Description
John Wiley & Sons Inc Dynamic Hedging. by Nassim Nicholas Taleb
Dynamic Hedging is the definitive source on derivatives risk. It provides a realworld methodology for managing portfolios containing any nonlinear security. It presents risks from the vantage point of the option market maker and arbitrage operator. The only book about derivatives risk written by an experienced trader with theoretical training it remolds option theory to fit the practitioners environment. As a larger share of market exposure cannot be properly captured by mathematical models noted option arbitrageur Nassim Taleb uniquely covers both onmodel and offmodel derivatives risks. The author discusses in plain English vital issues including:* The generalized option which encompasses all instruments with convex payoff including a traders potential bonus.* The techniques for trading exotic options including binary barrier multiasset and Asian options as well as methods to take into account the wrinkles of actual nonbellshaped distributions.*
Market dynamics viewed from the practitioners vantage point including liquidity holes portfolio insurance squeezes fat tails volatility surface GARCH curve evolution static option replication correlation instability ParetoLevy regime shifts autocorrelation of price changes and the severe flaws in the value at risk method.* New tools to detect risks such as higher moment analysis topography exposure and nonparametric techniques.* The path dependence of all options hedged dynamically. Dynamic Hedging is replete with helpful tools market anecdotes ataglance risk management rules distilling years of market lore and important definitions. The book contains modules in which the fundamental mathematics of derivatives such as the Brownian motion Itos lemma the numeraire paradox the Girsanov change of measure and the FeynmanKac solution are presented in intuitive practitioners language. Dynamic Hedging is an indispensable and definitive reference for market makers academics finance students risk managers and regulators. The definitive book on options trading and risk management If pricing is a science and hedging is an art Taleb is a virtuoso.
Bruno Dupire Head of Swaps and Options Research Paribas Capital Markets This is not merely the best book on how options trade it is the only book. Stan Jonas Managing Director FIMATSociety GARCH Dynamic Hedging bridges the gap between what the best traders know and what the best scholars can prove. William Margrabe President The William Margrabe Group Inc. The most comprehensive insightful intuitive work on the subject. It is instrumental for both beginning and experienced traders. A tour de force. That rare find a book of great practical and theoretical value. Taleb successfully bridges the gap between the academic and the real world. Interesting provocative well written. Each chapter worth a fortune to any current or prospective derivatives trader.Victor Niederhoffer Chairman Niederhoffer Investments