Dynamic Hedging

A reference to the complexities of the options market with clear explanations of all various forms of risk, this text presents real-world risk management and arbitrage techniques and strategies.

Auteur

Nassim Nicholas Taleb is the founder of Empirica Capital LLC, a hedge fund operator, and a fellow at the Courant Institute of Mathematical Sciences of New York University. He has held a variety of senior derivative trading positions in New York and London and worked as an independent floor trader in Chicago. Dr. Taleb was inducted in February 2001 in the Derivatives Strategy Hall of Fame. He received an MBA from the Wharton School and a Ph.D. from University Paris-Dauphine.

Texte du rabat

Destined to become a market classic, Dynamic Hedging is the only practical reference in exotic options hedgingand arbitrage for professional traders and money managers Watch the professionals. From central banks to brokerages to multinationals, institutional investors are flocking to a new generation of exotic and complex options contracts and derivatives. But the promise of ever larger profits also creates the potential for catastrophic trading losses. Now more than ever, the key to trading derivatives lies in implementing preventive risk management techniques that plan for and avoid these appalling downturns. Unlike other books that offer risk management for corporate treasurers, Dynamic Hedging targets the real-world needs of professional traders and money managers. Written by a leading options trader and derivatives risk advisor to global banks and exchanges, this book provides a practical, real-world methodology for monitoring and managing all the risks associated with portfolio management. Nassim Nicholas Taleb is the founder of Empirica Capital LLC, a hedge fund operator, and a fellow at the Courant Institute of Mathematical Sciences of New York University. He has held a variety of senior derivative trading positions in New York and London and worked as an independent floor trader in Chicago. Dr. Taleb was inducted in February 2001 in the Derivatives Strategy Hall of Fame. He received an MBA from the Wharton School and a Ph.D. from University Paris-Dauphine.

Résumé
Dynamic Hedging is the definitive source on derivatives risk. It provides a real-world methodology for managing portfolios containing any nonlinear security. It presents risks from the vantage point of the option market maker and arbitrage operator.

Contenu

Introduction Dynamic Hedging 1

Part 1 Markets, Instruments, People

1 Introduction to the Instruments 9

2 The Generalized Option 38

3 Market Making and Market Using 48

4. Liquidity and Liquidity Holes 68

5 Arbitrage and the Arbitrageurs 80

6 Volatility and Correlation 88

Part II Measuring Option Risks

7 Adapting Black-Scholes-Merton: The Delta 115

8 Gamma and Shadow Gamma 132

9 Vega and the Volatility Surface 147

10 Theta and Minor Greeks 167

11 The Greeks and Their Behavior 191

12 Fungibility, Convergence, and Stacking 208

13 Some Wrinkles of Option Markets 222

14 Bucketing and Topography 229

15 Beware the Distribution 238

16 Option Trading Concepts 256

Part III Trading and Hedging Exotic Options

17 Binary Options: European Style 273

18 Binary Options: American Style 295

19 Barrier Options (I) 312

20 Barrier Options (II) 347

21 Compound, Choosers, and Higher Order Options 376

22 Multiasset Options 383

23 Minor Exotics: Lookback and Asian Options 403

Part IV Modules

Module A Brownian Motion on a Spreadsheet, a Tutorial 415

Module B Risk Neutrality Explained 426

Module C Numeraire Relativity and the Two-Country Paradox 431

Module D Correlation Triangles: A Graphical Case Study 438

Module E The Value-at-Risk 445

Module F Probabilistic Rankings in Arbitrage 453

Module G Option Pricing 459

Notes 479

Bibliography 490

Index 499