Equity Hybrid Derivatives

Index

Affine diffusion models, for hazard rate processes, 175–176

Altiplano, 207, 218–223

American Monte Carlo 297–311

Broadie & Glasserman method, 299

Longstaff & Schwarz algorithm, 301–310

accuracy/bias, 305–306

parameterizing the exercise boundary, 311

upper bounds, 310–311

American-style option, 254

Arbitrage

arbitrage-free option price surfaces, 16–17

no-arbitrage conditions, 20, 231–232

Arrow-Debreu price, 234

Asset backed securities, 223

Ayache, Forsyth and Vetzal model, 130, 136–137

Barrier risk, 123–124

Basket default swaps, 207, 226–228

Bermudan-style options, 113, 254, 298

Black-Karasinski model, See short rate models

Black-Scholes

barrier pricing, 123–124

formula, 12

implied volatility, See Implied volatility

model, 11

PDE, 233

vega hedging, 64

Boundary conditions, 253–254

Dirichlet, 253–254

Robin, 253–254

Broadie & Glasserman method, See American Monte Carlo

Broyden's method, 109–111

Capital risk, 160

Caps, 100–102,

Carr-Madan technique, 93, 194

Cash delta, 61

Cash gamma, 61, 64, 70.

Characteristic functions, 38–41

Characteristics

curves/lines, 263–264

finite elements, See Lagrange-Galerkin method

method, 263

classical/first-order, 262–265

Crank-Nicolson, 274–276

multilevel schemes, 271

Cliquets, 49–56

multiplicative, 50

reverse, 50

Closed-end fund, 159

Constant Maturity Swap (CMS) rates, 91–92n

Collateralized debt obligations (CDOs), 223–226

balance sheet CDO, 224

cash CDO, 224

default leg, 224–225

synthetic CDO, 224

Concordance, 209

Conditional trigger swaps, ...