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Exotic Options Trading
von Frans de WeertWritten by an experienced trader and consultant, Frans deWeert's Exotic Options Trading offers a risk-focusedapproach to the pricing of exotic options. By giving readers thenecessary tools to understand exotic options, this book serves as amanual to equip the reader with the skills to price and risk managethe most common and the most complex exotic options.
De Weert begins by explaining the risks associated with tradingan exotic option before dissecting these risks through a detailedanalysis of the actual economics and Greeks rather than solelystating the mathematical formulae. The book limits the use ofmathematics to explain exotic options from an economic and riskperspective by means of real life examples leading to a practicalinterpretation of the mathematical pricing formulae.
The book covers conventional options, digital options, barrieroptions, cliquets, quanto options, outperformance options andvariance swaps, and explains difficult concepts in simple terms, with a practical approach that gives the reader a fullunderstanding of every aspect of each exotic option. The book alsodiscusses structured notes with exotic options embedded in them, such as reverse convertibles, callable and puttable reverseconvertibles and autocallables and shows the rationale behind thesestructures and their associated risks.
For each exotic option, the author makes clear why there is aninvestor demand; explains where the risks lie and how this affectsthe actual pricing; shows how best to hedge any vega or gammaexposure embedded in the exotic option and discusses the skewexposure.
By explaining the practical implications for every exotic optionand how it affects the price, in addition to the necessarymathematical derivations and tools for pricing exotic options, Exotic Options Trading removes the mystique surroundingexotic options in order to give the reader a full understanding ofevery aspect of each exotic option, creating a useable tool fordealing with exotic options in practice.
"Although exotic options are not a new subject infinance, the coverage traditionally afforded by many texts iseither too high level or overly mathematical. De Weert'sexceptional text fills this gap superbly. It is a rigoroustreatment of a number of exotic structures and includes numerousexamples to clearly illustrate the principles. What makes this bookunique is that it manages to strike a fantastic balance between thetheory and actual trading practice. Although it may be something ofan overused phrase to describe this book as compulsory reading, Ican assure any reader they will not be disappointed.„
--Neil Schofield, Training Consultant and author ofCommodity Derivatives: Markets and Applications
“Exotic Options Trading does an excellent job inproviding a succinct and exhaustive overview of exotic options. Thereal edge of this book is that it explains exotic options from arisk and economical perspective and provides a clear link to theactual profit and pricing formulae. In short, a must read foranyone who wants to get deep insights into exotic options and starttrading them profitably."
--Arturo Bignardi
De Weert begins by explaining the risks associated with tradingan exotic option before dissecting these risks through a detailedanalysis of the actual economics and Greeks rather than solelystating the mathematical formulae. The book limits the use ofmathematics to explain exotic options from an economic and riskperspective by means of real life examples leading to a practicalinterpretation of the mathematical pricing formulae.
The book covers conventional options, digital options, barrieroptions, cliquets, quanto options, outperformance options andvariance swaps, and explains difficult concepts in simple terms, with a practical approach that gives the reader a fullunderstanding of every aspect of each exotic option. The book alsodiscusses structured notes with exotic options embedded in them, such as reverse convertibles, callable and puttable reverseconvertibles and autocallables and shows the rationale behind thesestructures and their associated risks.
For each exotic option, the author makes clear why there is aninvestor demand; explains where the risks lie and how this affectsthe actual pricing; shows how best to hedge any vega or gammaexposure embedded in the exotic option and discusses the skewexposure.
By explaining the practical implications for every exotic optionand how it affects the price, in addition to the necessarymathematical derivations and tools for pricing exotic options, Exotic Options Trading removes the mystique surroundingexotic options in order to give the reader a full understanding ofevery aspect of each exotic option, creating a useable tool fordealing with exotic options in practice.
"Although exotic options are not a new subject infinance, the coverage traditionally afforded by many texts iseither too high level or overly mathematical. De Weert'sexceptional text fills this gap superbly. It is a rigoroustreatment of a number of exotic structures and includes numerousexamples to clearly illustrate the principles. What makes this bookunique is that it manages to strike a fantastic balance between thetheory and actual trading practice. Although it may be something ofan overused phrase to describe this book as compulsory reading, Ican assure any reader they will not be disappointed.„
--Neil Schofield, Training Consultant and author ofCommodity Derivatives: Markets and Applications
“Exotic Options Trading does an excellent job inproviding a succinct and exhaustive overview of exotic options. Thereal edge of this book is that it explains exotic options from arisk and economical perspective and provides a clear link to theactual profit and pricing formulae. In short, a must read foranyone who wants to get deep insights into exotic options and starttrading them profitably."
--Arturo Bignardi
