Quantitative Finance: Back to Basic Principles (Applied Quantitative Finance) - Hardcover

Reghai, A.

9781137414496: Quantitative Finance: Back to Basic Principles (Applied Quantitative Finance)

Hardcover

ISBN 10: 1137414499 ISBN 13: 9781137414496

Publisher: Palgrave Macmillan, 2014

The series of recent financial crises have thrown open the world of quantitative finance and financial modeling. The era of stochastic calculus is over and the time of Ito derivation is at an end. Today, quants need a broad modeling skillset – one that transcends mathematics to price and hedge financial products safely and effectively, but that also takes into account that we now live in a world of more frequent crises, fatter tail risk and the optimized search for alpha.

This book brings together proven and new methodologies from finance, physics and engineering, along with years of industry and academic experience to provide a cookbook of models for dealing with the challenges of today's markets. It begins by looking at approaches to vanilla and exotic options – including barrier, binary and American options. It then addresses the Black-Scholes conundrum – is it effective? The book then progresses to look at other pricing and valuation models commonly used in the industry, including Terminal Smile, stochastic volatility and more before confronting all the key challenges in model calibration and implementation.

Written for quantitative practitioners in banks and asset managers, Quantitative Finance provides a toolkit and robust methodology to confront new and unforeseen pricing and valuation challenges in the light of the new paradigm.

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Review:

'B�le III identifies Valuation and Risk models as key features to be measured and followed. Recently, with the wide spread mission of the Asset Quality Review (AQR) regulators reinforced best practices in this field proposing concrete solutions. This book offers a step by step introduction to the usage of models in practice and assesses the fair valuation as well as the model risk measurement. It is done with pedagogy and helps the reader fine tune the choice of model following an incremental implementation methodology for many practical situations'.

Jean-Marc Prevost, Global Head of Model Validation, Natixis.
'This is the only book I know of written by both a true practitioner of quantitative finance and a true scientist. For more than 15 years, Adil Reghai has constantly delivered models and products in production and for different market regimes. This book shares this learning experience on the usage of models and how to build them and make them evolve over time and market regimes. This book shows that in mathematical finance both historical data (past looking approach) and market prices (forward looking approach) must be combined to design an effective modelling approach. Finally, I recommend this book as it is full of tricks, graphs and well chosen examples that help develop easy learning by intuition'.

Nicolas Grandchamp Des Raux, Head of Equity Derivatives Research, HSBC.

Book Description:

A post-crisis valuation and pricing toolkit for finance practitioners modeling in the real world

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