Электронная книга: Emanuel Derman «The Volatility Smile»
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The Volatility Smile The Black-Scholes-Merton option model was the greatest innovation of 20th century finance, and remains the most widely applied theory in all of finance. Despite this success, the model is fundamentally at odds with the observed behavior of option markets: a graph of implied volatilities against strike will typically display a curve or skew, which practitioners refer to as the smile, and which the model cannot explain. Option valuation is not a solved problem, and the past forty years have witnessed an abundance of new models that try to reconcile theory with markets. The Volatility Smile presents a unified treatment of the Black-Scholes-Merton model and the more advanced models that have replaced it. It is also a book about the principles of financial valuation and how to apply them. Celebrated author and quant Emanuel Derman and Michael B. Miller explain not just the mathematics but the ideas behind the models. By examining the foundations, the implementation, and the pros and cons of various models, and by carefully exploring their derivations and their assumptions, readers will learn not only how to handle the volatility smile but how to evaluate and build their own financial models. Topics covered include: The principles of valuation Static and dynamic replication The Black-Scholes-Merton model Hedging strategies Transaction costs The behavior of the volatility smile Implied distributions Local volatility models Stochastic volatility models Jump-diffusion models The first half of the book, Chapters 1 through 13, can serve as a standalone textbook for a course on option valuation and the Black-Scholes-Merton model, presenting the principles of financial modeling, several derivations of the model, and a detailed discussion of how it is used in practice. The second half focuses on the behavior of the volatility smile, and, in conjunction with the first half, can be used for as the basis for a more advanced course. Издательство: "John Wiley&Sons Limited (USD)"
ISBN: 9781118959176 электронная книга Купить за 5528.36 руб и скачать на Litres |
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Emanuel Derman
| Emanuel Derman | |
|---|---|
| Born | Cape Town, South Africa |
| Residence | New York City, New York, United States |
| Citizenship | United States |
| Fields | particle physics, financial engineering |
| Institutions | Goldman Sachs Salomon Brothers Columbia University |
| Alma mater | Columbia University University of Cape Town |
| Doctoral advisor | Norman Christ |
| Known for | Financial Modelers' Manifesto Black-Derman-Toy model Local volatility Derman-Kani Model |
| Notable awards | 2000 Financial Engineer of the Year |
Emanuel Derman is a South African-born academic,[1] businessman and writer. He is best known as a quantitative analyst, and author of the book My Life as A Quant: Reflections on Physics and Finance.[2]
He is a co-author of Black-Derman-Toy model, one of the first interest-rate models, and the Derman-Kani local volatility or implied tree model, a model consistent with the volatility smile.
He is currently a professor at Columbia University[3] and Director of its program in financial engineering, and is also the Head of Risk and a partner at Prisma Capital Partners, a fund of funds. His book My Life as A Quant: Reflections on Physics and Finance, published by Wiley in September 2004, was one of Business Week's top ten books of the year for 2004.[4] His forthcoming book Models.Behaving.Badly, will be published by Free Press in October 2011.
Contents |
Biography
Derman studied at the University of Cape Town,[5] and received a Ph.D. in theoretical physics from Columbia in 1973, where he wrote a thesis that proposed a test for a weak-neutral current in electron-hadron scattering. This experiment was carried out at SLAC in 1978 by a team led by Charles Prescott and Richard Taylor, and confirmed the Weinberg-Salam model. Between 1973 and 1980 he did research in theoretical particle physics at the University of Pennsylvania, the University of Oxford, Rockefeller University and the University of Colorado at Boulder. From 1980 to 1985 he worked at AT&T Bell Laboratories, where he developed computer languages for business modeling applications.
In 1985 Derman joined Goldman Sachs' fixed income division where he was one of the co-developers of the Black-Derman-Toy interest-rate model.
He left Goldman Sachs at the end of 1988[6] to take a position at Salomon Brothers Inc. as a Head of Adjustable Rate Mortgage Research in the Bond Portfolio Analysis group.
Rehired by Goldman Sachs, from 1990 to 2000 he led the Quantitative Strategies group in the Equities division, which pioneered the study of local volatility models and the volatility smile. He was appointed a managing director of Goldman Sachs in 1997. In 2000 he became head of the firm’s Quantitative Risk Strategies group. He retired from Goldman Sachs in 2002 and took up his current positions at Columbia University and Prisma Capital Partners.
Derman was named the IAFE/Sungard Financial Engineer of the Year 2000,[7] and was elected to the Risk Hall of Fame in 2002.[8] He is the author of numerous articles on quantitative finance on the topics of volatility and the nature of financial modeling.[9]
Since 1995, Derman has written many articles pointing out the essential difference between models in physics and models in finance. Good models in physics aim to predict the future accurately from the present, or to predict new previously unobserved phenomena; models in finance are used mostly to estimate the values of illiquid securities from liquid ones. Models in physics deal with objective variables; models in finance deal with subjective ones. “In physics there may one day be a Theory of Everything; in finance and the social sciences, you’re lucky if there is a usable theory of anything.”
Professor Derman together with Paul Wilmott wrote the Financial Modelers' Manifesto, a set of principles for doing responsible financial modeling.[10]
Models.Behaving.Badly
In 2011, Prof. Derman published a new book titled Models.Behaving.Badly: Why Confusing Illusion With Reality Can Lead to Disaster, on Wall Street and in Life. In that work he decries the breakdown of capitalism as a model during the bailouts characterizing the 2008 financial crisis and calls for a return to principles, to the notion that if you want to take a chance on the upside, you have also taken a chance on the downside. More generally, he analyzes three ways of understanding the behavior of the world: models, theory and intuition. Models. he argues, are merely metaphors that compare something you would like to understand with something you already do. Models provide relative knowledge. Theories, in contrast, are attempts to understand the world on absolute terms; while models stand on someone else's legs, theories, like Newton's or Maxwell's or Spinoza's, stand on their own. Intuition, the deepest kind of knowledge, comes only occasionally, after long and hard work, and is a merging of the understander with the understood. His book elaborates on these ideas with examples from the theories of physics and philosophy, and the models of finance.
See also
References
- ^ http://www.ederman.com/new/docs/s-financial_engineer_award.html
- ^ E. Derman, My Life as A Quant: Reflections on Physics and Finance, Wiley (2004) ISBN 0471394203 (also available in paperback, ISBN 0470192733)
- ^ http://www.ieor.columbia.edu/fac-bios/derman/faculty.html
- ^ The Pick Of This Year's Crop Of Books (December 13, 2004)
- ^ http://www.ederman.com/new/docs/risk-worlds_of_yesterday.html
- ^ http://www.ederman.com/new/docs/risk-leaving_wall_street.html
- ^ Emanuel Derman 2000 IAFE/SunGard Financial Engineer of the Year Award (Copy of press release from SunGard)
- ^ Excerpts from Risk (PDF)
- ^ Publication list on quantative finance
- ^ Full text of Financial Modelers' Manifesto
External links
- Emanuel Derman: Writings on Quantitative Finance - Personal website
- Curriculum Vitae
- His profile at Department of Industrial Engineering and Operations Research, Columbia University
- Derman's Blog
- Living people
- Financial economists
- South African economists
- Jewish American scientists
- Columbia University alumni
- Columbia University faculty
- University of Cape Town alumni
- Goldman Sachs people
Источник: Emanuel Derman
См. также в других словарях:
Volatility smile — In finance, the volatility smile is a long observed pattern in which at the money options tend to have lower implied volatilities than in or out of the money options. The pattern displays different characteristics for different markets and… … Wikipedia
Volatility Smile — A common graphical shape that results from plotting the strike price and implied volatility of a group of options with the same expiration date. A volatility smile is used by investors to price options in the foreign currency market and the… … Investment dictionary
Volatility arbitrage — (or vol arb) is a type of statistical arbitrage that is implemented by trading a delta neutral portfolio of an option and its underlier. The objective is to take advantage of differences between the implied volatility of the option, and a… … Wikipedia
Volatility Skew — The difference in implied volatility (IV) between out of the money, at the money and in the money options. Volatility skew, which is affected by sentiment and the supply/demand relationship, provides information on whether fund managers prefer to … Investment dictionary
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SABR Volatility Model — In mathematical finance, the SABR model is a stochastic volatility model, which attempts to capture the volatility smile in derivatives markets. The name stands for Stochastic Alpha, Beta, Rho , referring to the parameters of the model.The SABR… … Wikipedia
