Financial Engineering :Derivatives
and Risk Management
A key aim of the book is to demonstrate the practical uses of derivatives
in speculation, hedging and arbitrage - in short, to analyse various
techniques used in financial engineering. Our second aim is to demonstrate
the various methods used to evaluate the changing market and credit
risk of global financial institutions.
The theoretical concepts used in analysing derivatives and market
risk are very close and in our view it is time these two aspects
were integrated in one text. At a practitioner level, the analysis
of market risk became prominent after the publication in 1996 of
the 'Value at Risk' idea, promulgated by J.P.Morgan's RiskMetrics
Group. This now forms the basis for setting regulatory capital requirements
for market risk in most financial institutions in the developed
world (as introduced under the auspices of the Bank for International
Settlements in Basle).
Recently, attention has moved from market risk to credit risk as
academics and practitioners look for a methodology to replace the
now outdated Basle Accord of 1988. We discuss the various approaches
to measuring credit risk currently on offer, together with the use
of credit derivatives for hedging.
Our aim is to motivate the reader using real world practical examples
for a whole range of derivatives and then to draw out the importance
of certain theoretical ideas in understanding the payoffs, hedging
and pricing of these assets. This naturally leads on to an analysis
of the theoretical concepts which underlie the measurement and management
of risk in financial institutions.
The book is aimed at final year undergraduates in finance, business
studies/management and core courses for MBA and MSc finance students.
The material is also directly applicable to those undertaking professional
qualifications in the finance sector. No prior knowledge of options
futures and swaps is assumed and there is no need for the reader
to have covered the core material in a course on investments or
corporate finance. A pre-requisite is that the reader be familiar
with the material in an undergraduate course in math and stats for
business/management. Those who feel the need for some revision in
basic math, stats and finance can read the material in our companion
text Investments: Spot and Derivatives Markets.
End
of Chapter Questions (also contents list of the textbook
'Financial Engineering : Derivatives and Risk Management').
Powerpoint
Slides (only Figures and Diagrams from book)
Lecture Slides for (1.) 'Derivatives and Markets :
An Introduction', (2.) 'Advanced Derivatives Markets',(3.) 'Risk
Management and Regulation'.
Excel
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