Book Description
The 2nd edition of this successful book has several new features. The calibration discussion of the basic LIBOR market model has been enriched considerably, with an analysis of the impact of the swaptions interpolation technique and of the exogenous instantaneous correlation on the calibration outputs. A discussion of historical estimation of the instantaneous correlation matrix and of rank reduction has been added, and a LIBOR-model consistent swaption-volatility interpolation technique has been introduced.
The old sections devoted to the smile issue in the LIBOR market model have been enlarged into several new chapters. New sections on local-volatility dynamics, and on stochastic volatility models have been added, with a thorough treatment of the recently developed uncertain-volatility approach. Examples of calibrations to real market data are now considered.
The fast-growing interest for hybrid products has led to new chapters. A special focus here is devoted to the pricing of inflation-linked derivatives.
The three final new chapters of this second edition are devoted to credit. Since Credit Derivatives are increasingly fundamental, and since in the reduced-form modeling framework much of the technique involved is analogous to interest-rate modeling, Credit Derivatives -- mostly Credit Default Swaps (CDS), CDS Options and Constant Maturity CDS - are discussed, building on the basic short rate-models and market models introduced earlier for the default-free market. Counterparty risk in interest rate payoff valuation is also considered, motivated by the recent Basel II framework developments.
Customer Reviews:
Best book on interest rate models.......2002-12-14
This is the best book available on interest rate models. Very detailed. Much more focused and readable than Rebonato's book. More pragmatic and explicit than Musiela and Rutkowski. Not as theoretical as Hunt and Kennedy. James and Webber also looks very good, but I'm not that familiar with it. All other books have only bits and pieces on interest rates.
The best book I have read on the subject.......2002-05-06
With all the due respect to the other authors I would say that if one is interested in a good theoretical book whihc is also good on the implementation side then the book of Brigo and Mercurion is definetly the best book I have ever read on the subject.
Anyone interested in implementing the LMM/BGM/MSS model in practice is well advised to read it.
I would just say that this is certainly a must have in the field.
New stuff and nice overview: hard to beat!.......2002-01-17
In the late nineties I went through Brigo's innovative work on stochastic nonlinear filtering with differential geometry techniques. I was favorably impressed by results and style, particularly in his dissertation and in his 'geometry in present day science' very readable overview. Interesting results are found and nicely told with accurate - but not pointlessly complicated - advanced mathematics for the problems at hand, I reasoned.
I've followed a similar path from control to finance, and having worked with interest rate models, I couldn't help but order this Brigo-Mercurio book. I had high expectations 'cause these two guys are working in a bank on the real thing.
Sure enough I'm not disappointed.
1-factor models are handled with great care, a ton of formulas and recipes are given. I've never seen this kind of analysis of pricing with Gaussian 1-f models. The new upgrade of the CIR model is interesting and accurate. "CIR++" is now my favorite 1-f model. I like the treatment of lognormal 1-f models and the explanation of Monte Carlo and trees -- the flow-chart for Bermudan swaptions is crystal clear! Plots of market implied structures and volatility calibration are useful additions.
The chapter on 2-f extensions has one of the best discussions on volatility, and two tons of useful formulas/recipes. Two dimensional trees!
The HJM chapter size is OK. I agree - the useful models embedded in HJM are short rate models and market models.
Market models - these three chapters alone are worth the book. You'll find yourself nodding as you read the guided tour. They make it look easy all the time. The exposition is focused, clear, intuitive, detailed. There's also new stuff, just check the calibration discussion! Smile modeling begins with a brilliant tour and ends with Brigo-Mercurio's new approach - the mixing dynamics - deserving a whole chapter if expanded.
The detailed explanation on products is a much welcome original addition. Cross currency derivatives!
Quotes - as in Brigo's old work - are a pleasant diversion while reading. The 500 and more pages are a treat given the competitive price.
Still there's room for improvements - more "CIR2++"! Something on 3-f models. Historical estimation of the correlation matrix and low-rank optimized approximations. Expand smile modeling! More hedging. Something on structured products. Cross currency libor model. chapter 9 - other interest rate models - sounds out of place and can be suppressed for other things.
This book rings true and has useful teachings for students, academics and practitioners. Although it requires some background in stochastic calculus, it's hard to beat on the pricing front. Kudos to Brigo and Mercurio! It only harms there aren't enough books like this.
Nicely written overview of interest rate models.......2001-12-15
This recent book, written by two Italian "quants" Mercurio & Brigo, gives a nice and accessible overview of interest rate models which is a compromise between the practitioner viewpoint, expressed for ex. in Rebonato's book "Interet Rate option models"
and the theoretical viewpoint such as the one in Musiela & Rutkowski.
The authors, themselves PhDs in quantitative finance/ applied maths, wrote this book while working as quants in an Italian bank and this first hand contact with the market gave them a
practical view on the subject which markes this book very interesting.
The book contains a "rational" catalogue of models used in practice ( as opposed to models which are impossible to implement!).
In contrast with academic books on interest rate modeling which deal with HJM formulation, there is a lot of emphasis here on LIBOR and Swap market models
(BGM -Jamshidian models) which reflects the current market practice. This is a positive point since there are not many books with details on implementing and using these "market models".
Part II: Interest rate models in practice is particularly useful because it deals with implementation and calibration which, as any practitioner knows, are important and usually delicate issues.
However calibration issues are dealt with somewhat lightly, especially recent developments on modeling cap/swaption smiles
are not included here.
This book can also be used for a graduate level/PhD course on interest rate models.
There are a lot of numerical examples in the book and mathematics is kept to the necessary level while keeping the
approach both rigorous and understandable.
Overall, it is one of the best books written on the subject.
I highly recommend it to PhD students, quants and researchers interested in this field.
Well written and useful book.......2001-11-04
In my humble opinion, this is the best book on Interest Rate modeling out there. The writing style is clear and focused and the appendices are fantastic. The book is rigorous but someone with some background in Stochastic Calculus will find it easy to follow. If you need refresher, dont worry the authors have you covered, see the appendix on Stochastic Calculus. Not an introductory book. Very exciting book.
Book Description
Access to essential facilities or so-called bottlenecks has become the key public policy issue for the liberalization of network industries such as telecommunications, electricity, rail and so on. Still, access prices are not only important for competition in formerly monopolistic industries, but also for industries where competition has long been established such as payment and credit card networks or mobile telecommunications. As the latter industries have also come under closer scrutiny by regulatory agencies and competition authorities, this book is dedicated to the analysis of access pricing in theory and practice.
The structure of this book which is organized in five parts is as follows: The extended introduction will introduce the key concepts and issues including a brief explanation of the essential facility concept as well as the distinction between one-way and two-way access and will briefly survey the main contributions within the literature on access pricing theory and practice. While parts I and II deal with the theory of one-way and two-way access pricing, respectively, part III focuses on the newly emerging theory of access pricing with multihoming. Parts IV and V address the practice side and focus on industry-specific applications and special problems (Part IV) as well as public policy issues (Part V).
*Provides valuable theoretical and empirical analyses in Access Pricing and related topics
*Offers several different points of view
*Features research from highly reputed scientists working in this field
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The Transfer Pricing Problem: A Theory for Practice
Robert G. Eccles
Manufacturer: Lexington Books
ProductGroup: Book
Binding: Hardcover
 Corporate Finance
| Finance
| Business & Investing
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General
| Business & Investing
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Production & Operations
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ASIN: 0669090298 |
Book Description
The markets dealing with financial products related to credit risk have been booming over the last years. This has encouraged practitioners and academics at the same time to consider and develop sophisticated models for credit risk pricing. This book gives a deep insight into the latest basic and advanced credit risk modelling techniques covering not only the standard structural, reduced form and hybrid approaches but also showing how these methods can be applied to practice. Therefore, questions like the choice of an appropriate model, suitable parameter estimation and calibration techniques as well as back-testing issues are addressed. The book covers a broad range of financial instruments such as all kinds of defaultable fixed and floating rate debt, credit derivatives and collateralised debt obligations. In addition, there is a special emphasis on the discussion of data issues like the estimation of consistent transition matrices or the modelling of recovery rates. A lot of market data and latest credit market information completes the book. This volume will be a valuable source for the financial community involved in pricing credit linked financial instruments. In addition, the book can be used by students and academics to get a comprehensive overview of the most important credit risk modelling issues.
Customer Reviews:
Great Overview of Models but a Little Too Academic.......2002-06-07
This book is an excellent read and should be required reading for any credit trader or risk manager - buy- or sell-side.
The model that is proposed is general enough to be practical but academically rigorous enough to garner respect.
The actual application of the model is a little limited and I lokk forward to further research by the author.
All-in-all - a well structured tour of current models and application of an innovative generalisation of a number of frameworks.
Book Description
The past decade has seen a surge of pricing innovations in the U.S. telecommunications industry. This book systematically reviews recent innovations in the economic theory of pricing and extends results to the conditions that characterize telecommunications markets. The authors develop and illuminate the normative theory of pricing--with its objectives of social welfare, economic efficiency and fairness--and compare it with the practice of business and regulators.
Average customer rating:
- A high quality treatment of financial services theory
- Understanding CAPM
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Portfolio Indexing: Theory and Practice (Frontiers in Finance Series)
Harold Hutchinson
Manufacturer: Wiley
ProductGroup: Book
Binding: Hardcover
General
| Popular Economics
| Business & Investing
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Public Finance
| Economics
| Business & Investing
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General
| Business & Investing
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General
| Investing
| Business & Investing
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Pricing
| Management & Leadership
| Business & Investing
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General
| Finance
| Accounting & Finance
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ASIN: 0471988685 |
Book Description
The dominant paradigm in modern-day fund management remains the Capital Asset Pricing Model (CAPM). Originally developed in the 1960s as an explanatory and predictive model of capital market behaviour, it has subsequently acquired enormous significance in many fund-management institutions.
"Harold Hutchinson's Portfolio Indexing is a long-overdue theoretical and practical perspective on the 'managers versus trackers' debate. He concludes that the indexing solution to risk management is flawed and that individual judgment will always have a proper role to play in investment. This much-needed book will hopefully help to stop the current steam-rolling move of the fund management industry towards indexing in its tracks, and encourage a more balanced view of the benefits of the active manager, especially in volatile or falling markets." Phillip Keane, Director, Industrial Bank of Japan Asset Management International Ltd
"Portfolio Indexing challenges the growing consensus in favour of portfolio indexing as the optimal investment strategy. His devastating criticisms of the theoretical foundations underlying indexing, and his plea for a more modest inductive approach to portfolio management, have huge and as yet untapped implications for the asset management industry." Dr Andrew Allan, Vice President, Salomon Smith Barney
Professionals, students and amateur investors alike will profit from this enjoyable tract on how to maintain and navigate vehicles of investment.
Customer Reviews:
A high quality treatment of financial services theory.......1999-12-27
Sombody has, at last, written a clear and concise treatment on the use of the CAPM and accociated financial tools. But what really sets this book apart from the crowd is its overall readability. Hutchinson uses a clarity of language to express ideas that goes well beyond the usual linguistic treatment affoarded by most academics without entering the waters of poor grammer and management jargon of the consultancy brigade. Should you wish to work in the securities or financial services industry this book is a must buy.
Understanding CAPM.......1999-12-18
This is a great little book. I'm still struggling with the lastChapter, but Chapter 3 is the most readable account I've come across of the problems with the Capital Asset Pricing Model. For anybody that wants a clear account of CAPM, this is the book.
Average customer rating:
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Pricing in Theory and Practice (Copenhagen Studies in Economics and Management)
Bjarke Fog
Manufacturer: Handelshojskolens Forlag
ProductGroup: Book
Binding: Hardcover
General
| Popular Economics
| Business & Investing
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Microeconomics
| Economics
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Money & Monetary Policy
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Pricing
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ASIN: 8716132297 |
Book Description
Traditional price theory is often criticized as being insufficient in practice due to unrealistic assumptions. This book explores systematically the relationship between economic theory and price practice. For the first time a professional economist gives a presentation based on his own experience of more than thirty years' work in this field. The book is a supplement to basic textbooks in price theory, providing business students and professionals with insights into how theory can be applied in practice. The author is Professor of Business Economics at the Copenhagen Business School and has extensive experience as a business analyst for Scandinavian companies as well as a member of the board of directors in a number of firms. TABLE OF CONTENTS: Normative and descriptive theories Marginalism as a normative theory Marginalism as a descriptive theory Full cost as a descriptive theory Full cost as a normative theory Price strategy in competitive environments: different types of competition; illustrative cases; oligopoly theory as a descriptive theory; oligopoly and game theory; the theory of joint profit maximization; oligopoly theory as a normative theory; pricing under monopolistic competition Multi-product pricing: joint production; multiple products Transfer pricing: definition; transfer pricing in theory and practice; the practical solution; the theoretical solution Price discrimination: conditions for price discrimination; price discriminiation in practice; predatory pricing; discount policy; charging for extras Vertical relations: the basic theory; examples of monopsony; subcontracting; relations between producers and retailers Conclusion
Average customer rating:
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Road Pricing: Theory and Practice
Nigel C. Lewis
Manufacturer: Thomas Telford
ProductGroup: Book
Binding: Paperback
Microeconomics
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Industry
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ASIN: 0727719637 |
Book Description
This digital document is a journal article from Journal of Economic Behavior and Organization, published by Elsevier in 2004. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.
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Utility of Gains and Losses: Measurement-Theoretical and Experimental Approaches (Scientific Psychology Series)
R. Duncan Luce
Manufacturer: Lawrence Erlbaum
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Binding: Hardcover
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Individual Choice Behavior: A Theoretical Analysis
ASIN: 0805834605 |
Book Description
This new monograph presents Dr. Luce's current understanding of the behavioral properties people exhibit (or should exhibit) when they make selections among alternatives and how these properties lead to numerical representations of those preferences. It summarizes, and places in historical perspective, the research Dr. Luce has done on utility theory for over 10 years. Included are axiomatic theoretical formulations, experiments designed to test individual assumptions, and analyses of the fit to bodies of data of numerical representations derived from the theory.
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