \u003cp\u003e10.3 Interest rate volatility 190\u003c\/p\u003e \u003cp\u003e10.4 Par and forward volatilities 199\u003c\/p\u003e \u003cp\u003e10.5 Caps, floors and collars 201\u003c\/p\u003e \u003cp\u003e10.6 Digital options 210\u003c\/p\u003e \u003cp\u003e10.7 Embedded structures 211\u003c\/p\u003e \u003cp\u003e10.8 Swaptions 214\u003c\/p\u003e \u003cp\u003e10.9 Structures with embedded swaptions 220\u003c\/p\u003e \u003cp\u003e10.10 Options on credit default swaps 223\u003c\/p\u003e \u003cp\u003e10.11 FX options 223\u003c\/p\u003e \u003cp\u003e10.12 Hedging FX options 227\u003c\/p\u003e \u003cp\u003e10.13 Appendix: The SABR model for stochastic volatility 231\u003c\/p\u003e \u003cp\u003e\u003cb\u003e11 Swapping Structured Products 235\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eObjective 235\u003c\/p\u003e \u003cp\u003e11.1 Introduction 235\u003c\/p\u003e \u003cp\u003e11.2 Examples of some structured securities 236\u003c\/p\u003e \u003cp\u003e11.3 Numerical interest rate models 239\u003c\/p\u003e \u003cp\u003e11.4 Simulation models 249\u003c\/p\u003e \u003cp\u003e11.5 Appendix: Extensions to numerical trees 262\u003c\/p\u003e \u003cp\u003e11.5.1 Incorporating a volatility smile 262\u003c\/p\u003e \u003cp\u003e11.5.2 Hull–White numerical trees 263\u003c\/p\u003e \u003cp\u003e11.5.3 Extensions to BDT and HW models 270\u003c\/p\u003e \u003cp\u003e\u003cb\u003e12 Traditional Market Risk Management 273\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eObjective 273\u003c\/p\u003e \u003cp\u003e12.1 Introduction 273\u003c\/p\u003e \u003cp\u003e12.2 Interest rate risk management 276\u003c\/p\u003e \u003cp\u003e12.3 Gridpoint risk management—market rates 277\u003c\/p\u003e \u003cp\u003e12.4 Equivalent portfolios 278\u003c\/p\u003e \u003cp\u003e12.5 Gridpoint risk management—forward rates 280\u003c\/p\u003e \u003cp\u003e12.6 Gridpoint risk management—zero-coupon rates 282\u003c\/p\u003e \u003cp\u003e12.7 Yield curve risk management 284\u003c\/p\u003e \u003cp\u003e12.8 Bond and swap futures 289\u003c\/p\u003e \u003cp\u003e12.9 Theta risk 290\u003c\/p\u003e \u003cp\u003e12.10 Risk management of IR option portfolios 291\u003c\/p\u003e \u003cp\u003e12.11 Hedging of inflation swaps 303\u003c\/p\u003e \u003cp\u003e12.12 Appendix: Analysis of swap curves 305\u003c\/p\u003e \u003cp\u003e\u003cb\u003e13 Value-at-Risk 309\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eObjective 309\u003c\/p\u003e \u003cp\u003e13.1 Introduction 309\u003c\/p\u003e \u003cp\u003e13.2 A very simple example 310\u003c\/p\u003e \u003cp\u003e13.3 A very simple example extended 317\u003c\/p\u003e \u003cp\u003e13.4 Multi-factor delta VaR 321\u003c\/p\u003e \u003cp\u003e13.5 Choice of risk factors and cashflow mapping 324\u003c\/p\u003e \u003cp\u003e13.6 Estimation of volatility and correlations 328\u003c\/p\u003e \u003cp\u003e13.7 A running example 329\u003c\/p\u003e \u003cp\u003e13.8 Simulation methods 330\u003c\/p\u003e \u003cp\u003e13.9 Shortcomings and extensions to simulation methods 333\u003c\/p\u003e \u003cp\u003e13.10 Delta–gamma and other methods 340\u003c\/p\u003e \u003cp\u003e13.11 Spread VaR 344\u003c\/p\u003e \u003cp\u003e13.12 Equity VaR 346\u003c\/p\u003e \u003cp\u003e13.13 Shock testing of VaR 347\u003c\/p\u003e \u003cp\u003e13.14 Stress testing of VaR 350\u003c\/p\u003e \u003cp\u003e13.15 Appendix: Extreme value theory 351\u003c\/p\u003e \u003cp\u003e13.15.1 Peaks over threshold: negative exponential 351\u003c\/p\u003e \u003cp\u003e13.15.2 Peaks over threshold: Generalised Pareto 352\u003c\/p\u003e \u003cp\u003e13.15.3 Block maxima 353\u003c\/p\u003e \u003cp\u003eIndex 355\u003c\/p\u003e  \u003cp\u003e\u003cb\u003eRICHARD FLAVELL\u003c\/b\u003e has spent over twenty years working as a financial engineer, consultant and trainer, specialising in complex derivatives and risk management. He spent seven years as Director of Financial Engineering at Lombard Risk, where he was responsible for the mathematical development and implementation of models in its varied pricing and risk systems. He is currently Chairman of Lucidate, a company which specialises in the provision of consultancy and training to financial institutions.   \u003c\/p\u003e\u003cp\u003e\u003ci\u003e“Richard Flavell has a strong theoretical perspective on swaps with considerable practical experience in the actual trading of these instruments. This rare combination makes this welcome updated second edition a useful reference work for market practitioners.”\u003c\/i\u003e\u003cbr\u003e —\u003cb\u003eSatyajit Das\u003c\/b\u003e, author of \u003ci\u003eSwaps and Financial Derivatives Library \u003c\/i\u003eand \u003ci\u003eTraders and Guns \u0026amp; Money: Knowns and Unknowns in the Dazzling World of Derivatives \u003c\/i\u003e \u003c\/p\u003e\u003cp\u003eFully revised and updated from the first edition, \u003ci\u003eSwaps and Other Derivatives, Second Edition,\u003c\/i\u003e provides a practical explanation of the pricing and evaluation of swaps and interest rate derivatives. \u003c\/p\u003e\u003cp\u003eBased on the author’s extensive experience in derivatives and risk management, working as a financial engineer, consultant and trainer for a wide range of institutions across the world this book discusses in detail how many of the wide range of swaps and other derivatives, such as yield curve, index amortisers, inflation-linked, cross-market, volatility, diff and quanto diffs, are priced and hedged. It also describes the modelling of interest rate curves, and the derivation of implied discount factors from both interest rate swap curves, and cross-currency adjusted curves. \u003c\/p\u003e\u003cp\u003eThere are detailed sections on the risk management of swap and option portfolios using both traditional approaches and also Value-at-Risk. Techniques are provided for the construction of dynamic and robust hedges, using ideas drawn from mathematical programming. \u003c\/p\u003e\u003cp\u003eThis second edition has expanded sections on the credit derivatives market – its mechanics, how credit default swaps may be priced and hedged, and how default probabilities may be derived from a market strip. It also prices complex swaps with embedded options, such as range accruals, Bermudan swaptions and target accrual redemption notes, by constructing detailed numerical models such as interest rate trees and LIBOR-based simulation. There is also increased discussion around the modelling of volatility smiles and surfaces. \u003c\/p\u003e\u003cp\u003eThe book is accompanied by a CD-ROM where all the models are replicated, enabling readers to implement the models in practice with the minimum of effort.\u003c\/p\u003e","brand":"Wiley","offers":[{"title":"Default Title","offer_id":47990120382693,"sku":"NP9780470721919","price":141.0,"currency_code":"USD","in_stock":false}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/1842\/7735\/files\/9780470721919.jpg?v=1761786591","url":"https:\/\/k12savings.com\/products\/swaps-and-other-derivatives-isbn-9780470721919","provider":"K12savings","version":"1.0","type":"link"}