Quantitative Analysis
Parallel Processing
Numerical Analysis
C++ Multithreading
Python for Excel
Python Utilities
Author
Printable PDF file
I. Basic math.
II. Pricing and Hedging.
1. Basics of derivative pricing I.
2. Change of numeraire.
3. Basics of derivative pricing II.
4. Market model.
5. Currency Exchange.
A. Change of numeraire in currency markets.
B. Invariant form of SDE transformation formula.
C. Delta hedging in currency markets.
D. Example: forward contract to purchase foreign stock for domestic currency.
E. Example: forward currency exchange contract.
F. Example: quanto forward contract.
G. Example: quanto caplet.
H. Example: quanto fixed-for-floating swap.
6. Credit risk.
7. Incomplete markets.
III. Explicit techniques.
IV. Data Analysis.
V. Implementation tools.
VI. Basic Math II.
VII. Implementation tools II.
VIII. Bibliography
Notation. Index. Contents.

Example: forward currency exchange contract.


e price at time t the contract to exchange $\U{a3}$ for $\$$ at the future time $T$ and at some exchange rate $X$ . We determine a fair forward exchange rate $X$ by the following argument. We purchase $\alpha$ units of the $\U{a3}$ -bond, short $-bond with maturity at $T$ and enter into the exchange contract in question. The forward exchange rate $X$ that makes such position of zero value is the correct exchange rate. MATH where we used MATH by definition of the bond. We obtained two equations for two unknown variables $\alpha$ and $X$ . The solution is

MATH (Forward exchange rate)





Notation. Index. Contents.


















Copyright 2007