Advanced Equity Derivatives

Equity exotic derivatives are staples of sophisticated investment and portfolio management strategies. Knowing the formulas that lead to correct fair value pricing and hedging of these instruments is requisite for trading equity-linked products and enhancing yields. Advanced Equity Derivatives is a resource for traders, analysts, and other finance professionals who want to gain an in-depth understanding of how these advanced instruments work. This book ventures far beyond vanilla products and instruments that were considered exotic thirty years ago, making it a definitive text in the field. Written for readers with a solid background in basic equity derivatives pricing and advanced mathematics, this book references Black-Scholes and other standard formulas for exotics from the most common to the cutting-edge. With this background, readers can make use of detailed discussions of central concepts in advanced equity derivatives. Implied distributions, volatility derivatives, and correlation trading are among the topics addressed, and each chapter concludes with practice exercises and important derivations. Numerous illustrations allow readers to quickly grasp complicated concepts. Sébastien Bossu is a highly experienced exotics specialist. In Advanced Equity Derivatives, he presents his own work alongside the work of others in the field in order to prepare readers to accurately price next-generation instruments. In 2004, Bossu discovered a moel that corrected errors in the pricing and hedging of correlation swaps, and this model forms the basis for the correlation chapters of this book. Other possibilities, including stochastic correlation models, are also thoroughly explored, giving readers a sufficient understanding to transpose formulas into any context. This book builds on the concepts and principles explained by Bossu's popular textbook, An Introduction to Equity Derivatives. For investment professionals who need to go beyond the basics to manage risk and understand pricing models, this book is the indispensable next step. The front line of current equity exotics research is represented in the pages of Advanced Equity Derivatives. From standard instruments to brand new practices, this text quickly brings readers up to date on Wall Street standards and the direction of equity exotic derivatives markets.