Modern Pricing of Interest-Rate Derivatives: The LIBOR Market Model and Beyond
by Riccardo Rebonato
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List Price: $95.00
Our Price: $63.63
Your Save: $ 31.37 ( 33% )
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Manufacturer: Princeton University Press
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Average Customer Rating:  
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Binding: Hardcover
Dewey Decimal Number: 332.6323
EAN: 9780691089737
ISBN: 0691089736
Label: Princeton University Press
Number Of Items: 1
Number Of Pages: 480
Publication Date: 2002-11-04
Publisher: Princeton University Press
Studio: Princeton University Press
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Spotlight customer reviews:
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Customer Rating: 
Summary: this is not a book for beginner
Comment: I bought this book two years ago and couldn't follow it. After reading other books I found in surprise that I understand what he is talking about now (books not about the same subjects though). The book is well written and I finished the first five chapters. It has many scary formula but the good thing is the author does provide simple examples. It would be even better if he could provide some simple spread sheets for people to play with. I bet he has them. Formula are for mathematicians (I got a master in Math but still I don't feel easy at reading formula. You have to keep one thinking what i is and what k is and they location in the matrix and so on). Well the first 5 chapter is all about covariance matrix and no arbitrage drifts, I bet the later chapters have sophisticated stuff ... it will keep my commute to new york interesting
Customer Rating:
Summary: why bother
Comment: It's hard to believe a reviewer with such a myopic view of Derivatives pricing could go through the whole book, understood it and found time to rate it. Mindblowing waste of time !
Few hundreds years ago, he would have recommended burning the Madmen claiming the earth was round.
Anyway, while Derivatives Pricing achieves little for the welfare of mankind, the recent need for assets based on ever complex market scenarios calls for a more refined pricing methodology. There no supply and demand here, only customers who want hedge/trade/tradge assets /liabilities and traders who need to make sure their firms don't go burst when market move.
The author answers that demand by formatting and publishing his papers.
Customer Rating:
Summary: rebonato does it again
Comment: My avid reading kept jostling out superb hot ideas from this book. Rebonato carries out a comprehensive survey of the LIBOR market model. He tackles historical background, calibration, and effective implementation. The later chapters also cover extensions to the LIBOR market model to take account of smile and skew. In particular, there is extensive discussion of the cutting-edge Joshi-Rebonato stochastic-vol, displaced-diffusion LIBOR market model.
If you are working on the pricing of exotic interest rate derivatives, this book is a must buy.
Customer Rating:
Summary: Such pearls of wisdom
Comment: I am not qualified to write a review of this book, but neither is the above author as his "review" is nothing more than an uninformed assault on modern finance.
In fact, I submit, that said reviewer knows nothing of finance whatsoever.
(Since this book happens to be well regarded, I'll give it a five)
Customer Rating:
Summary: A theoretical substitute for supply and demand
Comment: A complicated body of mathematical theory, developed over a period of about 30 years, addresses the question: how should derivative X be valued if we know certain parameters, especially the volatility of the price of its underlying asset?
But why exactly does the question need answering? After all, the price of X, like that of its underlying, is determined by the point at which the demand for X is equal to the supply of X. One doesn't need a computer for that, one just needs a liquid marketplace. I can look up the price of a share of Microsoft's equity in my daily newspaper. I'm not tempted to develop a body of theory to figure it out, when I can flip through a few pages and find it.
Nowadays, I can also look up the price of a standardized option to buy Microsoft in the newspaper. In 1973, when people like Fischer Black began developing this body of theory, that was not yet the case.
This brings us to the point of my little sermon. The purpose of this body of theory is to produce a price figure in cases where there is not a liquid market for X. The theories answer the question a portfolio manager must often ask himself: if I were able to find a buyer for X, how much could I charge for it?
This book has its moments, but in general I believe this body of theory accomplishes less than its adepts believe. The imagery of a God-like Newton on the dust jacket indicates, I submit, some of the pretentiousness that gets into their ivory towers.
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Editorial Reviews:
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Customer Rating:
Summary: this is not a book for beginner
Comment: I bought this book two years ago and couldn't follow it. After reading other books I found in surprise that I understand what he is talking about now (books not about the same subjects though). The book is well written and I finished the first five chapters. It has many scary formula but the good thing is the author does provide simple examples. It would be even better if he could provide some simple spread sheets for people to play with. I bet he has them. Formula are for mathematicians (I got a master in Math but still I don't feel easy at reading formula. You have to keep one thinking what i is and what k is and they location in the matrix and so on). Well the first 5 chapter is all about covariance matrix and no arbitrage drifts, I bet the later chapters have sophisticated stuff ... it will keep my commute to new york interesting
Customer Rating:
Summary: why bother
Comment: It's hard to believe a reviewer with such a myopic view of Derivatives pricing could go through the whole book, understood it and found time to rate it. Mindblowing waste of time !
Few hundreds years ago, he would have recommended burning the Madmen claiming the earth was round.
Anyway, while Derivatives Pricing achieves little for the welfare of mankind, the recent need for assets based on ever complex market scenarios calls for a more refined pricing methodology. There no supply and demand here, only customers who want hedge/trade/tradge assets /liabilities and traders who need to make sure their firms don't go burst when market move.
The author answers that demand by formatting and publishing his papers.
Customer Rating:
Summary: rebonato does it again
Comment: My avid reading kept jostling out superb hot ideas from this book. Rebonato carries out a comprehensive survey of the LIBOR market model. He tackles historical background, calibration, and effective implementation. The later chapters also cover extensions to the LIBOR market model to take account of smile and skew. In particular, there is extensive discussion of the cutting-edge Joshi-Rebonato stochastic-vol, displaced-diffusion LIBOR market model.
If you are working on the pricing of exotic interest rate derivatives, this book is a must buy.
Customer Rating:
Summary: Such pearls of wisdom
Comment: I am not qualified to write a review of this book, but neither is the above author as his "review" is nothing more than an uninformed assault on modern finance.
In fact, I submit, that said reviewer knows nothing of finance whatsoever.
(Since this book happens to be well regarded, I'll give it a five)
Customer Rating:
Summary: A theoretical substitute for supply and demand
Comment: A complicated body of mathematical theory, developed over a period of about 30 years, addresses the question: how should derivative X be valued if we know certain parameters, especially the volatility of the price of its underlying asset?
But why exactly does the question need answering? After all, the price of X, like that of its underlying, is determined by the point at which the demand for X is equal to the supply of X. One doesn't need a computer for that, one just needs a liquid marketplace. I can look up the price of a share of Microsoft's equity in my daily newspaper. I'm not tempted to develop a body of theory to figure it out, when I can flip through a few pages and find it.
Nowadays, I can also look up the price of a standardized option to buy Microsoft in the newspaper. In 1973, when people like Fischer Black began developing this body of theory, that was not yet the case.
This brings us to the point of my little sermon. The purpose of this body of theory is to produce a price figure in cases where there is not a liquid market for X. The theories answer the question a portfolio manager must often ask himself: if I were able to find a buyer for X, how much could I charge for it?
This book has its moments, but in general I believe this body of theory accomplishes less than its adepts believe. The imagery of a God-like Newton on the dust jacket indicates, I submit, some of the pretentiousness that gets into their ivory towers.
In recent years, interest-rate modeling has developed rapidly in terms of both practice and theory. The academic and practitioners' communities, however, have not always communicated as productively as would have been desirable. As a result, their research programs have often developed with little constructive interference. In this book, Riccardo Rebonato draws on his academic and professional experience, straddling both sides of the divide to bring together and build on what theory and trading have to offer. Rebonato begins by presenting the conceptual foundations for the application of the LIBOR market model to the pricing of interest-rate derivatives. Next he treats in great detail the calibration of this model to market prices, asking how possible and advisable it is to enforce a simultaneous fitting to several market observables. He does so with an eye not only to mathematical feasibility but also to financial justification, while devoting special scrutiny to the implications of market incompleteness. Much of the book concerns an original extension of the LIBOR market model, devised to account for implied volatility smiles. This is done by introducing a stochastic-volatility, displaced-diffusion version of the model. The emphasis again is on the financial justification and on the computational feasibility of the proposed solution to the smile problem. This book is must reading for quantitative researchers in financial houses, sophisticated practitioners in the derivatives area, and students of finance.
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