Book description
It is widely acknowledged that many financial modelling techniques failed during the financial crisis, and in our post-crisis environment many techniques are being reconsidered. This single volume provides a guide to lessons learned for practitioners and a reference for academics. Including reviews of traditional approaches, real examples, and case studies, contributors consider portfolio theory; methods for valuing equities and equity derivatives, interest rate derivatives, and hybrid products; and techniques for calculating risks and implementing investment strategies. Describing new approaches without losing sight of their classical antecedents, this collection of original articles presents a timely perspective on our post-crisis paradigm.- Highlights pre-crisis best classical practices, identifies post-crisis key issues, and examines emerging approaches to solving those issues
- Singles out key factors one must consider when valuing or calculating risks in the post-crisis environment
- Presents material in a homogenous, practical, clear, and not overly technical manner
Table of contents
- Cover image
- Title page
- Table of Contents
- Editor’s Disclaimers
- Copyright
- Foreword
- Editors
- Contributors
- 1. The Effectiveness of Option Pricing Models During Financial Crises
-
2. Taking Collateral into Account
- 2.1 Introduction
- 2.2 Notations and Problem
- 2.3 Black–Scholes Partial Differential Equation in the Presence of Collateral
- 2.4 Collateral Discount Curve Bootstrapping
- 2.5 Pricing and Bootstrapping of the IR Vanilla Swap Term Structure
- 2.6 European Swaption Pricing Framework
- 2.7 Collateral Effect and Term-Structure Models
- 2.8 Conclusion
- References
- 3. Scenario Analysis in Charge of Model Selection
- 4. An “Economical” Pricing Model for Hybrid Products
- 5. Credit Valuation Adjustments– Mathematical Foundations, Practical Implementation and Wrong Way Risks
- 6. Counterparty Credit Risk and Credit Valuation Adjustments (CVAs) for Interest Rate Derivatives–Current Challenges for CVA Desks
- 7. Designing a Counterparty Risk Management Infrastructure for Derivatives
- 8. A Jump–Diffusion Nominal Short Rate Model
- 9. The Widening of the Basis: New Market Formulas for Swaps, Caps and Swaptions
- 10. The Financial Crisis and the Credit Derivatives Pricing Models
- 11. Industry Valuation-Driven Earnings Management
- 12. Valuation of Young Growth Firms and Firms in Emerging Economies
- 13. Towards a Replicating Market Model for the US Oil and Gas Sector
- 14. Measuring Systemic Risk from Country Fundamentals: A Data Mining Approach
- 15. Computing Reliable Default Probabilities in Turbulent Times
- 16. Discount Rates, Default Risk and Asset Pricing in a Regime Change Model
- 17. A Review of Market Risk Measures and Computation Techniques
- 18. High-Frequency Performance of Value at Risk and Expected Shortfall: Evidence from ISE30 Index Futures
- 19. A Copula Approach to Dependence Structure in Petroleum Markets
- 20. Mistakes in the Market Approach to Correlation: A Lesson For Future Stress-Testing
-
21. On Correlations between a Contract and Portfolio and Internal Capital Alliocation
- 21.1 Introduction
- 21.2 Adding a Deal to a Company Portfolio
- 21.3 Example: Correlated Power-Law Distributions
- 21.4 Formula for the Quantile Shift
- 21.5 Quantile Shift Under Secondary Uncertainty
- 21.6 Capital Allocation by Average Shortfall
- 21.7 Evolution of Quantiles in Portfolio Aggregation
- 21.8 Static and Dynamic Capital Allocation
- 21.9 Conclusion
- References
- 22. A Maximum Entropy Approach to the Measurement of Event Risk
- 23. Quantifying the Unquantifiable: Risks Not in Value at Risk
- 24. Active Portfolio Construction When Risk and Alpha Factors are Misaligned
- 25. Market Volatility, Optimal Portfolios and Naive Asset Allocations
- 26. Hedging Strategies with Variable Purchase Options
- 27. Asset Selection Using a Factor Model and Data Envelopment Analysis– A Quantile Regression Approach
- 28. Tail Risk Reduction Strategies
- 29. Identification and Valuation Implications of Financial Market Spirals
- 30. A Rating-Based Approach to Pricing Sovereign Credit Risk
- 31. Optimal Portfolio Choice, Derivatives and Event Risk
- 32. Valuation and Pricing Concepts in Accounting and Banking Regulation
- 33. Regulation, Regulatory Uncertainty and the Stock Market: The Case of Short Sale Bans
- 34. Quantitative Easing, Financial Risk and Portfolio Diversification
- 35. Revisiting Interest Rate Pricing Models from an Indian Perspective: Lessons and Challenges
- 36. Investment Opportunities in Australia’s Healthcare Stock Markets After the Recent Global Financial Crisis
- 37. Predicting ASX Health Care Stock Index Movements After the Recent Financial Crisis Using Patterned Neural Networks
- Index
Product information
- Title: Rethinking Valuation and Pricing Models
- Author(s):
- Release date: December 2012
- Publisher(s): Academic Press
- ISBN: 9780124158887
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