Following several high-profile company insolvencies, regulatory requirements have moved towards a risk-adjusted basis which has lead to the Solvency II developments. The key focus in the new regime is that financial companies need to analyze adverse developments in their portfolios. Reserving actuaries now have to not only estimate reserves for the outstanding loss liabilities but also to quantify possible shortfalls in these reserves that may lead to potential losses. Such an analysis requires stochastic modeling of loss liability cash flows and it can only be done within a stochastic framework. Therefore stochastic loss liability modeling and quantifying prediction uncertainties has become standard under the new legal framework for the financial industry.
This book covers all the mathematical theory and practical guidance needed in order to adhere to these stochastic techniques. Starting with the basic mathematical methods, working right through to the latest developments relevant for practical applications; readers will find out how to estimate total claims reserves while at the same time predicting errors and uncertainty are quantified. Accompanying datasets demonstrate all the techniques, which are easily implemented in a spreadsheet. A practical and essential guide, this book is a must-read in the light of the new solvency requirements for the whole insurance industry.
Over the years, market developments have proven the wisdom of Graham’s strategies. While preserving the integrity of Graham’s original text, this revised edition includes updated commentary by noted financial journalist Jason Zweig, whose perspective incorporates the realities of today’s market, draws parallels between Graham’s examples and today’s financial headlines, and gives readers a more thorough understanding of how to apply Graham’s principles.
Vital and indispensable, The Intelligent Investor is the most important book you will ever read on how to reach your financial goals.
This book is the story of a financial sector that has grown hugelyin importance in the 40 years since Euroclear, now theworld’s premier settlement system for domestic andinternational securities transactions, was created to deal with asettlement crisis that threatened to smother the internationalcapital market in its infancy.
Beginning with the settlement crisis in the Eurobond market, thisbook describes how Euroclear and later Cedel, its arch-rival, werefounded to deal with the problem. It follows the challenges posedby cross-border settlement for a growing range of securities whenmost financial infrastructures operated only within nationalfrontiers. The book demonstrates how securities settlement becamean issue for public policy after the stock market crash of 1987 andhow the problems of cross-border settlement moved rapidly up theEuropean policy agenda after the euro’s launch.
More than a mere history, this book engages with the people whocreated the modern European securities settlement industry and tapsinto the often entertaining memories of its founding fathers. Thisbook also focuses on the difficulties and challenges ofcross-border transactions which have been identified as hamperingEurope’s economic growth. It looks at the present state ofthe industry seeking a way forward so that the securitiessettlement infrastructure will better serve a single Europeancapital market.
Property funds, insurance companies, pension and life funds,speculators, hedge funds or any asset manager with a view on thereal estate market can apply the new derivatives to hedge propertyrisk, to invest synthetically in real estate, or for portfoliooptimization. Moreover, developers, builders, home suppliers,occupiers, banks, mortgage lenders and governmental agencies canbetter cope with their real estate exposure using propertyderivatives.
This book is a practical introduction to property derivativesand their numerous applications. Providing a comprehensive overviewof the property derivatives market and indices, there is alsoin-depth coverage of pricing, hedging and risk management, whichwill deepen the readers understanding of the market'smechanisms.
Covering both the theoretical and practical aspects of theproperty derivatives markets; this book is the definitive referenceguide to a new and fast-growing market.
Michael Lewis creates a fresh, character-driven narrative brimming with indignation and dark humor, a fitting sequel to his #1 bestseller Liar's Poker. Out of a handful of unlikely-really unlikely-heroes, Lewis fashions a story as compelling and unusual as any of his earlier bestsellers, proving yet again that he is the finest and funniest chronicler of our time.
Bringing together some of the best authors in the field, thisbook focuses on the risk management issues associated with bothsoft and hard commodities: energy, weather, agriculturals, metalsand shipping. Taking the reader through every part of thecommodities markets, the authors discuss the intricacies ofmodelling spot and forward prices, as well as the design of newFutures markets. The book also looks at the use of options andother derivative contract forms for hedging purposes, as well assupply management in commodity markets. It looks at theimplications for climate policy and climate research and analyzesthe various freight derivatives markets and products used to manageshipping and freight risk in a global commodity world.
It is required reading for energy and mining companies,utilities’ practitioners, commodity and cash derivativestraders in investment banks, CTA’s and hedge funds
* Increased pressure to add value through investments makes this ahot topic in the investment world
* Combined theoretical and practical approach makes this bookappealing to a wide audience of quants and investors
* The only book to show how to design and implement quantitativemodels for gaining positive alpha
Bitcoin, the first successful decentralized digital currency, is still in its early stages and yet it’s already spawned a multi-billion-dollar global economy open to anyone with the knowledge and passion to participate. Mastering Bitcoin provides the knowledge. You simply supply the passion.
The second edition includes:A broad introduction of bitcoin and its underlying blockchain—ideal for non-technical users, investors, and business executivesAn explanation of the technical foundations of bitcoin and cryptographic currencies for developers, engineers, and software and systems architectsDetails of the bitcoin decentralized network, peer-to-peer architecture, transaction lifecycle, and security principlesNew developments such as Segregated Witness, Payment Channels, and Lightning NetworkA deep dive into blockchain applications, including how to combine the building blocks offered by this platform into higher-level applicationsUser stories, analogies, examples, and code snippets illustrating key technical concepts
The book is aimed at entrants into investment banking anddealing businesses, existing personnel in non-trading jobs, andpeople outside of the financial services industry trying to gain aview into what drives dealers in today’s highly integratedmarketplace. A committed reader is guaranteed to leave with a deepunderstanding of all current issues.
"This is an excellent introduction to the financial marketsby an author with a strong academic approach and practical insightsfrom trading experience. At a time when the proliferation offinancial instruments and the increased use of sophisticatedmathematics in their analysis, makes an introduction to financialmarkets intimidating to most, this book is very useful. It providesan insight into the core concepts across markets and usesmathematics at an accessible level. It equips readers to understandthe fundamentals of markets, valuation and trading. I would highlyrecommend it to anyone looking to understand the essentials ofsuccessfully trading, structuring or using the entire range offinancial instruments available today."
—Varun Gosain, Principal, Constellation CapitalManagement, New York
"Robert Dubil, drawing from his extensive prior tradingexperience, has made a significant contribution by writing an easyto understand book about the complex world of today’sfinancial markets, using basic mathematical concepts. Thebook is filled with insights and real life examples about howtraders approach the market and is required reading for anyone withan interest in understanding markets or a career in trading."
—George Handjinicolaou, Partner, Etolian Capital, NewYork
"This book provides an excellent guide to the current stateof the financial markets. It combines academic rigour with theauthor’s practical experience of the financial sector, givingboth students and practitioners an insight into the arbitragepricing mechanism."
—Zenji Nakamura, Managing Director, Europe Fixed IncomeDivision, Nomura International plc, London
Describing how the key products and markets work, who theprinciple participants are and their overall goals and objectives,Andrew Chisholm provides a thorough overview of the global capitalmarkets. The book covers a wide range of equity, debt, foreignexchange and credit instruments as well as the principal derivativeproducts. In a step-by-step fashion, making extensive use of realworld cases and examples, it explains money markets, foreignexchange, bond markets, cash equity markets, equity valuationtechniques, swaps, forwards, futures, credit derivatives, options,option risk management and convertible bonds. An extensive glossaryalso explains concisely many of the ‘jargon’expressions used in the financial markets.
Boasting an international focus, examples are drawn from majorinternational markets around the world. It makes extensive use ofnumerical examples and case studies to help explain a wide range ofcash and derivative products used in the capital markets business.It covers both debt and equity products and includes new materialon credit products such as collateralized debt obligations andcredit derivative structures; equity fundamental analysis,portfolio theory and convertible bonds. Market data has been fullyupdated from the first edition and recent events such as the‘credit crisis’ are discussed.
Key features include:Discussion of the principles of Islamic finance;Introduction to the key products and procedures thatInternational Financial Institutions are using or may adopt to funda variety of clients ensuring Sharī´ah compliance;Discussion of the role Islamic finance can play in thedevelopment of the financial system and of economies;Practical and operational examples that cover deposit and fundmanagement by banks involving financing of various sectors of theeconomy, risk management, accounting treatment, and working ofIslamic financial markets and instruments.
This book is not only an important text for all banks andfinancial institutions entering this particular market with acommitment to building Islamic financial solutions, but is alsoessential reading for undergraduate and postgraduate students ofIslamic finance.
The Art of Credit Derivatives shows practitioners how toput a framework in place which will support the securitizationactivity. By showing the models that support this activityand linking them with very practical examples, the authors show whya mind-shift within the quant community is needed - a move fromsimple modeling to a more hands on mindset where the modelerunderstands the trading implicitly.
The book has been written in five parts, covering the modelingframework; single name corporate credit derivatives; multi namecorporate credit derivatives; asset backed securities and dynamiccredit portfolio management.
Coverage includes:groundbreaking solutions to the inherent risks associated withinvesting in securitization instrumentshow to use the standardized credit indices as the mostappropriate instruments in price discovery processes and why theseindices are the essential tools for short term credit portfoliomanagementwhy the dynamics of systemic correlation and the standardisedcredit indices are linked with leverage, and consequently theimplications for liquidity and solvability of financialinstitutionshow Lévy processes and long term memory processes arerelated to the understanding of economic activitywhy regulatory capital should be portfolio dependant and how touse stress tests and scenario analysis to model thishow to put structured products in a mark-to market-environment,increasing transparency for accounting and compliance.
This book will be invaluable reading for Credit Analysts,Quantitative Analysts, Credit Portfolio Managers, Academics andanyone interested in these complex yet important markets.
Fully revised and updated to take in to account the newproducts, markets and risk requirements post financial crisis,Credit Derivatives: Trading, Investing and Risk Management,Second Edition, covers the subject from a real worldperspective, tackling issues such as liquidity, poor data, andcredit spreads, to the latest innovations in portfolio products,hedging and risk management techniques.
The book concentrates on practical issues and develops anunderstanding of the products through applications and detailedanalysis of the risks and alternative means of trading.
It provides:a description of the key products, applications, and ananalysis of typical trades including basis trading, hedging, andcredit structuring;analysis of the industry standard 'default and recovery' andCopula models including many examples, and a description of themodels' shortcomings;tools and techniques for the management of a portfolio or bookof credit risks including appropriate and inappropriate methods ofcorrelation risk management;a thorough analysis of counterparty risk;an intuitive understanding of credit correlation in reality andin the Copula model.
The book is thoroughly updated to reflect the changes theindustry has seen over the past 5 years, notably with an analysisof the lead up and causes of the credit crisis. It contains 50% newmaterial, which includes copula valuation and hedging, portfoliooptimisation, portfolio products and correlation risk management,pricing in illiquid environments, chapters on the evolution ofcredit management systems, the credit meltdown and new chapters onthe implementation and testing of credit derivative models andsystems.
The book is accompanied by a website which contains toolsfor credit derivatives valuation and risk management, illustratingthe models used in the book and also providing a valuationtoolkit.
This revised and updated edition adds commentary on hot topics, including the current economic crisis, globalization, the economics of information, the intersection of economics and politics, and the history—and future—of the Federal Reserve.
Exotic Options and Hybrids is a practical guide tostructuring, pricing and hedging complex exotic options and hybridderivatives that will serve readers through the recent crisis, theroad to recovery, the next bull market and beyond. Written byexperienced practitioners, it focuses on the three main parts of aderivative’s life: the structuring of a product, its pricingand its hedging.
Divided into four parts, the book covers a multitude ofstructures, encompassing many of the most up-to-date and promisingproducts from exotic equity derivatives and structured notes tohybrid derivatives and dynamic strategies. Based on a realisticsetting from the heart of the business, inside a derivativesoperation, the practical and intuitive discussions of these aspectsmake these exotic concepts truly accessible.
Adoptions of real trades are examined in detail, and all of thenumerous examples are carefully selected so as to highlightinteresting and significant aspects of the business. Theintroduction of payoff structures is accompanied by scenarioanalysis, diagrams and lifelike sample term sheets. Readers learnhow to spot where the risks lie to pave the way for sound valuationand hedging of such products. There are also questions andaccompanying discussions dispersed in the text, each exploited toillustrate one or more concepts from the context in which they areset.
The applications, the strengths and the limitations of variousmodels are highlighted, in relevance to the products and theirrisks, rather than the model implementations. Models arede-mystified in separately dedicated sections, but theirimplications are alluded to throughout the book in an intuitive andnon-mathematical manner.
By discussing exotic options and hybrids in a practical,non-mathematical and highly intuitive setting, this book will blastthrough the misunderstanding of exotic derivatives, enablingpractitioners to fully understand and correctly structure, priceand hedge theses products effectively, and stand strong as the onlybook in its class to make these “exotic” concepts trulyaccessible.
The book looks at private equity from the point of view of theindividual or the business. How is a private business valued? Howis the acquisition transaction processed? What are the duediligence issues that should be considered before moving ahead? Avaluable insight to a rather opaque market.
Introduction to Private Equity covers the private equityindustry as a whole, highlighting its historical development inorder to put its recent development into perspective. The bookcovers its organization, governance and function, then details thevarious segments within the industry, including LBO, VentureCapital, Mezzanine Financing, Growth Capital and beyond. Finally,it offers a framework to anticipate and understand its futuredevelopments.
It provides a balanced perspective on the current corporategovernance challenges which are affecting the industry and drawsperspective to understand the evolution of the sector, followingone of its major crises.
This book is a guide to ratings, the ratings industry and themechanics and economics of obtaining a rating. It sheds light onthe role that the agencies play in the international financialmarkets. It avoids the sensationalist approach often associatedwith studies of rating scandals and the financial crisis, andinstead provides an objective and critical analysis of the businessof ratings. The book will be of practical use to any individual whohas to deal with ratings and the ratings industry in theirday-to-day job.
"Rating agencies fulfil an important role in the capitalmarkets, but given their power, they are frequently the object ofcriticism. Some of it is justified but most of it portrays alack of understanding of their business. In their book TheRating Agencies and their Credit Ratings, Herwig and PatriciaLangohr provide an excellent economic background to the role ofrating agencies and also a thorough understanding of their businessand the problems they face. I recommend this book to allthose who have an interest in this somewhat arcane but extremelyimportant area."
-Robin Monro-Davies, Former CEO, Fitch Ratings.
"At a time of unprecedented public and political scrutiny of theeffectiveness and indeed the basic business model of the CreditRating industry, and heightened concerns regarding the transparencyand accountability of the leading agencies, this book provides acommendably comprehensive overview, and should provide invaluableassistance in the ongoing debate."
-Rupert Atkinson, Managing Director, Head of CreditAdvisory Group, Morgan Stanley and member of the SIFMA RatingAgency Task Force
"The Langohrs have provided useful information in a field whereone frequently finds only opinions or misconceptions. They supply afirm base from which to understand changes now underway. Awell-read copy of this monograph should be close to the desk ofevery investor, issuer and financial regulator, legislator orcommentator."
-John Grout, Policy and Technical Director, The Associationof Corporate Treasurers
Icelanders wanted to stop fishing and become investment bankers. The Greeks wanted to turn their country into a pinata stuffed with cash and allow as many citizens as possible to take a whack at it. The Germans wanted to be even more German; the Irish wanted to stop being Irish.
Michael Lewis's investigation of bubbles beyond our shores is so brilliantly, sadly hilarious that it leads the American reader to a comfortable complacency: oh, those foolish foreigners. But when he turns a merciless eye on California and Washington, DC, we see that the narrative is a trap baited with humor, and we understand the reckoning that awaits the greatest and greediest of debtor nations.
The book begins by analysing the current state of the hedge fundindustry - at the ongoing institutionalisation of the market, andat its latest developments. It then moves on to examine therange of risks, risk controls, and risk management strategiescurrently employed by practitioners, and focuses on particularrisks embedded in the more classic investment strategies such asLong/Short, Convertible Arbitrage, Fixed Income Arbitrage, Shortselling and risk arbitrage. Addressed along side these areother risks common to hedge funds, including liquidity risk,leverage risk and counterparty risk.
The book then moves on to examine more closely two models whichprovide the underpinning for market risk management in investmenttoday - Style Value-at-Risk and Implicit Value-at-Risk. Aswell as full quantitative analysis and backtesting of eachmethodology, the authors go on to propose a new style model forstyle and implicit Var, complete with analysis, real life examplesand backtesting. The authors then go on to discussannualisation issues and risk return before moving on to propose anew model based on the authors own Best Choice Implicit VaRapproach, incorporating quantitative analysis, market results andbacktesting and also its potential for new hedge fund cloneproducts.
This book is the only guide to VaR for Hedge Funds and willprove to be an invaluable resource as we embark into an era ofincreasing volatility and uncertainty.
A Foreign Exchange Primer provides a clear understanding of howthis market functions, from the main products through to thetechniques used, coverage of the main participants, details of thevarious 'players' and an understanding of the 'jargon' used ineveryday dealings.
This concise, highly accessible primer is ideal for anyone newto or wanting to become involved in the foreign exchange market,from a dealing room or sales perspective through to the noviceinvestor.
The Money Book for the Young, Fabulous & Broke is financial expert Suze Orman's answer to a generation's cry for help. They're called "Generation Debt" and "Generation Broke" by the media — people in their twenties and thirties who graduate college with a mountain of student loan debt and are stuck with one of the weakest job markets in recent history. The goals of their parents' generation — buy a house, support a family, send kids to college, retire in style — seem absurdly, depressingly out of reach. They live off their credit cards, may or may not have health insurance, and come up so far short at the end of the month that the idea of saving money is a joke. This generation has it tough, without a doubt, but they're also painfully aware of the urgent need to take matters into their own hands.
The Money Book was written to address the specific financial reality that faces young people today and offers a set of real, not impossible solutions to the problems at hand and the problems ahead. Concisely, pragmatically, and without a whiff of condescension, Suze Orman tells her young, fabulous & broke readers precisely what actions to take and why. Throughout these pages, there are icons that direct readers to a special YF&B domain on Suze's website that offers more specialized information, forms, and interactive tools that further customize the information in the book. Her advice at times bucks conventional wisdom (did she just say use your credit card?) and may even seem counter-intuitive (pay into a retirement fund even though your credit card debt is killing you?), but it's her honesty, understanding, and uncanny ability to anticipate the needs of her readers that has made her the most trusted financial expert of her day.
Over the course of ten chapters that can be consulted methodically, step-by-step or on a strictly need-to-know basis, Suze takes the reader past broke to a secure place where they'll never have to worry about revisiting broke again. And she begins the journey with a bit of overwhelmingly good news (yes, there really is good news): Young people have the greatest asset of all on their side — time.
Jumps and extreme events are crucial stylized features,essential in the modelling of the very volatile credit markets -the recent turmoil in the credit markets has once again illustratedthe need for more refined models.
Readers will learn how the classical models (driven by Brownianmotions and Black-Scholes settings) can be significantly improvedby using the more flexible class of Lévy processes. By doingthis, extreme event and jumps can be introduced into the models togive more reliable pricing and a better assessment of therisks.
The book brings in high-tech financial engineering models forthe detailed modelling of credit risk instruments, setting up thetheoretical framework behind the application of Lévy Processesto Credit Risk Modelling before moving on to the practicalimplementation. Complex credit derivatives structures such as CDOs,ABSs, CPPIs, CPDOs are analysed and illustrated with marketdata.
From the author of The Blind Side and Moneyball, The Big Short tells the story of four outsiders in the world of high-finance who predict the credit and housing bubble collapse before anyone else. The film adaptation by Adam McKay (Anchorman I and II, The Other Guys) features Academy Award® winners Christian Bale, Brad Pitt, Melissa Leo and Marisa Tomei; Academy Award® nominees Steve Carell and Ryan Gosling.
When the crash of the U.S. stock market became public knowledge in the fall of 2008, it was already old news. The real crash, the silent crash, had taken place over the previous year, in bizarre feeder markets where the sun doesn’t shine and the SEC doesn’t dare, or bother, to tread. Who understood the risk inherent in the assumption of ever-rising real estate prices, a risk compounded daily by the creation of those arcane, artificial securities loosely based on piles of doubtful mortgages? In this fitting sequel to Liar’s Poker, Michael Lewis answers that question in a narrative brimming with indignation and dark humor.
Fourier Transform Methods in Finance is a practical andaccessible guide to pricing financial instruments using Fouriertransform. Written by an experienced team of practitioners andacademics, it covers Fourier pricing methods; the dynamics of assetprices; non stationary market dynamics; arbitrage free pricing;generalized functions and the Fourier transform method.
Readers will learn how to:compute the Hilbert transform of the pricing kernel under aFast Fourier Transform (FFT) techniquecharacterise the price dynamics on a market in terms of thecharacteristic function, allowing for both diffusive processes andjumpsapply the concept of characteristic function to non-stationaryprocesses, in particular in the presence of stochastic volatilityand more generally time change techniquesperform a change of measure on the characteristic function inorder to make the price process a martingalerecover a general representation of the pricing kernel of theeconomy in terms of Hilbert transform using the theory ofgeneralised functionsapply the pricing formula to the most famous pricing models,with stochastic volatility and jumps.
Junior and senior practitioners alike will benefit from thisquick reference guide to state of the art models and marketcalibration techniques. Not only will it enable them to write analgorithm for option pricing using the most advanced models,calibrate a pricing model on options data, and extract the impliedprobability distribution in market data, they will also understandthe most advanced models and techniques and discover how thesetechniques have been adjusted for applications in finance.
—Paul Embrechts, Professor of Mathematics and Director of RiskLab, ETH Zurich
The convergence of insurance with the capital markets has opened up an alternative channel for insurers to transfer risk, raise capital and optimize their regulatory reserves as well as offering institutions a source of relatively liquid investment with limited correlation with other exposures. One of the financial instruments allowing for the cession of insurance-related risks to the capital markets is Insurance-Linked Securities (ILS).
This book provides hands-on information essential for market participants, drawing on the insights and expertise of an impressive team of international market players, representing the various aspects and perspectives of this growing sector.
The book presents the state of the art in Insurance-Linked Securitization, by exploring the various roles for the different parties involved in the transactions, the motivation for the transaction sponsors, the potential inherent pitfalls, the latest developments and transaction structures and the key challenges faced by the market.
The book is organized into parts, each covering a specific topic or sector of the market. After a general overview of the ILS market, the Insurance-Linked Securitization process is studied in detail. A distinction is made between non-life and life securitization, due to the specificities of each sector. The process and all the actors involved are identified and considered in a comprehensive and systematic way. The concepts are first looked at in a general way, before the analysis of relevant case studies where the ILS technology is applied.
Particular focus is given to:the key stages in both non-life and life securitizations, including the general features of the transactions, the cedant's perspectives, the legal issues, the rating methodologies, the choice of an appropriate trigger and the risk modeling,the particular challenges related to longevity securitization,the investor's perspective and the question of the management of a portfolio of ILS, the general issues related to insurance-linked securitization, such as accounting and tax issues, regulatory issues and solvency capital requirements.
The book is accompanied by a website www.wiley.com/go/albertini_barrieu_ILS which will feature updates and additions to the various contributions to follow market developments.
While the formula may be simple, understanding why the formulaworks is the true key to success for investors. The book will takereaders on a step-by-step journey so that they can learn theprinciples of value investing in a way that will provide them witha long term strategy that they can understand and stick withthrough both good and bad periods for the stock market.
As the Wall Street Journal stated about the originaledition, “Mr. Greenblatt…says his goal was to provideadvice that, while sophisticated, could be understood and followedby his five children, ages 6 to 15. They are in luck. His‘Little Book’ is one of the best, clearest guides tovalue investing out there.”
–David Louton, Professor of Finance, Bryant University
This book is directed at both industry practitioners andstudents interested in designing a pricing and risk managementframework for financial derivatives using the Python programminglanguage.
It is a practical book complete with working, tested code thatguides the reader through the process of building a flexible,extensible pricing framework in Python. The pricing frameworks'loosely coupled fundamental components have been designed tofacilitate the quick development of new models. Concreteapplications to real-world pricing problems are also provided.
Topics are introduced gradually, each building on the last. Theyinclude basic mathematical algorithms, common algorithms fromnumerical analysis, trade, market and event data modelrepresentations, lattice and simulation based pricing, and modeldevelopment. The mathematics presented is kept simple and to thepoint.
The book also provides a host of information on practicaltechnical topics such as C++/Python hybrid development (embeddingand extending) and techniques for integrating Python based programswith Microsoft Excel.
Fooled by Randomness is the word-of-mouth sensation that will change the way you think about business and the world. Nassim Nicholas Taleb–veteran trader, renowned risk expert, polymathic scholar, erudite raconteur, and New York Times bestselling author of The Black Swan–has written a modern classic that turns on its head what we believe about luck and skill.
This book is about luck–or more precisely, about how we perceive and deal with luck in life and business. Set against the backdrop of the most conspicuous forum in which luck is mistaken for skill–the world of trading–Fooled by Randomness provides captivating insight into one of the least understood factors in all our lives. Writing in an entertaining narrative style, the author tackles major intellectual issues related to the underestimation of the influence of happenstance on our lives.
The book is populated with an array of characters, some of whom have grasped, in their own way, the significance of chance: the baseball legend Yogi Berra; the philosopher of knowledge Karl Popper; the ancient world’s wisest man, Solon; the modern financier George Soros; and the Greek voyager Odysseus. We also meet the fictional Nero, who seems to understand the role of randomness in his professional life but falls victim to his own superstitious foolishness.
However, the most recognizable character of all remains unnamed–the lucky fool who happens to be in the right place at the right time–he embodies the “survival of the least fit.” Such individuals attract devoted followers who believe in their guru’s insights and methods. But no one can replicate what is obtained by chance.
Are we capable of distinguishing the fortunate charlatan from the genuine visionary? Must we always try to uncover nonexistent messages in random events? It may be impossible to guard ourselves against the vagaries of the goddess Fortuna, but after reading Fooled by Randomness we can be a little better prepared.
PRAISE FOR FOOLED BY RANDOMNESS:
Named by Fortune One of the Smartest Books of All Time
A Financial Times Best Business Book of the Year
“[Fooled by Randomness] is to conventional Wall Street wisdom approximately what Martin Luther’s ninety-five theses were to the Catholic Church.”
–Malcolm Gladwell, author of Blink
“The book that rolled down Wall Street like a hand grenade.”
–Maggie Mahar, author of Bull! A History of the Boom, 1982—1999
“Fascinating . . . Taleb will grab you.”
–Peter L. Bernstein, author of Capital Ideas Evolving
“Recalls the best of scientist/essayists like Richard Dawkins . . . and Stephen Jay Gould.”
–Michael Schrage, author of Serious Play: How the World’s Best Companies Simulate to Innovate
“We need a book like this. . . . Fun to read, refreshingly independent-minded.”
–Robert J. Shiller, author of Irrational Exuberance
“Powerful . . . loaded with crackling little insights [and] extreme brilliance.”
Modelling Operational and Reputational Risks shows practitionersthe best models to use in a given situation, according to the typeof risk an organization is facing. Based on extensive appliedresearch on operational risk models using real bank datasets, itoffers a wide range of various testing models and fittingtechniques for financial practitioners. With this book,professionals will have a foundation for measuring and predictingthese important intangibles.
Aldo Soprano (Madrid, Spain) is Group Head of operational riskmanagement at UniCredit Group.
It's safe to say that nearly everyone is seeking a happier, moresuccessful life. So then why do so few attain it? BusinessSecrets from the Bible proposes a new way to view and approachsuccess—one based upon key concepts from the Bible that areactually surprisingly simple. Written especially for those seekingsuccess in the realms of money, relationships, and spirituality,this book encourages readers to realize their common mistakes, cometo terms with them, and turn those mistakes into future triumphs.Filled with concrete advice for improved finances, spirituality,and connection, this resource takes a practical approach and aimsto change not just the minds, but the actions of readers with aself-evident and persuasive pathway.
Drawing on his wisdom and knowledge of the Bible, the authorreveals the clear link between making money and spirituality, andurges readers to focus on self-discipline, integrity, and characterstrength in order to achieve personal prosperity. Special emphasisis given to establishing positive attitudes toward making money andadopting effective Biblically-based strategies.Demonstrates how earnings and profits are God's reward forforming relationships with others and serving themStresses the importance of service, sharing, change,leadership, and creating boundaries and structuresEncourages readers to focus on other people's desires andteaches why and how to make connections with many peopleSuggests ways for readers to transform themselves and continuetoward success even in the face of fear and uncertainty
Attaining wealth and well-being is no longer a mystery. Let thisbook identify and correct the errors that are keeping you fromfulfillment and happiness.
The Commercial Imperative of a More Forensic and TransparentApproach
Brendon Young and Rodney Coleman
“Brendon Young and Rodney Coleman's book is extremelytimely. There has never been a greater need for the financialindustry to reassess the way it looks at risk. […] They areright to draw attention to the current widespread practices of riskmanagement, which […] have allowed risk to become underpricedacross the entire industry.”
Rt Hon John McFall MP, Chairman,
House of Commons Treasury Committee
Failure of the financial services sector to properly understandrisk was clearly demonstrated by the recent 'credit crunch'. In its2008 Global Stability Report, the IMF sharply criticised banks andother financial institutions for the failure of risk managementsystems, resulting in excessive risk-taking. Financial sectorsupervision and regulation was also criticised for lagging behindshifts in business models and rapid innovation.
This book provides investors with a sound understanding ofthe approaches used to assess the standing of firms and determinetheir true potential (identifying probable losers and potentiallonger-term winners). It advocates a 'more forensic' approachtowards operational risk management and promotes transparency,which is seen as a facilitator of competition and efficiency aswell as being a barrier to fraud, corruption and financialcrime.
Risk assessment is an integral part of informed decision making,influencing strategic positioning and direction. It is fundamentalto a company’s performance and a key differentiator betweencompeting management teams. Increasing complexity is resulting inthe need for more dynamic, responsive approaches to the assessmentand management of risk. Not all risks can be quantified; however,it remains incumbent upon management to determine the impact ofpossible risk-events on financial statements and to indicate thelevel of variation in projected figures.
To begin, the book looks at traditional methods of riskassessment and shows how these have developed into the approachescurrently being used. It then goes on to consider the more advancedforensic techniques being developed, which will undoubtedlyincrease understanding. The authors identify 'best practice' andaddress issues such as the importance of corporate governance,culture and ethics. Insurance as a mitigant for operational risk isalso considered. Quantitative and qualitative risk assessmentmethodologies covered include: Loss-data analysis; extreme valuetheory; causal analysis including Bayesian Belief Networks; controlrisk self-assessment and key indicators; scenario analysis; anddynamic financial analysis.
Views of industry insiders, from organisations such as Standard& Poors, Fitch, Hermes, USS, UN-PRI, Deutsche Bank, and AlchemyPartners, are presented together with those from experts at theFSA, the International Accounting Standards Board (IASB), and theFinancial Reporting Council.
In addition to investors, this book will be of interest toactuaries, rating agencies, regulators and legislators, as well asto the directors and risk managers of financial institutions inboth the private and public sectors. Students requiring acomprehensive knowledge of operational risk management will alsofind the book of considerable value.
De Weert begins by explaining the risks associated with tradingan exotic option before dissecting these risks through a detailedanalysis of the actual economics and Greeks rather than solelystating the mathematical formulae. The book limits the use ofmathematics to explain exotic options from an economic and riskperspective by means of real life examples leading to a practicalinterpretation of the mathematical pricing formulae.
The book covers conventional options, digital options, barrieroptions, cliquets, quanto options, outperformance options andvariance swaps, and explains difficult concepts in simple terms,with a practical approach that gives the reader a fullunderstanding of every aspect of each exotic option. The book alsodiscusses structured notes with exotic options embedded in them,such as reverse convertibles, callable and puttable reverseconvertibles and autocallables and shows the rationale behind thesestructures and their associated risks.
For each exotic option, the author makes clear why there is aninvestor demand; explains where the risks lie and how this affectsthe actual pricing; shows how best to hedge any vega or gammaexposure embedded in the exotic option and discusses the skewexposure.
By explaining the practical implications for every exotic optionand how it affects the price, in addition to the necessarymathematical derivations and tools for pricing exotic options,Exotic Options Trading removes the mystique surroundingexotic options in order to give the reader a full understanding ofevery aspect of each exotic option, creating a useable tool fordealing with exotic options in practice.
“Although exotic options are not a new subject infinance, the coverage traditionally afforded by many texts iseither too high level or overly mathematical. De Weert'sexceptional text fills this gap superbly. It is a rigoroustreatment of a number of exotic structures and includes numerousexamples to clearly illustrate the principles. What makes this bookunique is that it manages to strike a fantastic balance between thetheory and actual trading practice. Although it may be something ofan overused phrase to describe this book as compulsory reading, Ican assure any reader they will not be disappointed.”
—Neil Schofield, Training Consultant and author ofCommodity Derivatives: Markets and Applications
“Exotic Options Trading does an excellent job inproviding a succinct and exhaustive overview of exotic options. Thereal edge of this book is that it explains exotic options from arisk and economical perspective and provides a clear link to theactual profit and pricing formulae. In short, a must read foranyone who wants to get deep insights into exotic options and starttrading them profitably.”
What happens when ordinary people are taught a system to make extraordinary money? Richard Dennis made a fortune on Wall Street by investing according to a few simple rules. Convinced that great trading was a skill that could be taught to anyone, he made a bet with his partner and ran a classified ad in the Wall Street Journal looking for novices to train. His recruits, later known as the Turtles, had anything but traditional Wall Street backgrounds; they included a professional blackjack player, a pianist, and a fantasy game designer. For two weeks, Dennis taught them his investment rules and philosophy, and set them loose to start trading, each with a million dollars of his money. By the time the experiment ended, Dennis had made a hundred million dollars from his Turtles and created one killer Wall Street legend.
In The Complete Turtle Trader, Michael W. Covel, bestselling author of Trend Following and managing editor of TurtleTrader.com, the leading website on the Turtles, tells their riveting story with the first ever on the record interviews with individual Turtles. He describes how Dennis interviewed and selected his students, details their education and experiences while working for him, and breaks down the Turtle system and rules in full. He reveals how they made astounding fortunes, and follows their lives from the original experiment to the present day. Some have grown even wealthier than ever, and include some of today's top hedge fund managers. Equally important are those who passed along their approach to a second generation of Turtles, proving that the Turtles' system truly is reproducible, and that anyone with the discipline and the desire to succeed can do as well as—or even better than—Wall Street's top hedge fund wizards.
In an era full of slapdash investing advice and promises of hot stock tips for "the next big thing," as popularized by pundits like Jim Cramer of Mad Money, the easy-to-follow objective rules of the TurtleTrader stand out as a sound guide for truly making the most out of your money. These rules worked—and still work today—for the Turtles, and any other investor with the desire and commitment to learn from one of the greatest investing stories of all time.
Beyond the J Curve provides the answers to key questions,including:Why 'top-quartile' promises should be taken with a huge pinchof salt and what it takes to select superior fund managers?What do limited partners need to consider when designing andmanaging portfolios?How one can determine the funds' economic value to helpaddressing the questions of 'fair value' under IAS 39 and 'risk'under Basel II or Solvency II?Why is monitoring important, and how does a limited partnermanage his portfolio?How the portfolio's returns can be improved through properliquidity management and what to consider whenover-committing?And, why uncertainty rather than risk is an issue and how alimited partner can address and benefit from the fast changingprivate equity environment?
Beyond the J Curve takes the practitioner's view andoffers private equity and venture capital professionals acomprehensive guide making high return targets more realistic andsustainable. This book is a must have for all parties involved inthis market, as well as academic and students.
How do the world's most successful traders amass tens,hundreds of millions of dollars a year? Are they masters of anoccult knowledge, lucky winners in a random market lottery,natural-born virtuosi—Mozarts of the markets? In search of ananswer, bestselling author Jack D. Schwager interviewed dozens oftop traders across most financial markets. While their responsesdiffered in the details, all of them could be boiled down to thesame essential formula: solid methodology + proper mental attitude= trading success. In Market Wizards Schwager lets you hear,in their own words, what those super-traders had to say about theirunprecedented successes, and he distils their responses down into aset of guiding principles you can use to become a trading star inyour own right.Features interviews with superstar money-makers including BruceKovner, Richard Dennis, Paul Tudor Jones, Michel Steinhardt, EdSeykota, Marty Schwartz, Tom Baldwin, and moreTells the true stories behind sensational trading coups,including the one about the trader who turned $30,000 into $80million, the hedge fund manager who's averaged 30% returns everyyear for the past twenty-one years, and the T-bond futures traderwho parlayed $25,000 into $2 billion in a single day!
"Market Wizards is one of the most fascinating books everwritten about Wall Street. A few of the 'Wizards' are myfriends—and Jack Schwager has nailed their modus operandi onthe head."
--Martin W. Zweig, Ph.D., Editor, The Zweig Forecast
Focusing on the practical use and calculation of performance returns rather than the academic background, Practical Portfolio Performance Measurement and Attribution provides a clear guide to the role and implications of these methods in today's financial environment, enabling readers to apply their knowledge with immediate effect.
Fully updated from the first edition, this book covers key new developments such as fixed income attribution, attribution of derivative instruments and alternative investment strategies, leverage and short positions, risk-adjusted performance measures for hedge funds plus updates on presentation standards. The book covers the mathematical aspects of the topic in an accessible and practical way, making this book an essential reference for anyone involved in asset management.
Using structures unique to the individual market, each chapterincludes an explanation of the commodity and an analysis of itsphysical market, discussion on the typical patterns of demand andsupply and the main factors that will influence the price of thecommodity, and the main products.
Each chapter focuses on how the products could be used along thephysical supply chain and seeks to identify the main market risksand how they can be hedged. The book then brings into perspectivehow the structuring banks hedge their own resultant exposure andexamines the attraction of OTC investment structures for thewholesale market.
Commodity Derivatives: Markets and Applications isessential reading for those wishing to learn about the mainfeatures of the commodity markets, the mechanics of derivatives,and how they are applied.
The hedge fund industry has gone through dramatic changes inrecent years. Investors of all types continue to want to placetheir assets into these investment vehicles even in the wake of thecredit crisis, massive frauds, and insider trading scandals. Oncethe forbidden fruit of Wall Street, hedge funds are now considered"must have" investments in any diversified portfolio. Now in itssecond edition, The Fundamentals of Hedge Fund Management isrevised and updated to address how the credit crisis, legislation,fraud, technology, investor demand, global markets, and theeconomic landscape have affected the industry.
Providing readers with a detailed and in-depth analysis of theworld of hedge funds, the people working in it, and a look at whereit's headed, the book is a timely and indispensable reference andresearch tool for helping professional money managers, traders, andothers to launch and grow successful hedge fund businesses.Addresses how the credit crisis and its fallout has affectedthe hedge fund industry and what this means for the futureProvides the essential information needed to launch andmaintain a successful hedge fund in the new global economyWalks the reader through running a hedge fund, helping you togain success over years, not just months
An essential resource for anyone looking to invest in thesemuch-discussed investment products, The Fundamentals of HedgeFund Management, Second Edition is now fully revised andupdated.
Since its release in 2006, Financial Intelligence has become a favorite among managers who need a guided tour through the numbers—helping them to understand not only what the numbers really mean, but also why they matter.
This new, completely updated edition brings the numbers up to date and continues to teach the basics of finance to managers who need to use financial data to drive their business. It also addresses issues that have become even more important in recent years—including questions around the financial crisis and those around broader financial and accounting literacy.
Accessible, jargon-free, and filled with entertaining stories of real companies, Financial Intelligence gives nonfinancial managers the confidence to understand the nuance beyond the numbers—to help bring everyday work to a new level.
This book is up-to-date as it covers many of the importantdevelopments which have occurred in the credit derivatives marketin the past 4-5 years. These include the arrival of the CDSportfolio indices and all of the products based on these indices.In terms of models, this book covers the challenge of modellingsingle-tranche CDOs in the presence of the correlation skew, aswell as the pricing and risk of more recent products such asconstant maturity CDS, portfolio swaptions, CDO squareds, creditCPPI and credit CPDOs.
The book is case-driven with each case analysing in detail areal-life hedging strategy. A broad range of hedging strategieshave been included, some of them using sophisticatedderivatives.
The objective of this book is to provide a conceptual frameworkbased on the extensive use of cases so that readers can createtheir own accounting interpretation of the hedging strategy beingconsidered. Accounting for Derivatives will be essentialreading for CFOs, internal auditors and treasurers of corporations,professional accountants as well as derivatives professionalsworking at commercial and investment banks.
Key feature include:The only book to cover IAS39 from the derivativespractitioner’s perspectiveExtensive real-life case studies to providing essentialinformation for the practitionerCovers hedging instruments such as forwards, swaps,cross-currency swaps, and combinations of standard options as wellas more complex derivatives such as knock-in forwards, KIKOforwards, range accruals and swaps in arrears.Includes the latest information on FX hedging and hedging ofcommodities
Don't have much time? Get up to speed fast on the most essential business skills with HBR's 20-Minute Manager series. Whether you need a crash course or a brief refresher, each book in the series is a concise, practical primer that will help you brush up on a key management topic. Advice you can quickly read and apply, for ambitious professionals and aspiring executives--from the most trusted source in business. Also available as an ebook.
Fund manager Joel Greenblatt has been beating the Dow (with returns of 50 percent a year) for more than a decade. And now, in this highly accessible guide, he’s going to show you how to do it, too. You’re about to discover investment opportunities that portfolio managers, business-school professors, and top investment experts regularly miss—uncharted areas where the individual investor has a huge advantage over the Wall Street wizards. Here is your personal treasure map to special situations in which big profits are possible, including:
· Merger Securities
· Rights Offerings
· Risk Arbitrage
This accessible book, aimed at the implementers andpractitioners of ERM, provides a highly structured approach so youcan easily implement processes in your own organization. You'llfind a number of case studies and practical examples from a varietyof industries. The chapters are organized in a way that leads youthrough ERM implementation and include risk identificationtechniques, risk modelling methods, and the underlying statistics.Order your copy today!
Intended as a comprehensive reference for investors and fund andportfolio managers, Handbook of Hedge Funds combines new materialwith updated information from Francois-SergeL’habitant’s two other successful hedge fund books.This book features up-to-date regulatory and historicalinformation, new case studies and trade examples, detailed analysesof investment strategies, discussions of hedge fund indices anddatabases, and tips on portfolio construction.
Francois-Serge L’habitant (Geneva, Switzerland) isthe Head of Investment Research at Kedge Capital. He is Professorof Finance at the University of Lausanne and at EDHEC BusinessSchool, as well as the author of five books, including HedgeFunds: Quantitative Insights (0-470-85667-X) and HedgeFunds: Myths & Limits (0-470-84477-9), both from Wiley.
You work hard and try to save money, so why is there never enough to cover all the bills, to put some away in your child’s college fund, to pay off your credit card debt—or to relax and have some fun, for once? In the New York Times bestseller All Your Worth, mother/daughter team Elizabeth Warren and Amelia Warren Tyagi—authors of the acclaimed The Two-Income Trap—tell you the truth about money. The authors lay out a groundbreaking approach to getting control of your money so you can finally start building the life you’ve always wanted. The result of more than twenty years of intensive research, All Your Worth offers you a step-by-step plan that will let you master your finances—for the rest of your life.
The secret? It’s simple, really: get your money in balance. Warren and Tyagi show you how to balance your money into three essential parts: the Must-Haves (the bills you have to pay every month), the Wants (some fun money for right now), and your Savings (to build a better tomorrow). No complicated budgets, no keeping track of every penny. Warren and Tyagi will show you a whole new way of looking at money—and yourself—that will help you get your finances on track so you can enjoy peace of mind for the rest of your life.
Part I of the book covers the impact that the 2008 credit crunchhas had on the markets, it then shows how to build up a convertiblebond and introduces the reader to the traditional convertiblevocabulary of yield to put, premium, conversion ratio, delta,gamma, vega and parity. The market of stock borrowing and lendingwill also be covered in detail. Using an intuitive approach basedon the Jensen inequality, the authors will also show the advantagesof using a hybrid to add value - pre 2008, many investors labelledconvertible bonds as 'investing with no downside', there are ofcourse plenty of 2008 examples to prove that they were wrong. Theauthors then go onto give a complete explanation of the differentfeatures that can be embedded in convertible bond.
Part II shows readers how to price convertibles. It covers thedifferent parameters used in valuation models: credit spreads,volatility, interest rates and borrow fees and Maturity.
Part III covers investment strategies for equity, fixed incomeand hedge fund investors and includes dynamic hedging andconvertible arbitrage.
Part IV explains the all important risk management part of theprocess in detail.
This is a highly practical book, all products priced are realworld examples and numerical examples are not limited tohypothetical convertibles. It is a must read for anyone wanting tosafely get into this highly liquid, high return market.
Written by renowned risk expert Jon Danielsson, the book beginswith an introduction to financial markets and market prices,volatility clusters, fat tails and nonlinear dependence. It thengoes on to present volatility forecasting with both univatiate andmultivatiate methods, discussing the various methods used byindustry, with a special focus on the GARCH family of models. Theevaluation of the quality of forecasts is discussed in detail.Next, the main concepts in risk and models to forecast risk arediscussed, especially volatility, value-at-risk and expectedshortfall. The focus is both on risk in basic assets such as stocksand foreign exchange, but also calculations of risk in bonds andoptions, with analytical methods such as delta-normal VaR andduration-normal VaR and Monte Carlo simulation. The book then moveson to the evaluation of risk models with methods like backtesting,followed by a discussion on stress testing. The book concludes byfocussing on the forecasting of risk in very large and uncommonevents with extreme value theory and considering the underlyingassumptions behind almost every risk model in practical use –that risk is exogenous – and what happens when thoseassumptions are violated.
Every method presented brings together theoretical discussionand derivation of key equations and a discussion of issues inpractical implementation. Each method is implemented in both MATLABand R, two of the most commonly used mathematical programminglanguages for risk forecasting with which the reader can implementthe models illustrated in the book.
The book includes four appendices. The first introduces basicconcepts in statistics and financial time series referred tothroughout the book. The second and third introduce R and MATLAB,providing a discussion of the basic implementation of the softwarepackages. And the final looks at the concept of maximum likelihood,especially issues in implementation and testing.
The book is accompanied by a website - ahref="http://www.financialriskforecasting.com/"www.financialriskforecasting.com/a– which features downloadable code as used in the book.
Wealthy, powerful, and potentially dangerous, hedge fund moguls have become the It Boys of twenty-first- century capitalism. Beating the market was long thought to be impossible, but hedge funds cracked its mysteries and made fortunes in the process. Drawing on his unprecedented access to the industry, esteemed financial writer Sebastian Mallaby tells the inside story of the hedge funds, from their origins in the 1960s to their role in the financial crisis of 2007 to 2009.
Read Sebastian Mallaby's new book, The Man Who Knew: The Life and Times of Alan Greenspan.
The content of the Hand Book is organised to provide arapid yet comprehensive understanding of this topic. Chapter 1 setsout an overview of News Analytics (NA) with an explanation of thetechnology and applications. The rest of the chapters are presentedin four parts. Part 1 contains an explanation of methods and modelswhich are used to measure and quantify news sentiment. In Part 2the relationship between news events and discovery of abnormalreturns (the elusive alpha) is discussed in detail by the leadingresearchers and industry experts. The material in this part alsocovers potential application of NA to trading and fund management.Part 3 covers the use of quantified news for the purpose ofmonitoring, early diagnostics and risk control. Part 4 is entirelyindustry focused; it contains insights of experts from leadingtechnology (content) vendors. It also contains a discussion oftechnologies and finally a compact directory of content vendor andfinancial analytics companies in the marketplace of NA. Thebook draws equally upon the expertise of academics andpractitioners who have developed these models and is supported bytwo major content vendors - RavenPack and Thomson Reuters - leadingproviders of news analytics software and machine readablenews.
The book will appeal to decision makers in the banking, finance andinsurance services industry. In particular: asset managers;quantitative fund managers; hedge fund managers; algorithmictraders; proprietary (program) trading desks; sell-side firms;brokerage houses; risk managers and research departments willbenefit from the unique insights into this new and pertinent areaof financial modelling.
How to Get Rich is different from any other book on the subject because Dennis isn't selling snake oil, investment tips, or motivational claptrap. He merely wants to help people embrace entrepreneurship, and to share lessons he learned the hard way. He reveals, for example, why a regular paycheck is like crack cocaine; why great ideas are vastly overrated; and why "ownership isn't the important thing, it's the only thing."
Includes a CD containing the source code for all examples. It is strongly advised that you experiment with the code by compiling it and extending it to suit your needs. Support is offered via a user forum on www.datasimfinancial.com where you can post queries and communicate with other purchasers of the book.
This book is for those professionals who design and develop models in computational finance. This book assumes that you have a working knowledge of C ++.