Financial engineering. Derivatives and risk management

This text provides a thorough treatment of futures, ‘plain vanilla’ options and swaps as well as the use of exotic derivatives and interest rate options for speculation and hedging.

Pricing of options using numerical methods such as lattices (BOPM), Monte Carlo simulation and finite difference methods, in addition to solutions using continuous time mathematics, are also covered. Real options theory and its use in investment appraisal and in valuing internet and biotechnology companies provide cutting edge practical applications.

Practical risk management issues are examined in depth. Alternative models for calculating Value at Risk (market risk) and credit risk provide the theoretical basis for a practical and timely overview of these areas of regulatory policy.