Advanced Equity Derivatives: Volatility and Correlation

Foreword

I am pleased to introduce Sébastien Bossu's new book, Advanced Equity Derivatives, which is a great contribution to the literature in our field. Years of practical experience as an exotics structurer, combined with strong theoretical skills, allowed Sébastien to write a condensed yet profound text on a variety of advanced topics: volatility derivatives and volatility trading, correlation modeling, dispersion trading, local and stochastic volatility models, to name just a few.

This book not only reviews the most important concepts and recent developments in option pricing and modeling, but also offers insightful explications of great relevance to researchers as well as traders. For instance, readers will find formulas to overhedge convex payoffs, the derivation of Feller conditions for the Heston model, or an exposition of the latest local correlation models to correctly price basket options.

Perhaps the most exciting aspect of this book is its treatment of the latest generation of equity derivatives, namely volatility and correlation derivatives. Readers will find a wealth of information on these new securities, including original analyses and models to approach their valuation. The chapters on correlation are particularly commendable, as they shed light on an otherwise still obscure area.

The content quality, selection of topics, and level of insight truly set this book apart. I have no doubt that equity derivatives practitioners around the world, be they traders, ...