Finance and Derivatives: Theory and Practice,

* Supplementary material for readers and lecturers is provided on an accompanying website.

Sbastien Bossu graduated from HEC Paris and then went on to obtain his Masters in Financial Mathematics at the University of Chicago. He joined JPMorgans Equity Derivatives Group in 2003 and was recently appointed Vice-President at Dresdner Kleinwort Wasserstein.

Philippe Henrotte is an affiliate professor of finance at HEC Paris and a partner at Ito33, a financial software company providing cutting edge models to the quantitative finance community. He received his Ph.D. in Finance from Stanford University in 1993.

Preface.

Foreword.

Acknowledgements.

1 Interest rate.

1.1 Measuring time.

1.2 Interest rate.

1.3 Discounting.

Exercises.

Solutions.

2 Investment decision criteria.

2.1 Rate of return; time of return.

2.2 Net present value.

2.3 Internal rate of return.

2.4 Other investment criteria.

Further reading.

Exercises.

Solutions.

3 Bonds.

3.1 Financial markets.

3.2 Bonds.

3.3 Yield.

3.4 Zero-coupon yield curve; arbitrage price.

Further reading.

Exercises.

Solutions.

4 Derivatives.

4.1 Introduction.

4.2 Forward contracts.

4.3 ‘Plain vanilla’ options.

Exercises.

Solutions.

5 Portfolio theory.

5.1 Summary of portfolio valuation.

5.2 Risk and return.

5.3 Gains of diversification; portfolio optimization.

5.4 Capital Asset Pricing Model.

Further reading.

Exercises.

Solutions.

6 Binomial model.

6.1 Introduction.

6.2 Binomial trees

Further reading.

Exercises.

Solutions.

7 Lognormal model.

7.1 Lognormal model.

7.2 Closed-form formulas.

7.3 Monte-Carlo method.

Further reading.

Exercises.

Solutions.

8 Dynamic hedging.

8.1 Introduction.

8.2 Delta-hedging.

8.3 Other risk parameters: the Greek letters.

Further reading.

Exercises.

Solutions.

9 Models for asset prices in continuous time.

9.1 Continuously compounded interest rate.

9.2 Introduction to models for the behaviour of asset prices in continuous time.

9.3 Introduction to stochastic processes.

9.4 Introduction to stochastic calculus.

References and further reading.

Exercises.

Solutions.

10 The Black–Scholes model.

10.1 The Black–Scholes partial differential equation.

10.2 Black–Scholes formulas.

10.3 Volatility.

References and further reading.

Exercises.

Solutions.

Appendix A: Probability review.

Appendix B: Calculus review.

Appendix C: Finance formulas.

Index.

What is included with this book?

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Finance and Derivatives: Theory and Practice, Desktop Edition

Summary

Author Biography

Table of Contents

Supplemental Materials