DERIVAT, RISK MGMT & VALUE(2ND ED)

This book covers the fundamental concepts of financial markets and asset pricing, including hedging, arbitrage, speculation across different markets, classical models for the pricing of simple and complex derivatives, mathematical foundations, and the real-time management and monitoring of derivative portfolios. It also explores topics such as financial markets and instruments, and option pricing models and theory. Written in a clear and accessible style, and amply supported by real-world examples, the book will be of interest to students, academics, and practitioners alike.

This second edition features ten new chapters dedicated to risk management in banking and insurance. The new material offers an in-depth analysis of the fundamentals of risk management; market, investment, and credit risks (corporate and retail); credit risk management policies and tools; retail lending policies; operational risk management in light of the Basel III recommendations; IFRS 9 impairments; capital management; the Internal Capital Adequacy Assessment Process (ICAAP); and the regulatory requirements for stress testing. Drawing on the author's extensive professional experience, the chapters explain not only the theory but also the policies and procedures that underpin effective risk management practice.

Contents:

• Banking Risk Management:
  • Risk Management and Governance in Banks and Financial Institutions
  • Market Risk Management
  • Investment Risks Management
  • Managing Banking and Corporate Credit Risks
  • Credit Risk Management for Islamic Banking
  • Managing Retail Lending Credit
  • Operational Risk Management
• Capital and Risk Management:
  • International Financial Reporting Standards 9 (IFRS 9 Impairment)
  • Capital Management
  • Internal Capital Adequacy Assessment Process
• Financial Markets and Financial Instruments: Basic Concepts and Strategies:
  • Financial Markets, Financial Instruments, and Financial Crisis
  • Risk Management, Derivatives Markets and Trading Strategies
  • Trading Options and Their Underlying Asset: Risk Management in Discrete Time
• Pricing Derivatives and Their Underlying Assets in a Discrete-Time Setting:
  • Option Pricing: The Discrete-Time Approach for Stock Options
  • Credit Risks, Pricing Bonds, Interest Rate Instruments, and the Term Structure of Interest Rates
  • Extensions of Simple Binomial Option Pricing Models to Interest Rates and Credit Risk
  • Derivatives and Path-Dependent Derivatives: Extensions and Generalizations of the Lattice Approach by Accounting for Information Costs and Illiquidity
• Option Pricing in a Continuous-Time Setting: Basic Models, Extensions and Applications:
  • European Option Pricing Models: The Precursors of the Black–Scholes–Merton Theory and Holes During Market Turbulence
  • Simple Extensions and Applications of the Black–Scholes Type Models in Valuation and Risk Management
  • Applications of Option Pricing Models to the Monitoring and the Management of Portfolios of Derivatives in the Real World
• Mathematical Foundations of Option Pricing Models in a Continuous-Time Setting: Basic Concepts and Extensions:
  • The Dynamics of Asset Prices and the Role of Information: Analysis and Applications in Asset and Risk Management
  • Risk Management: Applications to the Pricing of Assets and Derivatives in Complete Markets
  • Simple Extensions and Generalizations of the Black–Scholes Type Models in the Presence of Information Costs
  • Extension of Asset and Risk Management in the Presence of American Options: Dividends, Early Exercise, and Information Uncertainty

Readership: Undergraduate and graduate students and academics in economics and finance, and professionals in the banking and investment industry interested in options.