Market Risk Analysis: Pricing, Hedging and Trading Financial Instruments (Market Risk Analysis) | 
| Author: Carol Alexander
Publisher: Wiley
Category: Book
List Price: $120.00
Buy New: $64.00
You Save: $56.00 (47%)
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Avg. Customer Rating:  7 reviews
Sales Rank: 164882
Media: Hardcover
Edition: Har/Cdr
Number Of Items: 1
Pages: 416
Shipping Weight (lbs): 2
Dimensions (in): 9.8 x 6.9 x 1.2
ISBN: 0470997893
Dewey Decimal Number: 332
EAN: 9780470997895
Publication Date: June 30, 2008
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Product Description
Written by leading market risk academic, Professor Carol Alexander, Pricing, Hedging and Trading Financial Instruments forms part three of the Market Risk Analysis four volume set. This book is an in-depth, practical and accessible guide to the models that are used for pricing and the strategies that are used for hedging financial instruments, and to the markets in which they trade. It provides a comprehensive, rigorous and accessible introduction to bonds, swaps, futures and forwards and options, including variance swaps, volatility indices and their futures and options, to stochastic volatility models and to modelling the implied and local volatility surfaces.
All together, the Market Risk Analysis four volume set illustrates virtually every concept or formula with a practical, numerical example or a longer, empirical case study. Across all four volumes there are approximately 300 numerical and empirical examples, 400 graphs and figures and 30 case studies many of which are contained in interactive Excel spreadsheets available from the the accompanying CD-ROM . Empirical examples and case studies specific to this volume include: - Duration-Convexity approximation to bond portfolios, and portfolio immunization;
- Pricing floaters and vanilla, basis and variance swaps;
- Coupon stripping and yield curve fitting;
- Proxy hedging, and hedging international securities and energy futures portfolios;
- Pricing models for European exotics, including barriers, Asians, look-backs, choosers, capped, contingent, power, quanto, compo, exchange, ‘best-of’ and spread options;
- Libor model calibration;
- Dynamic models for implied volatility based on principal component analysis;
- Calibration of stochastic volatility models (Matlab code);
- Simulations from stochastic volatility and jump models;
- Duration, PV01 and volatility invariant cash flow mappings;
- Delta-gamma-theta-vega mappings for options portfolios;
- Volatility beta mapping to volatility indices.
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| Customer Reviews: Read 2 more reviews...
 BEST BOOK ON THE SUBJECT BY FAR (THE LEADER) October 8, 2008
2 out of 3 found this review helpful
This volume covers all aspects of pricing, hedging and trading of financial instruments. The book has many practical exmaples not provided in other books. Excellent for undergraduate and graduate classes. Matlab codes and excel spreadsheets with codes are included making this one of the best and most practical books on the subject. By far the leader when compared to other smiliar books. I am sure the students will love the book as well as money managers, and academics, etc. A work of art by Professor Carol Alexander as with all the books in this series.
Dr. Greg N. Gregoriou, PhD
Professor of Finance
State University of New York (Plattsburgh)
Better than Hull's book September 28, 2008
5 out of 8 found this review helpful
I worked as a TA for my professor this semester and he chose to use this one as the textbook for his "Financial Instrument Pricing" class, and also gave me one copy.
After reading many chapters, i find this book provides a more quantitative insight on derivative models than Hull's Bible, which actually designed for MBAs. Detailed explanation about models and their calibration are very helpful.
 As badly written as volume 1 September 24, 2008
5 out of 8 found this review helpful
This book [volume 3] is as badly and obscurely written as volume 1. Difficult logic in the derivations, making it hard to follow many pages in the flow.
As with volume 1, a better alternative is to look for example as Fabozzi's long set of financial books. Those tend to be better written and easier reads.
Excellent all-round coverage September 18, 2008
9 out of 12 found this review helpful
I've been a big fan of Professor Alexander's work ever since I had her ground-breaking book "Market Models" on the structured finance desk with me at JPMorgan Chase back in 2001. She writes beautifully and accessibly, and this book is no different. Highly recommended to practitioners as well as graduate students, this book combines just the right amount of theoretical background with practical application. Given the flight-to-quality that the markets have witnessed in the last 12 months, it may well be that more exotic products fall back in popularity in the near future; however, this book gives a firm grounding in the complete range of products, vanilla to exotic. Required reading for the trading desk!
 inadequate modeling of risks September 17, 2008
6 out of 22 found this review helpful
I read this book recently and wasn't going to write a review. But the recent financial news [Lehman, Merrill, AIG...] puts the book in a new light and so I am commenting.
The text says next to nothing about the possible if not probable dangers of all those exotic instruments it describes. Sure, there is risk modeling described. But not at a deep enough level. It ignores the fact that stares at you. If an instrument is made by party A, it is because A wants to sell it to an unrelated party B. A gets a commission on this, and gets it at the start. But the instrument now exists for several years, and it entangles B with whoever are the original debtors that are the source of revenue of the instrument. It also probably entangles A with B, if the contract says so.
So what? The book has models of how many of the original debtors might default. It ignores in totality that A has an incentive to make optimistic models of debtor default. To make the instrument as safe as possible. A has no incentive to scrutinize the debtors. This is not hypothetical, as we all know now. This was how the liars' loans or ninja loans arose from real estate.
In other words, the book only does a partial human factor analysis in its modeling. It models debtors. But not sufficiently A. I dont think the book anywhere models A itself. It assumes that A will make an objective modeling of the intrument. But A has no incentive to do so. Ah but what about those contracts binding A to B? It does not bind the individuals in A who make the instruments. They get their annual bonuses first, before things go to pot. Even if A falls in an eventual bankruptcy due to these actions, the managers get away and keep their bonuses.
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