Interest-Rate Option Models: Understanding, Analysing and Using Models for Exotic Interest-Rate Options / Edition 2by Riccardo Rebonato
Pub. Date: 05/05/1998
"From the basics of swap and forward contracts through to the most complex exotic interest-rate options, Rebonato provides a comprehensive and unified treatment of this exciting area. I thoroughly recommend this book to both academics and practitioners. Academics will learn about the practical difficulties of applying theory. Practitioners will gain insight into… See more details below
"From the basics of swap and forward contracts through to the most complex exotic interest-rate options, Rebonato provides a comprehensive and unified treatment of this exciting area. I thoroughly recommend this book to both academics and practitioners. Academics will learn about the practical difficulties of applying theory. Practitioners will gain insight into the often implicit assumptions that lie behind the procedures they use." Ian Cooper, BZW Professor of Finance, London Business School, UK. Interest-Rate Option Models (Second Edition),presents in a unified way the theoretical and practical issues involved in the pricing of exotic interest-rate options. Despite the fact that relatively complex mathematical concepts are introduced and used in the book, financial intuition, rather than mathematical rigour, is emphasised throughout. The book is split into five distinct parts:
• Part One: The Need for Yield Curve Option Pricing Models.
• Part Two: The Theoretical Tools.
• Part Three: The Implementation Tools.
• Part Four: Analysis of Specific Models.
• Part Five: General Topics.
Table of Contents
THE NEED FOR YIELD CURVE OPTION PRICING MODELS.
Definition and Valuation of the Underlying Instruments.
Exotic Interest-Rate Instruments: Description and Valuation Issues.
A Statistical Approach to Yield Curve Models.
Correlation, Average and Instantaneous Volatilities, and Their Impact on the Pricing of LIBOR Options.
A Motivation for Yield Curve Models.
THE THEORETICAL TOOLS.
Establishing a Pricing Framework.
The Conditions of No-Arbitrage.
THE IMPLEMENTATION TOOLS.
The Partial Differential Equation (PDE) Approach.
Monte Carlo Methods.
ANALYSIS OF SPECIFIC MODELS.
The CIR and Vasicek Models.
The Black Derman and Toy Model.
The Hull and White Approach.
The Longstaff and Schwartz Model.
The Brennan and Schwartz Model.
A Class of Arbitrage-Free Log-Normal Short-Rate Two-Factor Models.
The Heath Jarrow and Morton Approach.
The Brace-Gatarek-Musiela/Jamshidian Approach.
Markovian amd Non-Markovian Interest-Rate Models.
Calibration to Cap Prices of Mean-Reverting Log-Normal Short-Rate Models.
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