Commodities

Author: M. A. H. Dempster
Publisher: CRC Press
ISBN: 1498712339
Format: PDF
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Since a major source of income for many countries comes from exporting commodities, price discovery and information transmission between commodity futures markets are key issues for continued economic development. This book covers the fundamental theory of and derivatives pricing for major commodity markets as well as the interaction between commodity prices, the real economy, and other financial markets. After an extensive theoretical and practical introduction, the book is divided into four parts: Oil Products – considers the structural changes in the demand and supply for hedging services that are increasingly determining the price of oil Other Commodities – examines markets related to agricultural commodities, including natural gas, wine, soybeans, corn, gold, silver, copper, and other metals Commodity Prices and Financial Markets – investigates the contemporary aspects of the financialization of commodities, including stocks, bonds, futures, currency markets, index products, and exchange traded funds Electricity Markets – supplies an overview of the current and future modelling of electricity markets With contributions from well-known academics and practitioners, this volume includes coverage of the fundamental theory of futures/forwards and derivatives pricing for major commodity markets. The contributions to Sections I and II of this volume, which treat storable or agricultural commodities, take speculation into account through a consideration of markets over time being either in backwardation or contango. Up-to-date considerations of both trading and investment are included in Sections I, II, and III. The book also reviews the effects of urbanization and the expanding middle-class population on commodities.

Commodities

Author: M. A. H. Dempster
Publisher: CRC Press
ISBN: 1498712339
Format: PDF, ePub
Download Now
Since a major source of income for many countries comes from exporting commodities, price discovery and information transmission between commodity futures markets are key issues for continued economic development. This book covers the fundamental theory of and derivatives pricing for major commodity markets as well as the interaction between commodity prices, the real economy, and other financial markets. After an extensive theoretical and practical introduction, the book is divided into four parts: Oil Products – considers the structural changes in the demand and supply for hedging services that are increasingly determining the price of oil Other Commodities – examines markets related to agricultural commodities, including natural gas, wine, soybeans, corn, gold, silver, copper, and other metals Commodity Prices and Financial Markets – investigates the contemporary aspects of the financialization of commodities, including stocks, bonds, futures, currency markets, index products, and exchange traded funds Electricity Markets – supplies an overview of the current and future modelling of electricity markets With contributions from well-known academics and practitioners, this volume includes coverage of the fundamental theory of futures/forwards and derivatives pricing for major commodity markets. The contributions to Sections I and II of this volume, which treat storable or agricultural commodities, take speculation into account through a consideration of markets over time being either in backwardation or contango. Up-to-date considerations of both trading and investment are included in Sections I, II, and III. The book also reviews the effects of urbanization and the expanding middle-class population on commodities.

Introduction to Risk Parity and Budgeting

Author: Thierry Roncalli
Publisher: CRC Press
ISBN: 1482207168
Format: PDF, Mobi
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Although portfolio management didn’t change much during the 40 years after the seminal works of Markowitz and Sharpe, the development of risk budgeting techniques marked an important milestone in the deepening of the relationship between risk and asset management. Risk parity then became a popular financial model of investment after the global financial crisis in 2008. Today, pension funds and institutional investors are using this approach in the development of smart indexing and the redefinition of long-term investment policies. Written by a well-known expert of asset management and risk parity, Introduction to Risk Parity and Budgeting provides an up-to-date treatment of this alternative method to Markowitz optimization. It builds financial exposure to equities and commodities, considers credit risk in the management of bond portfolios, and designs long-term investment policy. The first part of the book gives a theoretical account of portfolio optimization and risk parity. The author discusses modern portfolio theory and offers a comprehensive guide to risk budgeting. Each chapter in the second part presents an application of risk parity to a specific asset class. The text covers risk-based equity indexation (also called smart beta) and shows how to use risk budgeting techniques to manage bond portfolios. It also explores alternative investments, such as commodities and hedge funds, and applies risk parity techniques to multi-asset classes. The book’s first appendix provides technical materials on optimization problems, copula functions, and dynamic asset allocation. The second appendix contains 30 tutorial exercises. Solutions to the exercises, slides for instructors, and Gauss computer programs to reproduce the book’s examples, tables, and figures are available on the author’s website.

Stochastic Modelling of Electricity and Related Markets

Author: Fred Espen Benth
Publisher: World Scientific
ISBN: 9812812318
Format: PDF, Mobi
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The markets for electricity, gas and temperature have distinctive features, which provide the focus for countless studies. For instance, electricity and gas prices may soar several magnitudes above their normal levels within a short time due to imbalances in supply and demand, yielding what is known as spikes in the spot prices. The markets are also largely influenced by seasons, since power demand for heating and cooling varies over the year. The incompleteness of the markets, due to nonstorability of electricity and temperature as well as limited storage capacity of gas, makes spot-forward hedging impossible. Moreover, futures contracts are typically settled over a time period rather than at a fixed date. All these aspects of the markets create new challenges when analyzing price dynamics of spot, futures and other derivatives. This book provides a concise and rigorous treatment on the stochastic modeling of energy markets. OrnsteinOCoUhlenbeck processes are described as the basic modeling tool for spot price dynamics, where innovations are driven by time-inhomogeneous jump processes. Temperature futures are studied based on a continuous higher-order autoregressive model for the temperature dynamics. The theory presented here pays special attention to the seasonality of volatility and the Samuelson effect. Empirical studies using data from electricity, temperature and gas markets are given to link theory to practice. Sample Chapter(s). A Survey of Electricity and Related Markets (331 KB). Contents: A Survey of Electricity and Related Markets; Stochastic Analysis for Independent Increment Processes; Stochastic Models for the Energy Spot Price Dynamics; Pricing of Forwards and Swaps Based on the Spot Price; Applications to the Gas Markets; Modeling Forwards and Swaps Using the HeathOCoJarrowOCoMorton Approach; Constructing Smooth Forward Curves in Electricity Markets; Modeling of the Electricity Futures Market; Pricing and Hedging of Energy Options; Analysis of Temperature Derivatives. Readership: Researchers in energy and commodity markets, and mathematical finance.

Modeling and Valuation of Energy Structures

Author: Daniel Mahoney
Publisher: Springer
ISBN: 1137560150
Format: PDF, ePub, Mobi
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Commodity markets present several challenges for quantitative modeling. These include high volatilities, small sample data sets, and physical, operational complexity. In addition, the set of traded products in commodity markets is more limited than in financial or equity markets, making value extraction through trading more difficult. These facts make it very easy for modeling efforts to run into serious problems, as many models are very sensitive to noise and hence can easily fail in practice. Modeling and Valuation of Energy Structures is a comprehensive guide to quantitative and statistical approaches that have been successfully employed in support of trading operations, reflecting the author's 17 years of experience as a front-office 'quant'. The major theme of the book is that simpler is usually better, a message that is drawn out through the reality of incomplete markets, small samples, and informational constraints. The necessary mathematical tools for understanding these issues are thoroughly developed, with many techniques (analytical, econometric, and numerical) collected in a single volume for the first time. A particular emphasis is placed on the central role that the underlying market resolution plays in valuation. Examples are provided to illustrate that robust, approximate valuations are to be preferred to overly ambitious attempts at detailed qualitative modeling.

C for Financial Mathematics

Author: John Armstrong
Publisher: CRC Press
ISBN: 1498750060
Format: PDF, Kindle
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If you know a little bit about financial mathematics but don’t yet know a lot about programming, then C++ for Financial Mathematics is for you. C++ is an essential skill for many jobs in quantitative finance, but learning it can be a daunting prospect. This book gathers together everything you need to know to price derivatives in C++ without unnecessary complexities or technicalities. It leads the reader step-by-step from programming novice to writing a sophisticated and flexible financial mathematics library. At every step, each new idea is motivated and illustrated with concrete financial examples. As employers understand, there is more to programming than knowing a computer language. As well as covering the core language features of C++, this book teaches the skills needed to write truly high quality software. These include topics such as unit tests, debugging, design patterns and data structures. The book teaches everything you need to know to solve realistic financial problems in C++. It can be used for self-study or as a textbook for an advanced undergraduate or master’s level course.

Exotic Options

Author: Peter G Zhang
Publisher: World Scientific
ISBN: 9814496146
Format: PDF, ePub
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This is the first systematic and extensive book on exotic options. The book covers essentially all popular exotic options currently trading in the Over-the-Counter (OTC) market, from digitals, quantos, spread options, lookback options, Asian options, vanilla barrier options, to various types of exotic barrier options and other options. Each type of exotic options is largely written in a separate chapter, beginning with the basic concepts of the products and then moving on to how to price them in closed-form solutions. Many pricing formulae and analyses which have not previously appeared in the literature are included and illustrated with detailed examples. It will be of great interest to traders, marketers, analysts, risk managers, professors, graduate students, and anyone who is interested in what is going on in the rapidly changing financial market. Contents:From Vanilla Options to Exotic OptionsOption Pricing MethodologyVanilla OptionsAmerican OptionsAsian OptionsApproximating Arithmetic Asian Options with Corresponding Geometric Asian OptionsFlexible Arithmetic Asian OptionsForward-Start OptionsOne-Clique OptionsVanilla Barrier OptionsExotic Barrier OptionsLookback OptionsExchange OptionsOptions Paying the Best/Worst and CashStandard Digital Options and Correlation Digital OptionsQuotient OptionsProduct Options and Foreign Domestic OptionsForeign Equity OptionsEquity-Linked Foreign Exchange OptionsQuanto OptionsRainbow OptionsSpread OptionsSpread Over the RainbowsDual-Strike OptionsOut-Performance OptionsAlternative OptionsBasket OptionsPricing Correlation Options with Uncertain Correlation CoefficientsPackage or Hybrid OptionsNonlinear Payoff OptionsCompound OptionsChooser OptionsContingent Premium OptionsOther Exotic OptionsHedging Exotic OptionsFurther DevelopmentPayoff Functions for Various OptionsTable of Cumulative Function Values of the Standard Normal Distribution Readership: Professionals in the financial industry, interested general readers, and academics. Keywords:Reviews: “He has put together a comprehensive book on exotic option pricing, showing this to be possible without the measure theory twaddle. It takes the reader through the entire spectrum of products in an organized way and provides most necessary formulas as well as the intuition of their derivation … There is no other place where one can find all the pricing tools gathered together, which allows one to price an option without sneezing from the dust of stacks of journal articles … The author does a good job when he limits his role to providing a complete pricing encyclopedia … This is the most complete conventional option pricing book currently available.” Nassim Taleb Derivatives Strategy

Risk Budgeting

Author: Neil D. Pearson
Publisher: John Wiley & Sons
ISBN: 1118160835
Format: PDF, Mobi
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Covers the hottest topic in investment for multitrillion pension market and institutional investors Institutional investors and fund managers understand they must take risks to generate superior investment returns, but the question is how much. Enter the concept of risk budgeting, using quantitative risks measurements, including VaR, to solve the problem. VaR, or value at risk, is a concept first introduced by bank dealers to establish parameters for their market short-term risk exposure. This book introduces VaR, extreme VaR, and stress-testing risk measurement techniques to major institutional investors, and shows them how they can implement formal risk budgeting to more efficiently manage their investment portfolios. Risk Budgeting is the most sophisticated and advanced read on the subject out there in the market.

Analysis Geometry and Modeling in Finance

Author: Pierre Henry-Labordère
Publisher: CRC Press
ISBN: 9781420087000
Format: PDF, Mobi
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Analysis, Geometry, and Modeling in Finance: Advanced Methods in Option Pricing is the first book that applies advanced analytical and geometrical methods used in physics and mathematics to the financial field. It even obtains new results when only approximate and partial solutions were previously available. Through the problem of option pricing, the author introduces powerful tools and methods, including differential geometry, spectral decomposition, and supersymmetry, and applies these methods to practical problems in finance. He mainly focuses on the calibration and dynamics of implied volatility, which is commonly called smile. The book covers the Black–Scholes, local volatility, and stochastic volatility models, along with the Kolmogorov, Schrödinger, and Bellman–Hamilton–Jacobi equations. Providing both theoretical and numerical results throughout, this book offers new ways of solving financial problems using techniques found in physics and mathematics.