Mathematics of the Financial Markets

Mathematics of the Financial Markets Financial Instruments and Derivatives Modeling, Valuation and Risk Issues "e;Alain Ruttiens has the ability to turn extremely complex concepts and theories into very easy to understand notions. I wish I had read his book when I started my career!"e; Marco Dion, Global Head of Equity Quant Strategy, J.P. Morgan "e;The financial industry is built on a vast collection of financial securities that can be valued and risk profiled using a set of miscellaneous mathematical models. The comprehension of these models is fundamental to the modern portfolio and risk manager in order to achieve a deep understanding of the capabilities and limitations of these methods in the approximation of the market. In his book, Alain Ruttiens exposes these models for a wide range of financial instruments by using a detailed and user friendly approach backed up with real-life data examples. The result is an excellent entry-level and reference book that will help any student and current practitioner up their mathematical modeling skills in the increasingly demanding domain of asset and risk management."e; Virgile Rostand, Consultant, Toronto ON "e;Alain Ruttiens not only presents the reader with a synthesis between mathematics and practical market dealing, but, more importantly a synthesis of his thinking and of his life."e; Ren Chopard, CEO, Centro di Studi Bancari Lugano, Vezia / Professor, Universit dell'Insubria, Varese "e;Alain Ruttiens has written a book on quantitative finance that covers a wide range of financial instruments, examples and models. Starting from first principles, the book should be accessible to anyone who is comfortable with trading strategies, numbers and formulas."e; Dr Yuh-Dauh Lyuu, Professor of Finance & Professor of Computer Science & Information Engineering, National Taiwan University

Mathematics of the Financial MarketsFinancial Instruments and Derivatives Modeling, Valuation and Risk Issues"Alain Ruttiens has the ability to turn extremely complex concepts and theories into very easy to understand notions. I wish I had read his book when I started my career!"Marco Dion, Global Head of Equity Quant Strategy, J.P. Morgan"The financial industry is built on a vast collection of financial securities that can be valued and risk profiled using a set of miscellaneous mathematical models. The comprehension of these models is fundamental to the modern portfolio and risk manager in order to achieve a deep understanding of the capabilities and limitations of these methods in the approximation of the market. In his book, Alain Ruttiens exposes these models for a wide range of financial instruments by using a detailed and user friendly approach backed up with real-life data examples. The result is an excellent entry-level and reference book that will help any student and current practitioner up their mathematical modeling skills in the increasingly demanding domain of asset and risk management."Virgile Rostand, Consultant, Toronto ON"Alain Ruttiens not only presents the reader with a synthesis between mathematics and practical market dealing, but, more importantly a synthesis of his thinking and of his life."René Chopard, CEO, Centro di Studi Bancari Lugano, Vezia / Professor, Università dell'Insubria, Varese"Alain Ruttiens has written a book on quantitative finance that covers a wide range of financial instruments, examples and models. Starting from first principles, the book should be accessible to anyone who is comfortable with trading strategies, numbers and formulas."Dr Yuh-Dauh Lyuu, Professor of Finance & Professor of Computer Science & Information Engineering, National Taiwan University

Foreword by A.G. MALLIARIS, Loyola University, Chicago xiMain Notations xiiiIntroduction xvPART I THE DETERMINISTIC ENVIRONMENT1 Prior to the Yield Curve: Spot and Forward Rates 32 The Term Structure or Yield Curve 133 Spot Instruments 234 Equities and Stock Indexes 475 Forward Instruments 756 Swaps 917 Futures 119PART II THE PROBABILISTIC ENVIRONMENT8 The Basis of Stochastic Calculus 1479 Other Financial Models: From ARMA to the GARCH Family 16510 Option Pricing in General 17511 Options on Specific Underlyings and Exotic Options 20912 Volatility and Volatility Derivatives 23713 Credit Derivatives 25714 Market Performance and Risk Measures 27515 Beyond the Gaussian Hypothesis: Potential Troubles with Derivatives Valuation 303Bibliography 319Index 323