Financial Geometry: Geometric Approach to Hedging and Risk Management (Professional Finance Series)

The past thirty years have seen explosive growth in the use of financial deritivatives along with the development of an elegant mathematical theory for their valuation. The theory, based on stochastic calculus, provides a conceptual framework for valuation as well as efficient computational tools. As derivative markets have matured, much of the focus has shifted from the valuation of individual financial instruments to the problems of hedging and risk management of large financial portfolios. The challenge here is to understand the behaviour of a complex set of instruments that may depend on hundreds or thousands of underlying risk factors. "Financial Geometry" will help you to do so. Mathematical yet accessible, "Financial Geometry" provides intuitive geometric metaphors and powerful computational machinery for describing the complex risks of the modern financial world. Topics covered include: *marking to market *valuation techniques and models *risk-factor definition *sensitivity and scenario analysis *interest rate calculations *hedge calculations *Value at Risk *risk-factor mapping *volatility curves and surfaces *time effects