Swaps And Other Derivatives

Swaps and Other Derivatives

"Richard Flavell has a strong theoretical perspective on swaps withconsiderable practical experience in the actual trading of theseinstruments. This rare combination makes this welcome updatedsecond edition a useful reference work for marketpractitioners."
—Satyajit Das, author of Swaps and FinancialDerivatives Library and Traders and Guns & Money: Knownsand Unknowns in the Dazzling World of Derivatives

Fully revised and updated from the first edition, Swaps andOther Derivatives, Second Edition, provides a practicalexplanation of the pricing and evaluation of swaps and interestrate derivatives.

Based on the author’s extensive experience in derivativesand risk management, working as a financial engineer, consultantand trainer for a wide range of institutions across the world thisbook discusses in detail how many of the wide range of swaps andother derivatives, such as yield curve, index amortisers,inflation-linked, cross-market, volatility, diff and quanto diffs,are priced and hedged. It also describes the modelling of interestrate curves, and the derivation of implied discount factors fromboth interest rate swap curves, and cross-currency adjustedcurves.

There are detailed sections on the risk management of swap andoption portfolios using both traditional approaches and alsoValue-at-Risk. Techniques are provided for the construction ofdynamic and robust hedges, using ideas drawn from mathematicalprogramming.

This second edition has expanded sections on the creditderivatives market – its mechanics, how credit default swapsmay be priced and hedged, and how default probabilities may bederived from a market strip. It also prices complex swaps withembedded options, such as range accruals, Bermudan swaptions andtarget accrual redemption notes, by constructing detailed numericalmodels such as interest rate trees and LIBOR-based simulation.There is also increased discussion around the modelling ofvolatility smiles and surfaces.

The book is accompanied by a CD-ROM where all the models arereplicated, enabling readers to implement the models in practicewith the minimum of effort.