Finance and accounting Books

Book SynopsisAn intriguing look at the full range of value methods brought together for the first time The biggest block to success in the stock market is unconscious investing, or following the crowd without asking the right questions such as: What is it really worth? Even more fundamental is: What rate of return can I confidently expect to get? Without having the methods to answer these questions is like trying to sail a boat without a rudder. The Conscious Investor covers each of the main methods used to calculate value or return in the stock market, along with descriptions of how and when to use them, as well as their strengths and weaknesses. Interspersed throughout the methods are the timeless investment principles of Benjamin Graham and Warren Buffett. The book: Includes balance sheet methods, dividend discount methods, discounted cash flow methods, price ratio methods, and many others Explains the significance of viewing real value as a combinaTable of ContentsAcknowledgments ix Introduction 1 Chapter 1 What Is Intrinsic Value? 11 Chapter 2 Price Is What You Pay. . . 23 Chapter 3 . . . Value Is What You Get 53 Chapter 4 Follow the Money 71 Chapter 5 Everything Is Number and Ratio 109 Chapter 6 Measuring Value by Taking Snapshots 143 Chapter 7 A Bird in the Hand 169 Chapter 8 The Joy of Dividends 195 Chapter 9 Don’t Get Mad, Get Even 219 Chapter 10 PEG and Friends 229 Chapter 11 What Rate of Return Can I Expect? 241 Chapter 12 Please, Sir, I Want Some More 261 Chapter 13 Forecasting and the Three Most Important Words in Investing 287 Chapter 14 Where Do We Go from Here? 319 Appendix A Relationship between Return on Equity and Growth of Earnings 323 Appendix B Calculations for Discount Methods 325 Notes 333 Glossary 345 About the Author 353 Disclaimer 355 Index 357

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Book SynopsisIndispensable coverage of new federal regulatory reforms and federal financial issues An essential guide covering new federal regulatory reforms and federal financial issues Financial Institutions, Valuations, Mergers and Acquisitions, Third Edition presents a new regulatory framework for financial institutions in the post-bailout era. Provides valuable guidance to assess risks, measure performance and conduct valuations processes to create shareholder value Covers the protection of other stakeholders, including customers, regulators, government, and consumers Offers an up-to-date understanding of financial institutions, their challenges, and their opportunities in the post-Sarbanes-Oxley era Over the past decade, substantial changes have taken place in the structure and range of products and services provided by the financial services industry. Get current coverage of these changes that have transformed both tTable of ContentsPreface xi Acknowledgments xvii PART I: FINANCIAL SERVICES INDUSTRY: ITS MARKETS, REGULATIONS, AND GOVERNANCE 1 Chapter 1: Fundamentals of the Financial Markets and Institutions 3 Introduction 3 Financial Markets 3 Financial Information and Capital Markets 4 Financial Crisis and Financial Regulatory Reforms 5 Types and Roles of Financial Markets 15 Financial Services Firms 21 Conclusion 24 Notes 25 Chapter 2: Introduction to Financial Institutions 27 Introduction 27 Landscape of the Financial Services Industry 27 Structural Changes in the Financial Services Industry 28 Historical Perspective of American Banking 42 Current Trends in the Financial Services Banking Industry 43 Regulatory Reforms 46 Valuation Process 55 Conclusion 56 Notes 57 Chapter 3: Corporate Governance 61 Introduction 61 Corporate Governance Effectiveness 62 Global Regulatory Reforms 66 Sarbanes-Oxley Act of 2002 70 Dodd-Frank Act 74 Corporate Governance Functions 75 Board of Directors and Its Committees 78 Audit Committee Roles and Responsibilities 80 Executive Compensation 84 Conclusion 86 Notes 86 PART II: THE FOUNDATION: FINANCIAL INSTITUTIONS, VALUATIONS, MERGERS, ACQUISITIONS, AND REGULATORY AND ACCOUNTING ENVIRONMENT 89 Chapter 4: Overview of the Valuation Process 91 Introduction 91 Valuation Services 92 Valuation Profession 94 Valuation of the Business 97 Attracting Valuation Clients 105 Accepting a Client 109 Pricing Valuation Services 111 Importance of the Engagement Letter 112 Planning an Appraisal Engagement 114 General Planning 118 Appraiser’s Traits 121 Appraiser’s Due Diligence Process 124 Risk Assessment 125 Conclusion 126 Notes 126 Chapter 5: Overview of Mergers and Acquisitions 127 Introduction 127 Historical Perspective of Mergers and Acquisitions 128 Recent Trends in Mergers and Acquisitions 130 Regulations of Bank Mergers 136 Players in Mergers and Acquisitions 142 Motives for Business Combinations 146 Determinants of Mergers and Acquisitions 148 Perceived Shortcomings of Mergers and Acquisitions 152 Studies on Mergers and Acquisitions 155 Leveraged Buyout 159 Post Mergers and Acquisitions Performance 160 Shareholder Wealth and Effect of Mergers and Acquisitions 161 Joint Ventures and Strategic Alliances 162 Ethics in Mergers and Acquisitions 163 Governance in Mergers and Acquisitions 164 Mergers and Acquisitions Process 165 Conclusion 181 Notes 183 Chapter 6: Regulatory Environment and Financial Reporting Process of Financial Institutions 187 Introduction 187 Consolidation 187 Regulatory Environment 192 Bank Supervision 198 Financial Modernization: The Gramm-Leach-Bliley Act 205 Financial Reporting Process of Financial Institutions 208 Statement of Financial Accounting Standards No. 115 212 Auditing Proper Classifications of Marketable Securities 214 Tax Consideration of Fair Value 215 Recent Development of Fair Value Accounting 218 Financial Reporting Requirements of Financial Institutions 222 Corporate Governance of Financial Institutions 228 Conclusion 237 Notes 238 PART III: FUNDAMENTALS OF VALUATIONS: CONCEPTS, STANDARDS, AND TECHNIQUES 241 Chapter 7: Value and Valuation: A Conceptual Foundation 243 Asset-Liability Management 243 Investment Management 245 Lending Management 246 Liquidity Management 247 Nature of Value 249 Twelve Concepts of Value 250 Types of Property that Can Be Valued 260 Relationship among Different Types of Value 261 Principles of Valuation Theory 262 Pricing Value versus Reporting Value 263 Limitations of the Valuation Process 264 Conclusion 264 Notes 264 Chapter 8: Approaches to Measuring Value 267 Overview of the Valuation Process 267 Cost Approach to Valuation 268 Market Approach to Valuation 270 Income Approach to Valuation 273 Special Topics—Approaches to Intangible Asset Valuation 291 Special Topics—Business Valuation 294 Valuation and Business Concentrations 300 Special Topics—Closely Held Stock 301 Special Topics—Valuing Widely Traded Companies 304 Conclusion 305 Notes 305 Chapter 9: Valuations for Tax and Accounting Purposes 307 Tax Aspects of Mergers and Acquisitions 307 Typical Tax-Oriented Valuations 310 Accounting Aspects of Mergers and Acquisitions 313 Typical Accounting-Oriented Valuations 319 Acquisition Method 320 Presentation, Disclosure, and Transition Requirements of Business Combinations 324 Convergence in Accounting Standards on Mergers and Acquisitions 327 Conclusion 328 Notes 329 Chapter 10: Intangible Asset Valuation 331 Nature and Types of Intangible Assets 331 Amortizable versus Nonamortizable Intangible Assets 334 Measuring the Useful Life of an Intangible Asset 336 Establishing Value of Intangible Assets 338 Amortization Methods 341 Supporting Intangible Asset Valuation and Amortization 341 Goodwill Impairment 342 Conclusion 343 Notes 344 PART IV: ASSESSMENT OF FINANCIAL INSTITUTIONS 345 Chapter 11: Financial Analysis of Banks and Bank Holding Companies 347 Types and Sources of Financial Data 347 Overview of Financial Statements 351 Composition of Bank Assets 355 Composition of Bank Liabilities 359 Off–Balance Sheet Items 361 Composition of Bank Capital 362 Regulatory Capital Components 364 Risk-Based Capital 367 Value-at-Risk Models 370 Composition of Bank Income 371 Composition of Bank Expenses 373 Balance Sheet Analysis Illustration 376 Income Statement and Profitability Analysis Illustration 381 Loan Risk Analysis Illustration 385 Liquidity and Investment Portfolio Analysis Illustration 389 Portfolio Equities Analysis (REALM Model) 390 Special Bank Holding Company Considerations 391 Liability Management 392 Conclusion 392 Notes 392 Chapter 12: Internal Characteristics Assessment 395 Objectives and Benefits of an Internal Characteristics Assessment 396 Ten P Factor Framework 396 Shareholder Value Creation 405 Conclusion 412 Notes 413 Chapter 13: External Environment Assessment 415 Impact of External Environment on Value 415 Political Analysis 416 Economic Analysis 416 Social Analysis 417 Technological Analysis 420 Other Analysis 421 Conclusion 423 Notes 423 PART V: VALUATION OF MERGERS AND ACQUISITIONS 425 Chapter 14: Bank Merger and Acquisition Process 427 Strategy Phase 427 Negotiation and Investigation Phase 435 Finalization and Integration Phase 439 Other Considerations 443 Conclusion 446 Notes 446 Chapter 15: Valuing a Bank as a Business Enterprise 447 Business Enterprise versus a Collection of Assets 447 Concept of the Banking Franchise 448 Difference between Strategic and Tactical Valuations 449 Why the Cost Approach Is Not Used for Strategic Bank Valuations 450 Application of the Market Approach to Valuing a Bank 450 Application of the Income Approach to Valuing a Bank 454 Sensitivity of Value Estimate to Assumption Changes 461 Value-Creation Opportunities and the Acquisition Price 463 Valuation Methods for Mergers and Acquisitions 465 Sophisticated Valuation Techniques for Mergers and Acquisitions 470 Relation between Price and Value and Effect on Stockholders 475 Conclusion 478 Notes 478 Chapter 16: Valuation of Tangible Bank Assets 479 Tangible Physical Assets 480 Tangible Financial Assets 481 Tangible Assets in Bank Mergers and Acquisitions 486 Intangible Assets in Bank Mergers and Acquisitions 486 Conclusion 487 Chapter 17: Core Deposits as a Special Type of Intangible Asset Valuation 489 Concept of Core Deposit Base as an Intangible Asset 489 Internal Revenue Service Position on Core Deposits 490 Important Core Deposit Tax Court Cases 490 Deposits to Be Included in Valuation 497 Alternative Approaches to Valuing a Core Deposit Base 497 Core Deposit Base Life Estimation 499 Application of the Cost Savings Approach 502 Application of the Future Income Approach 505 Systemically Important Financial Institutions 508 Conclusion 511 Notes 511 Chapter 18: Derivative Financial Instruments 513 Authoritative Guidelines on Derivatives 515 Derivative Markets 516 Derivatives Risk Management 518 Derivatives Risk Management Policy 519 Accounting for Derivatives 528 Tax Considerations of Derivatives 535 Audit of Derivative Transactions 535 Sources of Information on Derivatives 537 Derivatives Valuation Models 538 Derivatives under the Dodd-Frank Act of 2010 542 Conclusion 543 Notes 543 Chapter 19: Real-World Bank Valuation Complications 547 Banks Experiencing Recent Losses 548 Banks with Low Equity Capital 551 Banks with Uncertain Future Loan Loss Exposure 554 Preferred and Common Stock 556 Highly Leveraged Banks 557 Branch Acquisitions 557 European Banking Model 559 Initial Public Offering 561 Islamic Banking System 562 Emerging Issues in the Financial Services Industry 564 Conclusion 568 Notes 568 About the Author 569 Index 571

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Book SynopsisFinancial legend Barton Biggs' fictional account of the hedge world and the broader workings of Wall Street Barton Biggs' latest book is an inspirational rags to riches story of drive and financial talent.Table of ContentsIntroduction 1 Chapter 1 Big Neck, Virginia 5 Chapter 2 Arizona Union 17 Chapter 3 New York and the Firm 33 Chapter 4 Onward and Upward 51 Chapter 5 Crisis and Confrontation 67 Chapter 6 Moving On 91 Chapter 7 Bridgestone 107 Chapter 8 Revenge of the Geeks 123 Chapter 9 Life Its Own Self 143 Chapter 10 The Halcyon Years 159 Chapter 11 Dinner at the Perots 181 Chapter 12 Big Decisions 193 Chapter 13 The Years of Milk and Honey 209 Chapter 14 The High Probability of the Improbable 223 Chapter 15 2008 Annus Horribilis 247 Chapter 16 The Age of Malevolence 279 Chapter 17 The End of the Affair 297 Epilogue 313 About the Author 319

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Book SynopsisA proven way to put together a portfolio that enhances performance and reduces risk Professor Craig Israelsen of Brigham Young University is an important voice in the area of asset allocation. The reason? He keeps things simple. Now, in 7Twelve, he shows you how to do the same, and demonstrates how his approach to investing can help you grow your money as well as protect it. 7Twelve outlines a multi-asset balanced portfolio that is a logical starting point when assembling a portfolio-either as the blueprint for the entire portfolio or as a significant building block. Page by page, he will show you how to create a balanced portfolio utilizing multiple asset classes to enhance performance and reduce risk. Discusses how the 7Twelve portfolio includes seven core asset classes and utilizes twelve specific mutual funds or exchange traded funds Details the tax efficiency of this specific investment approach Shows you how to use thTrade Review“Craig Israelsen has an interesting idea: Let's leave 1950 behind. The associate professor at Brigham Young University in Utah thinks it's time to include the world outside the United States, among other things, in our investments rather than just talk about it . . . . This is accomplished with what Israelsen dubs the ‘7Twelve Balanced Fund.’ Rather than just domestic stocks and bonds, the new benchmark has seven asset classes. Those asset classes, in turn, are subdivided into a dozen subsets, all held in equal amounts. The payoff is huge. Over the last 10 years, his better balanced index provided a return of 7.52 percent annualized. The Vanguard Balanced Index fund did better than nearly 60 percent of its managed competitors but returned only 2.64 percent over the same period. That 7.52 percent return would have ranked Israelsen's passive index in the top 2 percent of all moderate allocation funds. Indeed, it would have ranked in the top 30 percent of all world allocation funds - funds that do invest in a broader menu of assets . . . . This is no guarantee of investment nirvana, but it's a good start for a new millennium.”—Scott Burns, Syndicated Columnist, Dallas Morning News (March 27, 2010)Table of ContentsForeword. Preface. Acknowledgments. Chapter 1 A Recipe for Success. The 7Twelve Recipe. Salsa Anyone? U.S. Stock. Non–U.S. Stock. Real Estate. Resources. U.S. Bonds. Non–U.S. Bonds. Cash. The Complete Recipe. Chapter 2 Lining Up the Ingredients. A Recipe That Goes Waaay Back. Getting Better and Better. Chapter 3 The More Ingredients, the Better. Measuring Volatility and Risk. Diversification by Design. Diversification Requires Depth and Breadth. Chapter 4 Growth of Money. Why Measure Growth of Money? Expect Ups and Downs. Chapter 5 Combining Ingredients That Zig and Zag. Getting Close to Zero. Finding Assets That Play Nicely Together. Don't Forget Broad Diversification. Quantifying Correlation. Chapter 6 Stirring the Mix. Rebalancing versus Buy-and-Hold. Choosing a Schedule. Chapter 7 Adjusting the Secret Sauce. The Saving Years and the Spending Years. How Portfolio Mechanics Change in the Golden Years. Allocation Age versus Chronological Age. Life Stage Portfolios. Chapter 8 How Long Will My Nest Egg Last? Survival of the Fittest. Reviewing the Nest Egg Guidelines. Chapter 9 Should I Tilt toward Value or Growth? Does It Make a Difference? The 7Twelve's Value Bias Chapter 10 Should I Jump in or Let the Pot Simmer? To Stir or Not to Stir? The 7Twelve Works Both Ways. But If You Still Can't Decide . . . Chapter 11 A Better 401(K). Switching the Default. Introducing Target Date Funds and Balanced Funds. The 7Twelve Portfolio Approach. Determining Your Lifecycle Phase. Mismatch 101. Chapter 12 The Problem of Undersaving. Chasing Returns Is a Loser's Game. Add Plenty of Patience, Perspective, and Persistence. Chapter 13 Of Stocks, Bonds, and Risk. A Tale of Two Time Frames. The "Diversification" Premium. Chapter 14 Assembling Your Portfolio. Chapter 15 3 Secrets + 4 Principles = 7Twelve Perfection. About the Author. Index.

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Book SynopsisA step-by-step guide to implementing and closing securitization transactions Securitization is still in wide use despite the reduction in transactions. The reality is that investors and institutions continue to use this vehicle for raising funds and the demand for their use will continue to rise as the world''s capital needs increase. The Mechanics of Securitization specifically analyzes and describes the process by which a bank successfully implements and closes a securitization transaction in the post subprime era. This book begins with an introduction to asset-backed securities and takes you through the historical impact of these transactions including the implications of the recent credit crisis and how the market has changed. Discusses, in great detail, rating agency reviews, liaising with third parties, marketing the deals, and securing investors Reviews due diligence and cash flow analysis techniques Examines credit and casTable of ContentsForeword xi Preface xv Part One Introduction to Securitization 1 Chapter 1 Introduction to Securitization and Asset-Backed Securities 3 The Concept of Securitization 4 The Process of Securitization 7 Securitizing Mortgages 14 ABS Structures: A Primer on Performance Metrics and Test Measures 18 Securitization: Features of the 2007–2008 Financial Crisis 24 Summary and Conclusions 33 References 34 Chapter 2 The Securitization Market Post-2007 35 Market Observation 35 Impact on Rating Agencies 40 Summary and Conclusions 42 Part Two Guide to Closing a Securitization Transaction 45 Chapter 3 Structuring and Execution of a Transaction 47 A Securitization Process 47 Summary and Conclusions 69 Chapter 4 The Rating Agency Process and Legal Review 71 Select Rating Agencies 71 Undertaking Legal Due Diligence 73 Begin Drafting Documents 78 Set Up the SPV 82 Modeling the Transaction 85 Determine Capital Structure/Trigger Levels 90 Prepare Marketing Materials 96 Pricing, Close, and Settlement 98 Summary and Conclusions 99 Chapter 5 Static Synthetic CDO Cash Flow Waterfall Model 101 Summary and Conclusions 107 Part Three Transaction Closing Templates and Checklists 111 Chapter 6 Transaction Templates and Checklists 113 Red Sea Master Series Limited Structure Diagram 113 Underlying Asset Pool 113 Draft Term Sheet 120 Closing Process 126 Structuring Notes 127 Rating Agency Preparation and Questionnaire 129 Loan-Level Data: Rating Agency Checklist 138 Agenda for Rating Agency Site Visit 140 Legal Counsel Review 140 Form of Transfer Certificate 144 Investor and Rating Agency Presentation Template 147 In-House Credit Rating Mapping Chart: Lower and Upper Values 149 Rating Agency Presentation: Corporate Bank Origination Processes 149 Loan Transfer Schedule of Tasks 154 Loan Transfers, Accounting Movements 158 Sign-Off Document: Securitization Project 160 Securitization Testing: Finance Department 161 Accounting Process on Closing 166 EUR Junior Tranche Trade Ticket 167 Senior Tranche Trade Ticket 168 Internal Transfer Booking Process 169 Questions from Trustee, Paying Agent, and Services Provider 169 Summary and Conclusions 172 About the Authors 173 Index 175

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Book SynopsisA comprehensive volume that covers a complete array of traditional and alternative investment vehicles This practical guide provides a comprehensive overview of traditional and alternative investment vehicles for professional and individual investors hoping to gain a deeper understanding of the benefits and pitfalls of using these products. In it, expert authors Mark Anson, Frank Fabozzi, and Frank Jones clearly present the major principles and methods of investing and their risks and rewards. Along the way, they focus on providing you with the information needed to successfully invest using a host of different methods depending upon your needs and goals. Topics include equities, all types of fixed income securities, investment-oriented insurance products, mutual funds, closed-end funds, investment companies, exchange-traded funds, futures, options, hedge funds, private equity, and real estate Written by the expert author team of Mark Anson, FranTable of ContentsPreface. About the Authors. CHAPTER 1: Introduction. Risks Associated with Investing. Asset Classes. Super Asset Classes. Strategic vs. Tactical Allocations. Efficient vs. Inefficient Asset Classes. Beta and Alpha Drivers. Financial Instruments and Concepts Introduced in this Chapter. CHAPTER 2: Investing in Common Stock. Earnings. Dividends. Stock Repurchases. The U.S. Equity Markets. Trading Mechanics. Trading Costs. Financial Instruments and Concepts Introduced in this Chapter. CHAPTER 3: More on Common Stock. Pricing Efficiency of the Stock Market. Stock Market Indicators. Risk Factors. Tracking Error. Common Stock Investment Strategies. Financial Instruments and Concepts Introduced in this Chapter. CHAPTER 4: Bond Basics. Features of Bonds. Yield Measures and Their Limitations. Interest Rate Risk. Call and Prepayment Risk. Credit Risk. Financial Instruments and Concepts Introduced in this Chapter. CHAPTER 5: U.S. Treasury and Federal Agency Securities. Treasury Securities. Federal Agency Securities. Financial Instruments and Concepts Introduced in this Chapter. CHAPTER 6: Municipal Securities. Tax-Exempt and Taxable Municipal Securities. Types of Municipal Securities. Tax-Exempt Municipal Bond Yields. Risks Associated with Investing in Municipal Bonds. Build America Bonds. Financial Instruments and Concepts Introduced in this Chapter. CHAPTER 7: Corporate Fixed Income Securities. Corporate Bonds. Medium-Term Notes. Commercial Paper. Preferred Stock. Convertible Security. Financial Instruments and Concepts Introduced in this Chapter. CHAPTER 8: Agency Mortgage Passthrough Securities. Mortgages. Mortgage Passthrough Securities. Types of Agency Mortgage Passthrough Securities. Prepayment Conventions and Cash Flows. Factors Affecting Prepayment Behavior. Prepayment Models. Yield. A Closer Look at Prepayment Risk. Trading and Settlement Procedures for Agency Passthroughs. Stripped Mortgage-Backed Securities. Financial Instruments and Concepts Introduced in this Chapter. CHAPTER 9: Agency Collateralized Mortgage Obligations. The Basic Principle of CMOs. Agency CMOs. CMO Structures. Yields. Financial Instruments and Concepts Introduced in this Chapter. CHAPTER 10: Structured Credit Products. Private Label Residential MBS. Commercial Mortgage-Backed Securities. Nonmortgage Asset-Backed Securities. Auto Loan-Backed Securities. Collateralized Debt Obligations. Financial Instruments and Concepts Introduced in this Chapter. CHAPTER 11: Investment-Oriented Life Insurance. Cash Value Life Insurance. Stock and Mutual Insurance Companies. General Account vs. Separate Account Products. Overview of Cash Value Whole Life Insurance. Taxability of Life Insurance. Products. Financial Instruments and Concepts Introduced in this Chapter. CHAPTER 12: Investment Companies. Types of Investment Companies. Fund Sales Charges and Annual Operating Expenses. Advantages of Investing in Mutual Funds. Types of Funds by Investment Objective. The Concept of a Family of Funds. Taxation of Mutual Funds. Structure of a Fund. Financial Instruments and Concepts Introduced in this Chapter. CHAPTER 13: Exchange-Traded Funds. Review of Mutual Funds and Closed-End Funds. Basics of Exchange-Traded Funds. ETF Mechanics: The ETF Creation/Redemption Process. ETF Sponsors. Mutual Funds vs. ETFs: Relative Advantages. Uses of ETFs. The New Generation of Mutual Funds. Financial Instruments and Concepts Introduced in this Chapter. CHAPTER 14: Investing in Real Estate. The Benefits of Real Estate Investing. Real Estate Performance. Real Estate Risk Profile. Real Estate as Part of a Diversified Portfolio. Core, Value-Added, and Opportunistic Real Estate. Financial Instruments and Concepts Introduced in this Chapter. CHAPTER 15: Investing in Real Estate Investment Trusts. Advantages and Disadvantages of REITs. Different Types of REITs. REIT Rules. Economics of REITs. Financial Instruments and Concepts Introduced in this Chapter. CHAPTER 16: Introduction to Hedge Funds. Hedge Funds vs. Mutual Funds. Growth of the Hedge Fund Industry. Categories of Hedge Funds. Hedge Fund Strategies. Financial Instruments and Concepts Introduced in this Chapter. CHAPTER 17: Considerations in Investing in Hedge Funds. Hedge Fund Performance. Is Hedge Fund Performance Persistent? A Hedge Fund Investment Strategy. Selecting a Hedge Fund Manager. Financial Instruments and Concepts Introduced in this Chapter. CHAPTER 18: Investing in Capital Venture Funds. The Role of a Venture Capitalist. The Business Plan. Venture Capital Investment Vehicles. The Life Cycle of a Venture Capital Fund. Specialization within the Venture Capital Industry. Stage of Financing. Historical Performance. Financial Instruments and Concepts Introduced in this Chapter. CHAPTER 19: Investing in Leveraged Buyouts. A Theoretical Example of a Leveraged Buyout. How LBOs Create Value. LBO Fund Structures. Profile of an LBO Candidate. Venture Capital vs. Leveraged Buyouts. Risks of LBOs. Financial Instruments and Concepts Introduced in this Chapter. CHAPTER 20: Investing in Mezzanine Debt. Overview of Mezzanine Debt. Examples of Mezzanine Financing. Mezzanine Funds. Venture Capital and the Distinction Between Mezannine Financing and Different Forms of Private Equity. Advantages of Mezzanine Debt to the Investor. Advantages to the Company/Borrower. Negotiations with Senior Creditors. Market Performance. Financial Instruments and Concepts Introduced in this Chapter. CHAPTER 21: Investing in Distressed Debt. Vulture Investors and Hedge Fund Managers. Distressed Debt Is an Inefficient and Segmented Market. Distressed Debt and Bankruptcy. Distressed Debt Investment Strategies. Risks of Distressed Debt Investing. Market Performance. Financial Instruments and Concepts Introduced in this Chapter. CHAPTER 22: Investing in Commodities. Gaining Exposure to Commodities. Commodity Prices Compared to Financial Asset Prices. Economic Rationale. Commodity Futures Indexes. Financial Instruments and Concepts Introduced in this Chapter. APPENDIX A: Arithmetic Mean vs. Geometric Mean. APPENDIX B: Measures of Risk. Range and Location. Moments of the Distribution. INDEX.

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Book SynopsisThe essential guide to today''s hottest technical indicator-the Ichimoku Kinko Hyo cloud chart Ichimoku Kinko Hyo is a technical system that illustrates support and resistance values in a simplified form and is considered an extension of the very popular candlestick charting system. In fact, the system was built on the idea that at one glance you should be able to determine whether an instrument is in equilibrium (consolidation) or out of equilibrium (trending). Written in a straightforward and accessible style, Trading with Ichimoku Clouds offers a solid foundation in this discipline as well as its technical strategies. It shows you how to create and implement a trading plan based on this approach that can easily be tailored to your trading style. First available U.S. publication on this hot trading trend Reveals how Ichimoku Clouds work in both bullish and bearish markets Highlights how these strategies can easily be adopted for Table of ContentsIntroduction ix Background ix Components of a Trading System xv Chapter 1 Ichimoku Components 1 Tenkan Sen 4 Kijun Sen 10 Chikou Span 19 Kumo Cloud Components 25 Senkou Span A 27 Senkou Span B 28 Kumo Cloud 30 Chapter 2 Ichimoku Trading Plan 41 Components 41 Strategy Description 42 Chapter 3 Ichimoku Backtesting 45 Backtesting 45 EURUSD—A Two-Year Backtest 46 Summary—Two Years of Backtesting 134 Chapter 4 Post-Analysis 137 Examining the Backtest Results 137 Optimize Trading Plan 144 Chapter 5 Ichimoku Strategies 149 Ideal Ichimoku Strategy 150 Chapter 6 Ichimoku Time Elements 161 Ichimoku Time Elements 161 Chapter 7 Applied Trader Psychology/ Doug Laughlin 171 Is It as Easy as Just Being Taught a New System? 172 The Problem We Have with Getting in Our Own Way 172 Is There a Conspiracy Against the Small Trader? 173 Traders Myth—Smart People Make the Best Traders 174 Losing Trades Are Acceptable 175 A Successful System Will Fortify Your Convictions 176 Self-Sabotage and How It Applies to Your Trading 178 In Summary—Trader Psychology Overall 179 Chapter 8 Day Trading with Ichimoku 181 Consequences of Trading without a Trading Plan 184 Trading Plan 185 Backtesting 186 Conclusion 192 Chapter 9 Conclusion 193 Ichimoku Analysis Sheet 195 Bibliography 199 About the Author 201 Index 203

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Book SynopsisAn informative guide offering new and innovative ways to think about active management and investing ActiveBeta Indexes presents exciting new research that shows how above-market returns can be achieved in a low-cost, transparent, and efficient fashion. Active Betas reflect fundamental investment principles that have long been the foundation of active equity returns, but are commonly masqueraded as investment skill, or alpha. This groundbreaking book lifts the veil to uncover the common sources of active returns and reveals their beta-like properties. Developed by leading investment practitioners at Westpeak Global Advisors, ActiveBeta Indexes introduces Active Beta sources and explains how the behavior of short- and long-term earnings growth gives rise to systematic sources of active equity returns. Details a new index framework and research findings that could change the face of active portfolio management Presents patent-pending Table of ContentsForeword by Andrew W. Lo xi Preface xiii SECTION ONE Background CHAPTER 1 The Evolution of Market Indexes and Index Funds 3 The Early Days of Indexing 3 The Inception of the Mutual Fund Industry 5 Enter Academia 6 The Advent of Index/Passive Mutual Funds 7 Index Mutual Funds for the Public 8 Conclusion 9 CHAPTER 2 The Evolution of Equity Style Indexes 11 Empirical Challenges to Financial Theories 11 Theoretical Explanations of Anomalies 13 Establishing Equity Styles 14 Equity Style Index Methodology 16 Pitfalls of Current Equity Style Indexes 17 Conclusion 17 SECTION TWO ActiveBeta Conceptual Framework CHAPTER 3 Introducing Active Betas 21 Defining Active Betas 21 Identifying the Drivers of Equity Returns 24 Verification 26 Exploring the Behavior of Return Drivers 28 CHAPTER 4 Behavior of Short-Term Earnings Expectation and the Link with Price Momentum 29 Analysis Methodology 29 Relationships Studied 31 Decomposing Momentum Returns 48 Conclusion 51 Appendix: Regression Analysis and Correlation Coefficient 51 CHAPTER 5 Behavior of Long-Term Earnings Expectation and the Link with Value 53 Relationships Studied 53 Investment Horizon of Value Strategies 70 Implications for Stock Risk Premium 74 Decomposing Value Returns 76 Conclusion 79 CHAPTER 6 Pricing and Persistence of Systematic Sources of Active Equity Returns 81 Pricing of the Systematic Sources of Active Equity Returns 81 Persistence of the Systematic Sources of Active Equity Returns 89 Momentum, Value, and Risk Aversion 94 ActiveBeta Framework: A Summary of Relationships 99 SECTION THREE ActiveBeta Indexes CHAPTER 7 ActiveBeta Index Construction Methodology 103 Investment Process Indexes 104 Objectives of Investment Process Indexes 105 Conflicting Objectives 108 Transparency, Understanding, and Rationale of the ActiveBeta Momentum Index 110 ActiveBeta Index Construction Process 110 Differences in Construction between ActiveBeta Indexes and Other Public Style Indexes 112 Achieving Objectives 114 Conclusion 120 Appendix: ActiveBeta Index Construction Process Example 120 CHAPTER 8 Historical Performance of ActiveBeta Indexes 123 ActiveBeta Index Construction Process Overview 123 ActiveBeta Index Performance: Highlights 126 ActiveBeta Index Performance: Detailed Analysis 127 ActiveBeta Index Exposures 149 Conclusion 153 CHAPTER 9 ActiveBeta Index Applications 155 Style Investing: A New Framework 155 Performance Attribution: Decomposing Active Manager Returns 160 Portfolio Structuring: Revisiting the Alpha-Beta Return Separation 164 Performance Benchmarking 169 Research and Analysis 172 Investment Vehicles 174 SECTION FOUR ActiveBeta Customizable Solutions CHAPTER 10 Alternative Solutions for Capturing Active Betas 179 ActiveBeta Custom Indexes 179 ActiveBeta Custom Solutions 183 A Word on Traditional Active Management 194 Conclusion 197 CHAPTER 11 Concluding Remarks 199 Disclosures 201 Bibliography 203 About the Authors 207 Index 209

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Book SynopsisThe first comprehensive guide for mastering venture capital Essentials of Venture Capital is your guide to understanding how venture capital and technology finance works from the inside out.Table of ContentsPreface ix Acknowledgments xv 1 Industry Overview 1 What Is Venture Capital? 1 How Venture Capital Works 8 Performance Expectations 16 Venture Capital in Crisis 28 Summary 37 Notes 38 2 Careers and Organization 39 Launching a Career 39 Nurturing Your Career as a Venture Capitalist 43 Firm Structure and Organization 54 Planning for the Future 60 Summary 64 Notes 66 3 Fundraising 67 Fundraising Is a Venture Capitalist’s Number-One Priority 68 What Limited Partners Want 71 Working with Limited Partners 73 Why Invest in Funds That Lose Money? 80 First-Time Funds 89 Bigger Funds 97 The Future of Fundraising 99 Summary 101 Notes 103 4 Investing Basics 105 What Makes a Good Deal? 105 Macroeconomics of Investing 109 Investment Process 114 Stock Classifications 118 Typical Preferred Stock Clauses 120 Stock During Different Stages of Development 128 Syndication 131 Valuation 133 Summary 140 Notes 142 5 Finding Investments 145 Gathering Opportunities 146 Hunting for Investments 148 Growing Your Own Investments 159 Alternative Methods 163 Missed Opportunities 169 Summary 170 Notes 172 6 Getting the Money Back 175 Gains from Investment 176 Going Public 178 Getting Acquired 188 The IPO Crisis 195 Solving the IPO Problem 197 Are Fewer IPOs a Bad Thing? 200 New Strategies and Adaptations for Liquidity 204 Summary 216 Notes 219 7 Booms, Bubbles, and Busts 223 Riding the Waves 225 Boom Beginnings 230 Bubbles 237 Busts 242 Summary 249 Notes 251 8 Going Global 253 Strategies for Foreign Investing 254 Venture Capital Outside the United States 263 Israel 264 China 270 India 277 Russia 283 Europe 288 The Rest of the World 296 Summary 300 Notes 303 About the Author 307 Index 309

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Book SynopsisA practical guide to unlocking the power of option spreads When dealing with option spreads your looking to purchase one option in conjunction with the sale of another option. If managed properly, these spreads can provide experienced investors with the potential for large returns without undertaking a great deal of risk.Table of ContentsPreface xi Acknowledgments xiii CHAPTER 1 Essential Option Knowledge 1 The Option Basics 1 In-At-Out of the Money 5 Intrinsic and Time Value 6 Spread Basics 8 The Greeks 9 Payoff Tables and Diagrams 10 Option Pricing Calculators 12 CHAPTER 2 Spreads Using an Underlying Security 15 Covered Call 15 Covered Call Using LEAPSQR 22 Systematic Covered Call Strategies 25 Cash-Secured Put 26 Systematic Cash-Secured Put 31 Protective Put 32 The Collar 33 CHAPTER 3 Synthetic Positions 37 Put-Call Parity 39 Synthetic Long Positions 40 Synthetic Short Positions 44 Arbitrage in Put-Call Parity 50 Individuals Using Put-Call Parity 52 CHAPTER 4 The Greeks 55 Price-Related Greeks 55 Time-Related Greek 61 Volatility-Related Greek 65 Interest Rate-Related Greek 67 Conclusion 69 CHAPTER 5 Straddles 71 Long Straddle Mechanics 72 Short Straddle 81 CHAPTER 6 Strangles 89 Long Strangle Mechanics 89 Short Strangle Mechanics 98 CHAPTER 7 Bull Spreads 107 Bull Put Spread 107 Bull Call Spread 114 CHAPTER 8 Bear Spreads 121 Bear Call Spread 121 Bear Put Spread 127 CHAPTER 9 Butterfly Spreads 135 Introduction to Butterfly Spreads 136 Long Call Butterfly 136 Long Put Butterfly 139 Iron Butterfly 142 Short Straddle Comparison 146 Short Call Butterfly 149 Short Put Butterfly 152 Reverse Iron Butterfly 154 Reverse Iron Butterfly versus Straddle 156 CHAPTER 10 Condor Spreads 159 Introduction to Condor Spreads 159 Long Call Condor 160 Long Put Condor 163 Iron Condor 166 Iron Condor versus Short Strangle 170 Short Condor Spreads 172 Reverse Iron Condor 176 Reverse Iron Condor versus Long Strangle 179 CHAPTER 11 Ratio Spreads 183 Call Ratio Spread 184 Put Ratio Spread 189 Ratio Spread Comparisons 192 CHAPTER 12 Backspreads 199 Call Backspread 199 Put Backspread 203 Backspread Comparisons 207 CHAPTER 13 The Stock Repair Strategy 213 Doubling Down on a Position 214 The Stock Repair Trade 215 CHAPTER 14 Calendar Spreads 219 Time Value Effect 220 Long Call Calendar 221 Long Put Calendar 224 Combined Calendar Spread 227 CHAPTER 15 Diagonal Spreads 231 Call Diagonal Spread 231 LEAPS Call Diagonal Spread 234 Put Diagonal Spread 237 LEAPS Put Diagonal Spread 239 Double Diagonal Spread 241 CHAPTER 16 Delta Neutral Trading 245 Delta Review 245 Delta-Neutral Positions 246 Gamma 250 Market Maker Trading 251 CHAPTER 17 Executing a Spread Trade 255 Executing a Stock or Option Trade 256 A Single Option Spread 258 A Spread with Two Options 260 A Spread with Multiple Legs 261 Legging into a Spread Trade 265 About the Author 269 Index 271

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Book SynopsisIn 2007, a stranger-than-fiction multibillion-dollar bidding war for the Chicago Board of Trade (CBOT) erupted between the Chicago Mercantile Exchange (CME) and Atlanta's IntercontinentalExchange (ICE). Zero-Sum Game: The Rise of the World's Largest Derivatives Exchange takes readers behind the scenes of this battle to tell the grippingand often comicalstory of how the historic merger between CME and CBOT almost didn't happen. Author Erika S. Olson, a managing director at CBOT during the bidding war, delivers a blow-by-blow account of the fight for the world's oldest futures exchange, taking you inside CBOT's landmark Chicago Loop headquarters, onto the high-octane trading floor, and into executives' offices. Through the lens of the CME/CBOT deal, Zero-Sum Game: Introduces the colorful and outspoken personalities who call the shots in this close-knit and frequently misunderstood industry Details the reasons behind the recent, speTable of ContentsPreface ix Cast of Characters xiii Chapter 1 Welcome to the Jungle 1 Chapter 2 Into the Groove 17 Chapter 3 This Is How We Do It 30 Chapter 4 Don’t Speak 46 Chapter 5 Wanna Be Startin’ Somethin’ 58 Chapter 6 Dirty Laundry 74 Chapter 7 Under Pressure 88 Chapter 8 ICE ICE Baby 102 Chapter 9 War 117 Chapter 10 Suspicious Minds 132 Chapter 11 Land of Confusion 147 Chapter 12 Fight for Your Right 161 Chapter 13 Down Under 177 Chapter 14 Take the Money and Run 192 Epilogue 208 Notes 221 Glossary 237 References 240 Acknowledgments 241 About the Author 247 Index 249

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Book SynopsisHow to plan for the commercial real estate collapse Encompassing apartment, office, retail, hospitality, warehouse, manufacturing, and flex or R & D buildings, commercial real estate (CRE) investment in the U.S. totaled $6.4 trillion at the end of 2008. As noted in the February 2010 Congressional Oversight Panel Report, $1.4 trillion of CRE debt is coming due by 2014 and half of the CRE projects securing such debt are underwater. Commercial Real Estate Restructuring Revolution: Strategies, Tranche Warfare, and Prospects for Recovery looks at how we got into this messimpacts of the housing crisis, debt structures, lender-borrower collusion, and bankruptcy abusesand offers possible solutions to the CRE crisis. Along the way, author Stephen Meister: Discusses how CRE value losses are being driven by investors' risk adjusted cap rates, not just poorer market fundamentals Discusses strategies and emerging trends in CRE foreclosures, including forced leTable of ContentsPreface ix Acknowledgments xxix Chapter 1 The Housing Bubble 1 Chapter 2 The Bubble Implodes 15 Chapter 3 Capital Markets Supporting U.S. Commercial Real Estate 33 Chapter 4 CRE Values and Loan Defaults 55 Chapter 5 Putting Off the Day of Reckoning 65 Chapter 6 Tranche Warfare 77 Chapter 7 Loans to Own and Chilling the Bid 91 Chapter 8 Funding Cessations and Extension Fights 101 Chapter 9 Bankruptcy Considerations 117 Chapter 10 Multifamily Market 131 Chapter 11 Governmental Actions Caused the Affordable Housing Crisis 145 Chapter 12 Governmental Reactions to the Housing Crisis 157 Chapter 13 Assessing Blame for the Financial Crisis 175 Chapter 14 The Centerpiece for Real Reform 189 Chapter 15 Other Areas Requiring Reform 203 Notes 219 About the Author 231 Index 233

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Book SynopsisThe ultimate guide to investor relations Your one-stop resource for everything pertaining to your company''s dealings with the investment community, Running an Effective Investor Relations Department provides investor relations professionals with essential day-to-day information. From creating and properly communicating a company''s investment story, to dealing with both the sell side and buy side of the investment community, to providing guidance, and the form and frequency of that guidance, this authoritative resource covers it all. Addresses every possible area of the investor relations profession Includes chapters covering disclosure, forward-looking statements, guidance, event management, and twenty other topics Other titles by Bragg: The Vest Pocket Controller, Accounting Best Practices, Sixth Edition, and Just-in-Time Accounting, Third Edition Practical and thorough, this book offers the world-class guidTable of ContentsPreface xi About the Author xiii Chapter 1: Managing Investor Relations 1 Why Have an Investor Relations Department? 1 Investor Relations Objectives and Goals 2 Investor Relations Tools 3 Investor Relations Budget 6 Float Management 8 Managing Bad News 10 Responding to Rumors 14 Summary 15 Chapter 2: Investor Relations Officer Position 16 Key Aspects of the IRO Position 16 IRO Job Description 19 Investor Relations Team 21 IRO as Management Representative 22 Summary 23 Chapter 3: Creating the Company Story 24 Creating the Story 24 Packaging the Story 26 Strategic Credibility 29 Clarifying and Mitigating Risk 30 Company Reputation 32 Matching the Company to the Story 34 Duration of the Story 34 Coordination with Public Relations 35 Summary 35 Chapter 4: Event Management 37 Conference Call 37 Road Show 41 Non-Deal Road Show 46 Annual Meeting 47 Plant Tour 49 Annual Analyst Meeting 49 Analyst and Industry Conferences 50 Podcast Dissemination 50 Video Dissemination 52 Blog Dissemination 52 Event Disclosure Issues 53 Practicing for Events 54 Summary 55 Chapter 5: Public Communications 57 Constructing a Press Release 57 Dealing with the Media 63 Dealing with Electronic Message Boards 66 Investor Relations Advertising 67 Summary 68 Chapter 6: Publications 69 Fact Sheet 69 Annual Report 74 Product Pipeline Report 77 Company-Paid Research Reports 78 Independent Research Reports 78 Welcome Kit 79 Videos 79 Other Publications 80 Information Tracking Systems for Publications 81 Legal Liability 82 Summary 82 Chapter 7: Investor Relations Web Site 83 Basic Investor Relations Web Site 83 Intermediate Investor Relations Web Site 84 Advanced Investor Relations Web Site 87 Web Site Layout 90 Hyperlink Liability 91 Sample Web Sites 92 Summary 93 Chapter 8: Management Discussion and Analysis Section 94 MD&A Reporting Requirements 94 SEC Guidance 98 Examples of Enhanced MD&A Disclosure 99 A Case for Full Disclosure 101 Summary 102 Chapter 9: Disclosure 103 Form 8-K 104 Disclosure of Non-GAAP Information 111 Regulation FD 114 Disclosure Policy 115 Disclosure Procedure 117 Ensuring Compliance with Disclosure Rules 118 Disclosure During an Initial Public Offering 120 Summary 121 Chapter 10: Forward-Looking Statements 122 Basis for Class Action Lawsuits 122 Private Securities Litigation Reform Act 123 Forward-Looking Statements 124 Legal Liability for Past Statements 127 Summary 127 Chapter 11: Providing Guidance 128 Whether to Provide Guidance 128 Form of Guidance Issued 130 Frequency and Timing of Guidance 132 Aggressiveness of Guidance 133 Guidance Policy 134 Summary 135 Chapter 12: Dealing with the Sell Side 136 Analyst’s Perspective 136 Finding the Right Analyst 139 Dealing with Analysts 140 Negative Analyst Report 144 Dealing with Brokers 145 Pump and Dump 147 Dealing with Investment Bankers 148 Dealing with Sell-Side Specialists 149 Summary 149 Chapter 13: Dealing with the Buy Side 151 Types of Investors 151 Dealing with Institutional Investors 153 Travel Requirements for Meetings with Institutional Investors 156 Dealing with Individual Investors 158 Dealing with Investment Clubs 160 Dealing with Foreign Investors 161 Investor Presentation 162 Managing a Private Investment in Public Equity 164 Accredited Investor 164 Dividend Reinvestment 165 Direct Stock Purchase Plans 165 Summary 166 Chapter 14: Dealing with Credit Rating Agencies 167 Credit Rating Agency Relationship 167 Summary 169 Chapter 15: Dealing with Short Sellers and Activist Investors 170 How Short Sellers Operate 170 How to Handle Short Sellers 172 Monitoring Short Sellers 174 Dealing with Activist Investors 174 Summary 175 Chapter 16: Dealing with the Board of Directors 177 IRO and the Board of Directors 177 Investor Relations Board Packet 182 Summary 182 Chapter 17: Major Stock Exchanges 183 Listing Process 183 American Stock Exchange 184 Overview of the NASDAQ 187 NASDAQ Capital Market 187 NASDAQ Global Market 188 New York Stock Exchange 190 Comparing the Stock Exchanges 191 Summary 193 Chapter 18: Monitoring the Market 194 Monitoring through Internet Services 194 Monitoring through Individuals 195 Surveying Investors 196 Locating Investors 199 Monitoring through a Stock Surveillance Service 200 Monitoring through a Stock Transfer Agent 201 Bloomberg Terminals 201 Electronic Message Boards 201 Activity Caused by Trading Strategies 202 Summary 204 Chapter 19: Blue Sky Laws 206 Blue Sky Law Requirements and Implications 206 Blue Sky Advice for the IRO 208 Chapter 20: Proxy Solicitations 209 Proxy Solicitation Concepts 209 Online Proxy Voting 215 Proxy Distribution Process 218 NYSE Rule 452 222 Summary 223 Chapter 21: Dividends and Stock Buy-Backs 224 Transition to a Dividend 224 Dividend Policy 225 Stock Buy-Back Alternative 227 SEC Conditions on Stock Buy-Backs 228 Disclosure of a Stock Buy-Back Program 229 Odd-Lot Shareholdings 231 Summary 232 Chapter 22: Outsourcing Investor Relations 233 Skill Set of an Investor Relations Consultant 233 Managing the Consultant Relationship 236 National Investor Relations Institute 237 Summary 237 Chapter 23: Investor Relations Metrics 239 Internal and Financial Metrics 239 Peer Metrics 244 Company-Specific Metrics 245 Metrics Consistency 246 Explaining Results 247 Summary 249 Index 250

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Book SynopsisJanet Tavakoli takes you into the world of Warren Buffett by way of the recent mortgage meltdown. In correspondence and discussion with him over 2 years, they both saw the writing on the wall, made clear by the implosion of Bear Stearns.Table of ContentsPreface ix Acknowledgments xv Chapter 1: An Unanswered Invitation 1 Chapter 2: Lunch with Warren 9 Chapter 3: The Prairie Princes versus the Princes of Darkness 31 Chapter 4: The Insatiable Curiosity to Know Nothing Worth Knowing (Oscar Wilde Was Right) 41 Chapter 5: MAD Mortgages—The “Great” Against the Powerless 67 Chapter 6: Shell Games (Beware of Geeks Bearing Grifts) 97 Chapter 7: Financial Astrology—AAA Falling Stars 107 Chapter 8: Bear Market (I’d Like a Review of the Bidding) 123 Chapter 9: Dead Man’s Curve 143 Chapter 10: Bazooka Hank and Dread Reckoning (AIG, Fannie, Freddie, Lehman, Merrill, and Other Fluid Situations) 163 Chapter 11: Bond Insurance Burns Main Street 179 Chapter 12: Money, Money, Money (Warren and Washington) 191 Chapter 13: The Fogs of War, Religion, and Politics 209 Chapter 14: Finding Value 219 Notes 225 Bibliography 259 Index 267

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Book SynopsisIt''s Time to Rediscover America. Our nation is deteriorating. Slowly but surely the virtues and values we once celebratedresponsibility, resilience, dignity, respecthave been abandoned. Our work ethic has been replaced by an entitlement ethic. And as we lose the cultural traits that brought us to our leadership position, America''s standing in the world will surely fall as well. But there is good news, say David and Andrea R. Reiser. By rediscovering the qualities that made America great, we can start to turn things around. We can teach our young peoplenot to mention ourselves, our employees, and our fellow Americans of all ageswhat truly leads to success, prosperity, and fulfillment. That''s what Letters from Home is about. Written in the form of letters to the authors'' four sons, it explores fifteen basic American virtues that built our country and that foster individual success. Each chapter includes profiles of exceptional real peopleTable of ContentsIntroduction. 1 Education. John Dodig: Maverick Educator. 2 Hard Work. Eli Zabar: Hard Work Reaps Rewards. 3 Recognizing Opportunity. David Cohen: Navigating the Sea of Success. Tim Brabham: Opportunity Maker. 4 Realistic Vision. Kate & Matt Jennings: Delicious Visionaries. 5 Integrity & Positive Attitude. Ellis Waldman: Leading With Integrity. Marucha Andrzejewski: Looking Forward, Moving Forward. 6 Resilience & Accountability. Patrick Ciriello: Keeping Things in Perspective. Mike Nardone: Head Down, Chin Up. 7 Self-Discipline & Patience. Amy & Howie Blustein: Prudent Savers, Thoughtful Spenders. Mary & Alberto Lobo: Epitome of the American Dream. 8 Harmonious Balance. Stefani Phipps: Living a Yin-Yang Life. 9 Kindness & Gratitude. Linda & Dan Kortick: Giving Back to Community. Meredith Fried: A Friend Indeed. 10 Courage & Living Without Regrets. Alysa Mendelson Graf: The Courage to Follow Your Heart. Ina Garten: Jumping Off Cliffs. Epilogue. Acknowledgments. About the Authors.

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Book SynopsisEssential guidance for preventing fraud in the card-not-present (CNP) space This book focuses on the prevention of fraud for the card-not-present transaction. The payment process, fraud schemes, and fraud techniques will all focus on these types of transactions ahead.Table of ContentsAcknowledgments vii Introduction ix 1 Understanding Online Payment Options 1 2 Key Concepts for E-Commerce Credit Card Payments 27 3 Fraud Basics for Companies Doing Business Online 56 4 Fraud Management Key Concepts 101 5 Fraud Prevention Techniques: Identity Proofing 127 6 Fraud Prevention Techniques: Guaranteed Payments 175 7 Fraud Prevention Techniques: Fraud Scoring 183 8 Fraud Prevention Techniques: Operational Management (Enterprise) 190 9 Fraud Prevention Techniques: Analytics 231 10 Fraud Prevention Techniques: Data Quality 238 11 Fraud Prevention Techniques: Technology 247 12 Fraud Prevention Techniques: Data Sharing 272 Appendix A: Protecting Yourself from Identity Theft 277 Appendix B: Sample Strategy 281 About the Author 283 Index 285

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Book SynopsisA global look at the reasons behind the recent economic collapse, and the responses to it The speculative bubble in the housing market began to burst in the United States in 2007, and has been followed by ruptures in virtually every asset market in almost every country in the world. Each country proposed a range of policy initiatives to deal with its crisis. Policies that focused upon stabilizing the housing market formed the cornerstone of many of these proposals. This internationally focused book evaluates the genesis of the housing market bubble, the global viral contagion of the crisis, and the policy initiatives undertaken in some of the major economies of the world to counteract its disastrous affects. Unlike other books on the global crisis, this guide deals with the housing sector in addition to the financial sector of individual economies. Countries in many parts of the world were players in either the financial bubble or the housing bubble, or both, but the Table of ContentsAcknowledgments ix Editor’s Note xi 1 The Financial Crisis and HousingMarkets Worldwide: Similarities, Differences, and Comparisons 1 Ashok Bardhan, Robert H. Edelstein, and Cynthia A. Kroll PART I The United States Leads the Housing Bubble’s Rise and Collapse 2 The U.S. HousingMarket and the Financial Crisis 23 Ashok Bardhan, Robert H. Edelstein, and Cynthia A. Kroll PART II The European Union—One Continent, Many Markets: A Gauge of Government Institutions and Interventions 3 The 2008 Financial Crisis and the Danish Mortgage Market 53 Jacob Gyntelberg, Kristian Kjeldsen, Morten Baekmand Nielsen, and Mattias Persson 4 Prolonged Crisis 69 Thies Lindenthal and Piet Eichholtz 5 The Dynamics of the Irish HousingMarket 101 Simon Stevenson 6 House Prices and Market Institutions: The Dutch Experience 135 Dirk Brounen and Piet Eichholtz 7 Real Estate Boom and Crisis in Spain 157 Antoni Sureda-Gomila 8 The UK and Europe’s Selective Housing Bubble 173 Christine Whitehead and Kathleen Scanlon PART III Eastern Europe: European Emerging Markets Ride the Waves 9 The HousingMarket in Russia: Lessons of the Mortgage Crisis 195 Nadezhda Kosareva and Andrey Tumanov 10 The HousingMarket and Housing Finance in Russia and Its Regions: A Quantitative Analysis 229 Carsten Sprenger and Branko Uroˇsevi´c 11 The HousingMarket in Serbia in the Past Decade 247 Dejan Sˇosˇkic´, Branko Urosˇevic´, Bosˇko Zˇ ivkovic´, and Milosˇ Bozˇovic´ PART IV Asia Housing Bubbles Past, Present, and Future: Contrasts among Asian Economic Giants 12 Irrational Prosperity, HousingMarket, and Financial Crisis: An Empirical Study of Beijing 271 Lu Ping, Zhen Hui, and Xu Yuehong 13 HomeMortgage and Real Estate Market in Shanghai 295 Jie Chen 14 Evolution of the Indian Housing Finance System and HousingMarket 319 R. V. Verma 15 The HousingMarket and Housing Finance under Liberalization in India 343 C. P. Chandrasekhar 16 The Recent Financial Crisis and the HousingMarket in Japan 357 Miki Seko, Kazuto Sumita, and Michio Naoi PART V Managing Housing Bubbles and Housing Markets in Diverse Asian Economies 17 Comparing Two Financial Crises: The Case of Hong Kong Real Estate Markets 377 Charles Ka Yui Leung and Edward Chi Ho Tang 18 The Global Financial Crisis and the Korean Housing Sector: How Is This Time Different from the 1997 Asian Financial Crisis? 399 Kyung-Hwan Kim 19 Government Policy, Housing Finance, and Housing Production in Singapore 421 Lum Sau Kim 20 Taiwan: Housing Bubbles and Affordability 447 Chin-Oh Chang and Ming-Chi Chen PART VI Avoiding Contagion in Other Markets 21 Australia’s Economic Response to the Global Financial Crisis and Its HousingMarkets 467 Dogan Tirtiroglu 22 The Financial Crisis and Brazil’s Expanding HousingMarket 491 Emilio Haddad and Joao Meyer 23 The Canadian HousingMarket: No Bubble? No Meltdown? 511 Tom Carter 24 Partly Cloudy to Clear: The Israeli Economy and the Local HousingMarket under the Storm of the World Financial Crisis 535 Danny Ben-Shahar and Jacob Warszawski Index 557

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Book SynopsisThis authoritative handbook illustrates practical implementation of simulation techniques in the banking and financial industries through use of real-world, time-sensitive applications.Table of ContentsList of Figures x List of Tables xiv Preface xx 1 An Introduction to Excel VBA 1 1.1 How to start Excel VBA 1 1.2 VBA Programming Fundamentals 3 1.3 Linking VBA to C++ 14 1.5 Random Number Generation 19 1.6 List of functions defined in the book 22 2 Background 27 2.1 A brief review of Martingales and Itô’s calculus 28 2.2 Volatility 39 2.3 Mark to Market and Calibration 41 2.4 Variance Reduction Techniques 43 3 Structured Products 55 3.1 When is simulation unnecessary? 55 3.2 Simulation of Black-Scholes model and European Options 56 3.3 American Options 61 3.4 Range Accrual Notes 69 3.5 FX accumulator: The case of Citic Pacific LTD 73 3.6 Life Insurance Contracts 80 3.7 Multi-asset Instruments 83 4 Volatility Modeling 93 4.1 Local Volatility Models: Simulation and Binomial tree 94 4.2 The Heston Stochastic Volatility Model 104 4.3 Simulation of Exotic Option Prices under Heston Model 110 4.4 The GARCH Option Pricing Model 121 4.5 Jump-Diffusion Model 127 5 Fixed-Income Derivatives I: Short-Rate Models 137 5.1 Yield Curve Building 138 5.2 The Hull-White Model 150 5.3 Pricing Interest Rate Products Using The Direction Simulation Approach 156 5.4 Pricing Interest Rate Products Using The Trinomial Tree Approach 161 6 Fixed-Income Derivatives II: LIBOR Market Models 169 6.1 LIBOR Market Models 171 6.2 Calibration to Caps and Swaptions 177 6.3 Simulation Across Different Forward Measures 186 6.4 Bermudan Swaptions in a Three-Factor Model 194 6.5 Epilogue 196 7 Credit Derivatives and Counterparty Credit Risk 199 7.1 Structural Models of Credit Risk 200 7.2 The Vasicek Single-Factor Model 203 7.3 Copula Approach to Credit Derivative Pricing 212 7.4 Counterparty credit risk 223 8 Value-at-Risk and Related Risk Measures 237 8.1 Value-at-Risk 237 8.2 Parametric VaR 238 8.3 Delta-normal Approximation 245 8.4 Delta-Gamma Approximation 247 8.5 VaR Simulation Methods 249 8.6 VaR-related Risk Measures 258 8.7 VaR Back-testing 264 9 The Greeks 267 9.1 Black-Scholes Greeks 269 9.2 Greeks in A Binomial Tree 271 9.3 Finite Difference Approximation 272 9.4 Likelihood Ratio Method 276 9.5 Pathwise Derivative Estimates 279 9.6 Greek Calculation with Discontinuous Payoffs 289 10 Appendix 295 References 315 Subject Index 319 Author Index 323

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Book SynopsisWritten by Steven Collings, winner of Accounting Technician of the Year at the British Accountancy Awards 2011, this book deals with the significant changes auditing has undergone in recent years, due in large part to well-publicised corporate disasters such as Enron and Parmalat, which have shaken the profession.Table of ContentsPreface. Acknowledgements. About the Author. 1 The History of Auditing. 2 The Clarity Project. 3 The Code of Ethics for Professional Accountants. 4 ISA 200 (revised and redrafted) Overall Objectives of the Independent Auditor and theConduct of an Audit in Accordance with International Standards on Auditing. 5 ISA 210 (redrafted) Agreeing the Terms of Audit Engagements. 6 ISA 220 (redrafted) Quality Control for an Audit of Financial Statements. 7 ISA 230 (revised) Audit Documentation. 8 ISA 240 (redrafted) The Auditor's Responsibilities Relating to Fraud in an Audit of Financial Statements. 9 ISA 250 (redrafted) Consideration of Laws and Regulations in an Audit of Financial Statements. 10 ISA 260 (revised and redrafted) Communication with Those Charged with Governance. 11 ISA 265 Communicating Deficiencies in Internal Control to Those Charged with Governance and Management. 12 ISA 300 (redrafted) Planning an Audit of Financial Statements. 13 ISA 315 (redrafted) Identifying and Assessing the Risks of Material Misstatement Through Understanding the Entity andits Environment. 14 ISA 320 (revised and redrafted) Materiality in Planning and Performing an Audit. 15 ISA 330 (redrafted) The Auditor's Responses to Assessed Risks. 16 ISA 402 (revised and redrafted) Audit Considerations Relating to an Entity Using a Service Organisation. 17 ISA 450 (revised and redrafted) Evaluation of Misstatements Identified during the Audit. 18 ISA 500 (redrafted) Audit Evidence. 19 ISA 501 (redrafted) Audit Evidence — Specific Considerations for Selected Items. 20 ISA 505 (revised and redrafted) External Confirmations. 21 ISA 510 (redrafted) Initial Audit Engagements — Opening Balances. 22 ISA 520 (redrafted) Analytical Procedures. 23 ISA 530 (redrafted) Audit Sampling. 24 ISA 540 (revised and redrafted) Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and Related Disclosures. 25 ISA 550 (revised and redrafted) Related Parties. 26 ISA 560 (redrafted) Subsequent Events. 27 ISA 570 (redrafted) Going Concern. 28 ISA 580 (revised and redrafted) Management Representations. 29 ISA 600 (revised and redrafted) Special Considerations — Audits of Group Financial Statements (Including the Work of Component Auditors). 30 ISA 610 (redrafted) Using theWork of Internal Auditors. 31 ISA 620 (revised and redrafted) Using the Work of an Auditor's Expert. 32 ISA 700 (revised) Forming an Opinion on the Financial Statements. 33 ISA 705 (revised and redrafted) Modifications to the Opinion in the Independent Auditor's Report. 34 ISA 706 (revised and redrafted) Emphasis of Matter Paragraphs and Other Matter(s) Paragraphs in the Independent Auditors' Report. 35 ISA 710 (redrafted) Comparative Information — Corresponding Figures and Comparative Financial Statements. 36 ISA 720 (redrafted) The Auditor's Responsibilities Relating to Other Information in Documents Containing Audited Financial Statements. 37 ISA 800 (revised and redrafted) Special Considerations — Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks. 38 ISA 805 (revised and redrafted) Special Considerations — Audits of Single Financial Statements and Specific Elements, Accounts or Items of a Financial Statement. 39 ISA 810 (revised and redrafted) Engagements to Report on Summary Financial Statements. 40 The Framework for the Preparation and Presentation of Financial Statements. 41 IFRS for Small and Medium Entities (SMEs). 42 ISQC 1 'Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements'. Appendix 1: Overview of IFRS and IAS. Appendix 2: Illustrative Audit Tests. Appendix 3: Illustrative Financial Statements. Appendix 4: Illustrative Auditor Report (UK and Ireland). Index.

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Book SynopsisThe recent financial crisis has highlighted the need for better valuation models and risk management procedures, better understanding of structured products, and has called into question the actions of many financial institutions.Table of ContentsPreface. Acknowledgements. About the Authors. Notation and List of Symbols. 1 Introduction: Credit Modelling Pre- and In-Crisis. 1.1 Bottom-up models. 1.2 Compound correlation. 1.3 Base correlation. 1.4 Implied Copula. 1.5 Expected Tranche Loss Surface. 1.6 Top (down) framework. 1.7 GPL and GPCL models. 1.8 Structure of the book. 2 Market Quotes. 2.1 Credit indices. 2.2 CDO tranches. 3 Gaussian Copula Model and Implied Correlation. 3.1 One-factor Gaussian Copula model. 3.1.1 Finite pool homogeneous one-factor Gaussian Copula model. 3.1.2 Finite pool heterogeneous one-factor Gaussian Copula model. 3.1.3 Large pool homogeneous one-factor Gaussian Copula model. 3.2 Double-t Copula Model. 3.3 Compound correlation and base correlation. 3.4 Existence and non-monotonicity of market spread as a function of compound correlation. 3.5 Invertibility limitations of compound correlation: pre-crisis. 3.6 Base correlation. 3.7 Is base correlation a solution to the problems of compound correlation? 3.8 Can the Double-t Copula flatten the Gaussian base correlation skew? 3.9 Summary on implied correlation. 4 Consistency across Capital Structure: Implied Copula. 4.1 Calibration of Implied Copula. 4.2 Two-stage regularization. 4.3 Summary of considerations around Implied Copula. 5 Consistency across Capital Structure and Maturities: Expected Tranche Loss. 5.1 Index and tranche NPV as a function of ETL. 5.2 Numerical results. 5.3 Summary on Expected (Equity) Tranche Loss. 6 A Fully Consistent Dynamical Model: Generalized-Poisson Loss Model. 6.1 Loss dynamics. 6.2 Model limits. 6.3 Model calibration. 6.4 Detailed calibration procedure. 6.5 Calibration results. 7 Application to More Recent Data and the Crisis. 7.1 Compound correlation in-crisis. 7.2 Base correlation in-crisis. 7.3 Implied Copula in-crisis. 7.4 Expected Tranche Loss surface in-crisis. 7.4.1 Deterministic piecewise constant recovery rates. 7.5 Generalized-Poisson Loss model in-crisis. 8 Final Discussion and Conclusions. 8.1 There are more things in heaven and earth, Horatio. . . . 8.2 . . . Than are dreamt of in your philosophy. Bibliography. Index.

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Book SynopsisIn Coherent Stress Testing: A Bayesian Approach, industry expert Riccardo Rebonato presents a groundbreaking new approach to this important but often undervalued part of the risk management toolkit. Based on the author''s extensive work, research and presentations in the area, the book fills a gap in quantitative risk management by introducing a new and very intuitively appealing approach to stress testing based on expert judgement and Bayesian networks. It constitutes a radical departure from the traditional statistical methodologies based on Economic Capital or Extreme-Value-Theory approaches. The book is split into four parts. Part I looks at stress testing and at its role in modern risk management. It discusses the distinctions between risk and uncertainty, the different types of probability that are used in risk management today and for which tasks they are best used. Stress testing is positioned as a bridge between the statistical areas where VaR can be effectivTable of ContentsAcknowledgements. 1 Introduction. 1.1 Why We Need Stress Testing. 1.2 Plan of the Book. 1.3 Suggestions for Further Reading. I Data, Models and Reality. 2 Risk and Uncertainty – or, Why Stress Testing is Not Enough. 2.1 The Limits of Quantitative Risk Analysis. 2.2 Risk or Uncertainty? 2.3 Suggested Reading. 3 The Role of Models in Risk Management and Stress Testing. 3.1 How Did We Get Here? 3.2 Statement of the Two Theses of this Chapter. 3.3 Defence of the First Thesis (Centrality of Models). 3.3.1 Models as Indispensable Interpretative Tools. 3.3.2 The Plurality-of-Models View. 3.4 Defence of the Second Thesis (Coordination). 3.4.1 Traders as Agents. 3.4.2 Agency Brings About Coordination. 3.4.3 From Coordination to Positive Feedback. 3.5 The Role of Stress and Scenario Analysis. 3.6 Suggestions for Further Reading. 4 What Kind of Probability Do We Need in Risk Management? 4.1 Frequentist versus Subjective Probability. 4.2 Tail Co-dependence. 4.3 From Structural Models to Co-dependence. 4.4 Association or Causation? 4.5 Suggestions for Further Reading. II The Probabilistic Tools and Concepts. 5 Probability with Boolean Variables I: Marginal and Conditional Probabilities. 5.1 The Set-up and What We are Trying to Achieve. 5.2 (Marginal) Probabilities. 5.3 Deterministic Causal Relationship. 5.4 Conditional Probabilities. 5.5 Time Ordering and Causation. 5.6 An Important Consequence: Bayes’ Theorem. 5.7 Independence. 5.8 Two Worked-Out Examples. 5.8.1 Dangerous Running. 5.8.2 Rare and Even More Dangerous Diseases. 5.9 Marginal and Conditional Probabilities: A Very Important Link. 5.10 Interpreting and Generalizing the Factors x k/i. 5.11 Conditional Probability Maps. 6 Probability with Boolean Variables II: Joint Probabilities. 6.1 Conditioning on More Than One Event. 6.2 Joint Probabilities. 6.3 A Remark on Notation. 6.4 From the Joint to the Marginal and the Conditional Probabilities. 6.5 From the Joint Distribution to Event Correlation. 6.6 From the Conditional and Marginal to the Joint Probabilities? 6.7 Putting Independence to Work. 6.8 Conditional Independence. 6.9 Obtaining Joint Probabilities with Conditional Independence. 6.10 At a Glance. 6.11 Summary. 6.12 Suggestions for Further Reading. 7 Creating Probability Bounds. 7.1 The Lay of the Land. 7.2 Bounds on Joint Probabilities. 7.3 How Tight are these Bounds in Practice? 8 Bayesian Nets I: An Introduction. 8.1 Bayesian Nets: An Informal Definition. 8.2 Defining the Structure of Bayesian Nets. 8.3 More About Conditional Independence. 8.4 What Goes in the Conditional Probability Tables? 8.5 Useful Relationships. 8.6 A Worked-Out Example. 8.7 A Systematic Approach. 8.8 What Can We Do with Bayesian Nets? 8.8.1 Unravelling the Causal Structure. 8.8.2 Estimating the Joint Probabilities. 8.9 Suggestions for Further Reading. 9 Bayesian Nets II: Constructing Probability Tables. 9.1 Statement of the Problem. 9.2 Marginal Probabilities – First Approach. 9.2.1 Starting from a Fixed Probability. 9.2.2 Starting from a Fixed Magnitude of the Move. 9.3 Marginal Probabilities – Second Approach. 9.4 Handling Events of Different Probability. 9.5 Conditional Probabilities: A Reasonable Starting Point. 9.6 Conditional Probabilities: Checks and Constraints. 9.6.1 Necessary Conditions. 9.6.2 Triplet Conditions. 9.6.3 Independence. 9.6.4 Deterministic Causation. 9.6.5 Incompatibility of Events. 9.7 Internal Compatibility of Conditional Probabilities: The Need for a Systematic Approach. III Applications. 10 Obtaining a Coherent Solution I: Linear Programming. 10.1 Plan of the Work Ahead. 10.2 Coherent Solution with Conditional Probabilities Only. 10.3 The Methodology in Practice: First Pass. 10.4 The CPU Cost of the Approach. 10.5 Illustration of the Linear Programming Technique. 10.6 What Can We Do with this Information? 10.6.1 Extracting Information with Conditional Probabilities Only. 10.6.2 Extracting Information with Conditional and Marginal Probabilities. 11 Obtaining a Coherent Solution II: Bayesian Nets. 11.1 Solution with Marginal and n-conditioned Probabilities. 11.1.1 Generalizing the Results. 11.2 An ‘Automatic’ Prescription to Build Joint Probabilities. 11.3 What Can We Do with this Information? 11.3.1 Risk-Adjusting Returns. IV Making It Work In Practice. 12 Overcoming Our Cognitive Biases. 12.1 Cognitive Shortcomings and Bounded Rationality. 12.1.1 How Pervasive are Cognitive Shortcomings? 12.1.2 The Social Context. 12.1.3 Adaptiveness. 12.2 Representativeness. 12.3 Quantification of the Representativeness Bias. 12.4 Causal/Diagnostic and Positive/Negative Biases. 12.5 Conclusions. 12.6 Suggestions for Further Reading. 13 Selecting and Combining Stress Scenarios. 13.1 Bottom Up or Top Down? 13.2 Relative Strengths and Weaknesses of the Two Approaches. 13.3 Possible Approaches to a Top-Down Analysis. 13.4 Sanity Checks. 13.5 How to Combine Stresses – Handling the Dimensionality Curse. 13.6 Combining the Macro and Bottom-Up Approaches. 14 Governance. 14.1 The Institutional Aspects of Stress Testing. 14.1.1 Transparency and Ease of Use. 14.1.2 Challenge by Non-specialists. 14.1.3 Checks for Completeness. 14.1.4 Interactions among Different Specialists. 14.1.5 Auditability of the Process and of the Results. 14.2 Lines of Criticism. 14.2.1 The Role of Subjective Inputs. 14.2.2 The Complexity of the Stress-testing Process. Appendix A Simple Introduction to Linear Programming. A.1 Plan of the Appendix. A.2 Linear Programming – A Refresher. A.3 The Simplex Method. References. Index.

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Book SynopsisCompanies can gain a real competitive advantage from managing their performance effectively. This book is bristling with ideas, tools and practical examples of how your business can manage performance better. Mark Baker, Head of Risk and Assurance for Pentland Brands Mike & Pippa Bourne have really covered the field with this book ? from the practical tools to the conceptual approaches. A thoughtful but highly practical approach to corporate performance measurement and management. Paul Woodward, CEO Sue Ryder - Former CEO Schering UK The theory of corporate performance management is not complicated but putting it into practice is quite another issue. This book explains very clearly the underpinning theory and it also provides examples of how leaders have tackled some of the thorny problems associated with implementation. Mike Ophield, Managing Director, Crowcon If you are finding it hard to implement your strategy then it's time to read this book. Corporate Performance Management will Trade ReviewAll in all, an interesting side-lecture if you want to take a break from the heavy figures finance book. (doitinvest.com, March 2012)Table of ContentsPreface xi Acknowledgements xiii Introduction xv 1. Performance and the Role of Measurement 1 1.1 Introduction 1 1.2 What is good performance? 1 1.3 Whose perspective? 1 1.4 Making comparisons 2 1.5 Present success and future sustainability 3 1.6 How is performance delivered? 3 1.7 The roles of a performance measurement system 5 1.8 The focus of measurement 7 1.9 The role of management and leadership 9 1.10 In summary 10 Further reading 10 2. Practical Tools for Measuring Performance 13 2.1 Introduction 13 2.2 Elements of a performance measurement system 13 2.3 The Balanced Scorecard 15 2.4 The Performance Prism 19 2.5 Objectives and success maps 20 2.6 Designing measures 24 2.7 Summary 30 Further reading 31 3. Designing the System 33 3.1 Introduction 33 3.2 A four phase life cycle 33 3.3 Design 34 3.4 How is this done in practice? 34 3.5 The debate 35 3.6 Developing the success map 37 3.7 Developing the measures 39 3.8 The next stage 40 Further reading 40 4. Managing Implementation 41 4.1 Introduction 41 4.2 Phases of implementation 41 4.3 Why does implementation succeed or fail? 41 4.4 Hurdles and blockers 45 4.5 Steps to successful implementation 46 4.6 Conclusion 48 Further reading 48 5. Assessing and Managing Change 51 5.1 Introduction 51 5.2 Change in context 51 5.3 Assessing resistance to change 53 5.4 Return on management 54 5.5 Assessing likelihood of implementation 55 5.6 Conclusion 58 Further reading 58 6. Target Setting 59 6.1 Introduction 59 6.2 Why do you set targets? 59 6.3 Ten common problems 60 6.4 The target setting wheel 62 6.5 Closing remark 65 Further reading 65 7. Linking Rewards to Performance 67 7.1 Introduction 67 7.2 Pitfalls 67 7.3 Linking rewards to performance 71 7.4 Examples 75 7.5 Summary 78 Further reading 78 8. Managing with Measures – Statistical Process Control 81 8.1 Introduction 81 8.2 Variation and our reaction 81 8.3 Statistical process control 83 8.4 Performance and performance improvement 91 Further reading 92 9. Using Measures – Performance Reviews 93 9.1 Introduction 93 9.2 The Performance planning value chain 93 9.3 Performance reviews 99 Further reading 104 10. Using Measures to Manage – Challenging Strategy 105 10.1 Introduction 105 10.2 Company examples 105 10.3 Testing success maps in practice 109 10.4 Testing in theory and practice 113 10.5 Behavioural issues 117 10.6 Conclusion 118 Further reading 118 11. Keeping Your Measurement Process up to Date 119 11.1 Introduction 119 11.2 Keeping the process up to date 119 11.3 When do you update targets? 119 11.4 Revising measures 122 11.5 Reviewing the measures in line with your success map 123 11.6 Reflecting on your strategy 124 11.7 Challenging strategy 125 11.8 Overcoming barriers to updating your system 126 11.9 Summary 133 Further reading 133 12. Measuring Performance of People 135 12.1 Introduction 135 12.2 Essential elements for high performance 135 12.3 Measuring employee satisfaction and engagement 136 12.4 Performance appraisals 141 12.5 HR performance measures 145 12.6 Acting on results 147 Further reading and sources of information 147 13. Measuring Customers 149 13.1 Introduction 149 13.2 What are you measuring? 149 13.3 Using customer feedback 157 13.4 Summary 160 Further reading 161 14. Measuring Process Performance 163 14.1 Introduction 163 14.2 A process framework 163 14.3 Process measurement 164 14.4 Key process measures 165 14.5 Summary 169 Further reading 169 15. Measuring Competence and Resource Development 171 15.1 Introduction 171 15.2 Defining terms 171 15.3 Why measure resource and competence development? 172 15.4 A framework for displaying the relationship between 176 resources and competences 15.5 Conclusion 183 Further reading 184 16. Measuring Financial Performance 185 16.1 Introduction 185 16.2 A shareholder perspective 186 16.3 Key shareholder ratios 189 16.4 Accounting ratios 191 16.5 Management ratios 194 16.6 Conclusion 196 Further reading 196 17. Measuring Sustainability 197 17.1 Introduction 197 17.2 What are ‘sustainability’ and ‘corporate responsibility’? 197 17.3 What are the benefits? 199 17.4 Building sustainability into your business 201 17.5 Conclusion 206 Further reading and sources of information 206 18. Creating a Culture of High Performance 209 18.1 Introduction 209 18.2 Creating the right environment 209 18.3 Creating the right culture 210 18.4 Recruiting the right people 212 18.5 What motivates? 214 18.6 Dealing with underperformers 215 18.7 Understanding your influence 216 18.8 Direction setting and engagement 217 18.9 Communication 218 18.10 Conclusion 219 Further reading 219 19. Leadership Vignettes 221 19.1 Introduction 221 19.2 Paul Woodward – Chief Executive, Sue Ryder Care 221 19.3 PY Gerbeau – Chief Executive, X-Leisure 223 19.4 Richard Boot OBE – IRC Global Executive Search Partners 225 19.5 David Child 227 19.6 Baroness Sally Greengross 229 19.7 Charles Carter 231 19.8 Nigel Bond – CEO, Domino Printing Sciences 232 19.9 Mark Lever – CEO, National Autistic Society 236 19.10 Mike Ophield 239 19.11 Andy Wood – Chief Executive, Adnams plc 242 20. Bringing It All Together 245 20.1 Introduction 245 20.2 Performance measurement 245 20.3 Performance management 246 20.4 Performance leadership 248 Further reading 251 Index 253

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Book SynopsisThis book is the first to evaluate the organisation, behaviour and performance of six major East Asian real estate markets. It offers a unique analysis of the growth and transformation of the real estate sector across East Asia.Trade ReviewThis is a significant contribution to the Real Estate Issues series... To make housing the central theme is welcome, since the role of the housing market in economic instability is crucial. The focus on East Asia will be valuable, given that most literature on real estate cycles has tended to concentrate on Europe and the US. The behavioural and institutional perspective that the authors favour should also provide useful insights. -Richard Barras, Property Market AnalysisTable of ContentsPreface xi Part I: Foundations and Emergence of Modern East Asian Housing Systems 1 1 Introduction: Motivations of the Study 3 1.1 The first comparative study of housing dynamics across East Asian countries 3 1.2 Distinguishing features of East Asian economies 6 1.3 Organization of the book 12 2 Growth Take-Offs and Emerging EA Housing Systems 21 2.1 East Asia and the global experience with growth and development 22 2.2 East Asian growth policies from an urbanization and housing perspective 27 2.3 East Asia has had the highest tempos of urbanization in the world 35 2.4 The 50% urban population marker signaled the arrival of the growth transition 36 2.5 Exceptionally powerful land price increases during East Asian growth take]offs 40 3 From Vernacular Housing to Organized Housing Systems 45 3.1 Housing transformation from a Von Thünen to a Krugman urban dynamic 45 3.2 Stylized facts of organized East Asian urban housing markets 48 3.3 Four distinct East Asian housing strategies during the period 1950–1980 50 3.4 Patterns of EA government intervention in housing policies 53 3.5 Transition from the take]off stage to sustained long]term economic growth 69 Part II: Current East Asian Housing Systems 73 4 East Asian Housing Systems Today: A Regional Overview 75 4.1 Basic quantitative East Asian comparisons 76 4.2 Volatility of housing output across East Asia 81 4.3 The 1997 Asian Financial Crisis triggered important structural reforms 83 4.4 Limited impact of the 2008 global financial crisis on East Asian housing 87 4.5 Six economies, six different housing system behaviors 90 5 Housing Volatility in Japan and Taiwan: A Study in Contrasts 93 5.1 Japan: housing underinvestment followed by multiple asset bubbles 94 5.2 Taiwan: a housing market with little government intervention 113 6 Housing Volatility in East Asian City States: Hong Kong and Singapore 123 6.1 Hong Kong: volatility in an open economy with a dual housing system 124 6.2 Singapore: where housing is part of macroeconomic policies 139 Part III: Drivers of East Asian Housing Cycles: Evidence and Analysis 153 7 East Asian Housing Price Cycles: The Evidence 155 7.1 An overview of East Asian housing cycles 155 7.2 Country]specific housing price dynamics 161 7.3 Institutions and regulations shaping East Asian housing cycles 175 8 Drivers of East Asian Housing Price Cycles: An Analysis 187 8.1 What makes housing prices cyclical? An analytical overview 188 8.2 Quantifying the role of market fundamentals in EA price cycles 193 8.3 Two]way interactions between housing and the macroeconomy 201 Part IV: The Six Actors of Housing Cycles in China and in Korea 207 9 Housing During China’s Growth Transition 209 9.1 Impact of investment]led growth policies on households 210 9.2 The great housing boom during a unique decade 215 9.3 Incentives and behavior of the six key players in China’s housing boom 220 9.4 Channels of interaction between housing and other sectors of the economy 243 10 Korea: Overcoming Housing Shortages and Stabilizing Housing Prices 247 10.1 An overview 247 10.2 Housing outcomes and housing cycles 249 10.3 Key issues in housing policy 258 10.4 Main players in Korean housing cycles and their behavior 266 10.5 Looking ahead: Korean housing at a crossroads 277 Part V: Conclusions 279 11 Overall Findings and Outlook for East Asian Housing 281 11.1 Distinctive characteristics of East Asian housing systems 281 11.2 Issues and outlook for East Asian housing systems 289 References 303 Index of Names 329 General Index 331

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Book SynopsisLegal, Tax and Accounting Strategies for the Canadian Real Estate Investor begins and ends with the premise that buying property in Canada can be a smart, safe and successful way to invest your money. However, like most things in life, success requires hard work.Table of ContentsForeword vii Introduction 1 Chapter 1: Eyes Wide Open 7 Chapter 2: Building a Successful Team 17 Chapter 3: Mastering the Basics 29 Chapter 4: Structuring Your Acquisitions 49 Chapter 5: Structuring Your Acquisitions with a Large-Scale Joint Venture 89 Chapter 6: Structuring Your Real Estate Business 105 Chapter 7: Owning Your Properties 115 Chapter 8: More Tax Strategies for Property Ownership 153 Chapter 9: Structuring Dispositions 167 Chapter 10: Tax Considerations on Dispositions 183 Chapter 11: Estate-Planning Considerations 195 Chapter 12: Keeping the Books 205 Appendix 1: Joint Venture Agreement Checklist 227 Appendix 2: Legal Considerations Relating to Syndicate Offerings—Investor Checklist 231 Appendix 3: Legal Considerations Relating to Syndicate Offerings—Promoter Checklist 233 Acknowledgements 235 About the Authors 237 Index 239

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Book SynopsisThe latest tools and techniques for pricing and risk management This book introduces readers to the use of copula functions to represent the dynamics of financial assets and risk factors, integrated temporal and cross-section applications.Table of ContentsPreface ix 1 Correlation Risk in Finance 1 1.1 Correlation Risk in Pricing and Risk Management 1 1.2 Implied vs Realized Correlation 3 1.3 Bottom-up vs Top-down Models 4 1.4 Copula Functions 4 1.5 Spatial and Temporal Dependence 5 1.6 Long-range Dependence 5 1.7 Multivariate GARCH Models 7 1.8 Copulas and Convolution 8 2 Copula Functions: The State of the Art 11 2.1 Copula Functions: The Basic Recipe 11 2.2 Market Co-movements 14 2.3 Delta Hedging Multivariate Digital Products 16 2.4 Linear Correlation 19 2.5 Rank Correlation 20 2.6 Multivariate Spearman’s Rho 22 2.7 Survival Copulas and Radial Symmetry 23 2.8 Copula Volume and Survival Copulas 24 2.9 Tail Dependence 27 2.10 Long/Short Correlation 27 2.11 Families of Copulas 29 2.11.1 Elliptical Copulas 29 2.11.2 Archimedean Copulas 31 2.12 Kendall Function 33 2.13 Exchangeability 34 2.14 Hierarchical Copulas 35 2.15 Conditional Probability and Factor Copulas 39 2.16 Copula Density and Vine Copulas 42 2.17 Dynamic Copulas 45 2.17.1 Conditional Copulas 45 2.17.2 Pseudo-copulas 46 3 Copula Functions and Asset Price Dynamics 49 3.1 The Dynamics of Speculative Prices 49 3.2 Copulas and Markov Processes: The DNO approach 51 3.2.1 The * and _ Product Operators 52 3.2.2 Product Operators and Markov Processes 55 3.2.3 Self-similar Copulas 58 3.2.4 Simulating Markov Chains with Copulas 62 3.3 Time-changed Brownian Copulas 63 3.3.1 CEV Clock Brownian Copulas 64 3.3.2 VG Clock Brownian Copulas 65 3.4 Copulas and Martingale Processes 66 3.4.1 C-Convolution 67 3.4.2 Markov Processes with Independent Increments 75 3.4.3 Markov Processes with Dependent Increments 78 3.4.4 Extracting Dependent Increments in Markov Processes 81 3.4.5 Martingale Processes 83 3.5 Multivariate Processes 86 3.5.1 Multivariate Markov Processes 86 3.5.2 Granger Causality and the Martingale Condition 88 4 Copula-based Econometrics of Dynamic Processes 91 4.1 Dynamic Copula Quantile Regressions 91 4.2 Copula-based Markov Processes: Non-linear Quantile Autoregression 93 4.3 Copula-based Markov Processes: Semi-parametric Estimation 99 4.4 Copula-based Markov Processes: Non-parametric Estimation 108 4.5 Copula-based Markov Processes: Mixing Properties 110 4.6 Persistence and Long Memory 113 4.7 C-convolution-based Markov Processes: The Likelihood Function 116 5 Multivariate Equity Products 121 5.1 Multivariate Equity Products 121 5.1.1 European Multivariate Equity Derivatives 122 5.1.2 Path-dependent Equity Derivatives 125 5.2 Recursions of Running Maxima and Minima 126 5.3 The Memory Feature 130 5.4 Risk-neutral Pricing Restrictions 132 5.5 Time-changed Brownian Copulas 133 5.6 Variance Swaps 135 5.7 Semi-parametric Pricing of Path-dependent Derivatives 136 5.8 The Multivariate Pricing Setting 137 5.9 H-Condition and Granger Causality 137 5.10 Multivariate Pricing Recursion 138 5.11 Hedging Multivariate Equity Derivatives 141 5.12 Correlation Swaps 144 5.13 The Term Structure of Multivariate Equity Derivatives 147 5.13.1 Altiplanos 148 5.13.2 Everest 150 5.13.3 Spread Options 150 6 Multivariate Credit Products 153 6.1 Credit Transfer Finance 153 6.1.1 Univariate Credit Transfer Products 154 6.1.2 Multivariate Credit Transfer Products 155 6.2 Credit Information: Equity vs CDS 158 6.3 Structural Models 160 6.3.1 Univariate Model: Credit Risk as a Put Option 160 6.3.2 Multivariate Model: Gaussian Copula 161 6.3.3 Large Portfolio Model: Vasicek Formula 163 6.4 Intensity-based Models 164 6.4.1 Univariate Model: Poisson and Cox Processes 165 6.4.2 Multivariate Model: Marshall–Olkin Copula 165 6.4.3 Homogeneous Model: Cuadras Aug´e Copula 167 6.5 Frailty Models 170 6.5.1 Multivariate Model: Archimedean Copulas 170 6.5.2 Large Portfolio Model: Sch¨onbucher Formula 171 6.6 Granularity Adjustment 171 6.7 Credit Portfolio Analysis 172 6.7.1 Semi-unsupervised Cluster Analysis: K-means 172 6.7.2 Unsupervised Cluster Analysis: Kohonen Self-organizing Maps 174 6.7.3 (Semi-)unsupervised Cluster Analysis: Hierarchical Correlation Model 175 6.8 Dynamic Analysis of Credit Risk Portfolios 176 7 Risk Capital Management 181 7.1 A Review of Value-at-Risk and Other Measures 181 7.2 Capital Aggregation and Allocation 185 7.2.1 Aggregation: C-Convolution 187 7.2.2 Allocation: Level Curves 189 7.2.3 Allocation with Constraints 191 7.3 Risk Measurement of Managed Portfolios 193 7.3.1 Henriksson–Merton Model 195 7.3.2 Semi-parametric Analysis of Managed Funds 200 7.3.3 Market-neutral Investments 201 7.4 Temporal Aggregation of Risk Measures 202 7.4.1 The Square-root Formula 203 7.4.2 Temporal Aggregation by C-convolution 203 8 Frontier Issues 207 8.1 Levy Copulas 207 8.2 Pareto Copulas 210 8.3 Semi-martingale Copulas 212 A Elements of Probability 215 A.1 Elements of Measure Theory 215 A.2 Integration 216 A.2.1 Expected Values and Moments 217 A.3 The Moment-generating Function or Laplace Transform 218 A.4 The Characteristic Function 219 A.5 Relevant Probability Distributions 219 A.6 Random Vectors and Multivariate Distributions 224 A.6.1 The Multivariate Normal Distribution 225 A.7 Infinite Divisibility 226 A.8 Convergence of Sequences of Random Variables 228 A.81 The Strong Law of Large Numbers 229 A.9 The Radon–Nikodym Derivative 229 A.10 Conditional Expectation 229 B Elements of Stochastic Processes Theory 231 B.1 Stochastic Processes 231 B.1.1 Filtrations 231 B.1.2 Stopping Times 232 B.2 Martingales 233 B.3 Markov Processes 234 B.4 L´evy Processes 237 B.4.1 Subordinators 240 B.5 Semi-martingales 240 References 245 Extra Reading 251 Index 259

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Book SynopsisDiscusses analytical issues and intricate financial instruments in a way that it is accessible to postgraduate students with or without a previous background in probability theory and finance. This title covers an overview of MATLAB and the various components that will be used alongside it throughout the textbook.Trade Review“The book can be warmly recommended to readers who wish to learn the main methods of quantitative finance without delving into its mathematical foundations.” (Zentralblatt MATH, 1 December 2012) Table of ContentsPreface xi 1 An Introduction to Probability Theory 1 1.1 The Notion of a Set and a Sample Space 1 1.2 Sigma Algebras or Field 2 1.3 Probability Measure and Probability Space 2 1.4 Measurable Mapping 3 1.5 Cumulative Distribution Functions 4 1.6 Convergence in Distribution 5 1.7 Random Variables 5 1.8 Discrete Random Variables 6 1.9 Example of Discrete Random Variables: The Binomial Distribution 6 1.10 Hypergeometric Distribution 7 1.11 Poisson Distribution 8 1.12 Continuous Random Variables 9 1.13 Uniform Distribution 9 1.14 The Normal Distribution 9 1.15 Change of Variable 11 1.16 Exponential Distribution 12 1.17 Gamma Distribution 12 1.18 Measurable Function 13 1.19 Cumulative Distribution Function and Probability Density Function 13 1.20 Joint, Conditional and Marginal Distributions 17 1.21 Expected Values of Random Variables and Moments of a Distribution 19 2 Stochastic Processes 25 2.1 Stochastic Processes 25 2.2 Martingales Processes 26 2.3 Brownian Motions 29 2.4 Brownian Motion and the Reflection Principle 32 2.5 Geometric Brownian Motions 35 3 Ito Calculus and Ito Integral 37 3.1 Total Variation and Quadratic Variation of Differentiable Functions 37 3.2 Quadratic Variation of Brownian Motions 39 3.3 The Construction of the Ito Integral 40 3.4 Properties of the Ito Integral 41 3.5 The General Ito Stochastic Integral 42 3.6 Properties of the General Ito Integral 43 3.7 Construction of the Ito Integral with Respect to Semi-Martingale Integrators 44 3.8 Quadratic Variation of a General Bounded Martingale 46 4 The Black and Scholes Economy 55 4.1 Introduction 55 4.2 Trading Strategies and Martingale Processes 55 4.3 The Fundamental Theorem of Asset Pricing 56 4.4 Martingale Measures 58 4.5 Girsanov Theorem 59 4.6 Risk-Neutral Measures 62 5 The Black and Scholes Model 67 5.1 Introduction 67 5.2 The Black and Scholes Model 67 5.3 The Black and Scholes Formula 68 5.4 Black and Scholes in Practice 70 5.5 The Feynman–Kac Formula 71 6 Monte Carlo Methods 79 6.1 Introduction 79 6.2 The Data Generating Process (DGP) and the Model 79 6.3 Pricing European Options 80 6.4 Variance Reduction Techniques 81 7 Monte Carlo Methods and American Options 91 7.1 Introduction 91 7.2 Pricing American Options 91 7.3 Dynamic Programming Approach and American Option Pricing 92 7.4 The Longstaff and Schwartz Least Squares Method 93 7.5 The Glasserman and Yu Regression Later Method 95 7.6 Upper and Lower Bounds and American Options 96 8 American Option Pricing: The Dual Approach 101 8.1 Introduction 101 8.2 A General Framework for American Option Pricing 101 8.3 A Simple Approach to Designing Optimal Martingales 104 8.4 Optimal Martingales and American Option Pricing 104 8.5 A Simple Algorithm for American Option Pricing 105 8.6 Empirical Results 106 8.7 Computing Upper Bounds 107 8.8 Empirical Results 109 9 Estimation of Greeks using Monte Carlo Methods 113 9.1 Finite Difference Approximations 113 9.2 Pathwise Derivatives Estimation 114 9.3 Likelihood Ratio Method 116 9.4 Discussion 118 10 Exotic Options 121 10.1 Introduction 121 10.2 Digital Options 121 10.3 Asian Options 122 10.4 Forward Start Options 123 10.5 Barrier Options 123 10.5.1 Hedging Barrier Options 125 11 Pricing and Hedging Exotic Options 129 11.1 Introduction 129 11.2 Monte Carlo Simulations and Asian Options 129 11.3 Simulation of Greeks for Exotic Options 130 11.4 Monte Carlo Simulations and Forward Start Options 131 11.5 Simulation of the Greeks for Exotic Options 132 11.6 Monte Carlo Simulations and Barrier Options 132 12 Stochastic Volatility Models 137 12.1 Introduction 137 12.2 The Model 137 12.3 Square Root Diffusion Process 138 12.4 The Heston Stochastic Volatility Model (HSVM) 139 12.5 Processes with Jumps 143 12.6 Application of the Euler Method to Solve SDEs 143 12.7 Exact Simulation Under SV 144 12.8 Exact Simulation of Greeks Under SV 146 13 Implied Volatility Models 151 13.1 Introduction 151 13.2 Modelling Implied Volatility 152 13.3 Examples 153 14 Local Volatility Models 157 14.1 An Overview 157 14.2 The Model 159 14.3 Numerical Methods 161 15 An Introduction to Interest Rate Modelling 167 15.1 A General Framework 167 15.2 Affine Models (AMs) 169 15.3 The Vasicek Model 171 15.4 The Cox, Ingersoll and Ross (CIR) Model 173 15.5 The Hull and White (HW) Model 174 15.6 The Black Formula and Bond Options 175 16 Interest Rate Modelling 177 16.1 Some Preliminary Definitions 177 16.2 Interest Rate Caplets and Floorlets 178 16.3 Forward Rates and Numeraire 180 16.4 Libor Futures Contracts 181 16.5 Martingale Measure 183 17 Binomial and Finite Difference Methods 185 17.1 The Binomial Model 185 17.2 Expected Value and Variance in the Black and Scholes and Binomial Models 186 17.3 The Cox–Ross–Rubinstein Model 187 17.4 Finite Difference Methods 188 Appendix 1 An Introduction to MATLAB 191 A1.1 What is MATLAB? 191 A1.2 Starting MATLAB 191 A1.3 Main Operations in MATLAB 192 A1.4 Vectors and Matrices 192 A1.5 Basic Matrix Operations 194 A1.6 Linear Algebra 195 A1.7 Basics of Polynomial Evaluations 196 A1.8 Graphing in MATLAB 196 A1.9 Several Graphs on One Plot 197 A1.10 Programming in MATLAB: Basic Loops 199 A1.11 M-File Functions 200 A1.12 MATLAB Applications in Risk Management 200 A1.13 MATLAB Programming: Application in Financial Economics 202 Appendix 2 Mortgage Backed Securities 205 A2.1 Introduction 205 A2.2 The Mortgage Industry 206 A2.3 The Mortgage Backed Security (MBS) Model 207 A2.4 The Term Structure Model 208 A2.5 Preliminary Numerical Example 210 A2.6 Dynamic Option Adjusted Spread 210 A2.7 Numerical Example 212 A2.8 Practical Numerical Examples 213 A2.9 Empirical Results 214 A2.10 The Pre-Payment Model 215 Appendix 3 Value at Risk 217 A3.1 Introduction 217 A3.2 Value at Risk (VaR) 217 A3.3 The Main Parameters of a VaR 218 A3.4 VaR Methodology 219 A3.5 Empirical Applications 222 A3.6 Fat Tails and VaR 224 Bibliography 227 References 229 Index 233

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Book Synopsis* A unique resource for busy online traders of all levels. * Featuring a variety of short- and long-term trading strategies addressing the need amongst the growing number of those trading and investing from home.Table of ContentsPreface ix Acknowledgements xiii About the Authors xv Introduction 1 PART I APERITIF Recipe 1 Uncle’s Favourite 11 Difficulty Level: Beginner Recipe 2 What Good Dishes Taste Like – The Recipe for Trading Success 21 Difficulty Level: Beginner Recipe 3 Trend Lines and Channelling: Mind the Bumps 31 Difficulty Level: Beginner Recipe 4 Japanese as Easy as Sushi: Exotic but not Complicated 37 Difficulty Level: Beginner Recipe 5 Moving Averages: Decisions Decisions 43 Difficulty Level: Beginner Recipe 6 Breakfast at 8 49 Difficulty Level: Beginner Recipe 7 Let’s Get a Takeaway! 55 Difficulty Level: Beginner PART II HORS D’OEUVRES Recipe 8 MACD, MA and Stochastic – Mixing Cocktails 69 Difficulty Level: Beginner/Intermediate Recipe 9 The Breakout 75 Difficulty Level: Intermediate PART III AMUSE-BOUCHE Recipe 10 Natural Diet: Don’t Forget Your Roughage 85 Difficulty Level: Intermediate PART IV ENTREMET Recipe 11 MACD (Mac-D) and Friends 101 Difficulty Level: Intermediate/Advanced Recipe 12 Nouvelle Cuisine: New Issues 107 Difficulty Level: Intermediate/Advanced Recipe 13 Momentum: Short Termism Does Pay! 111 Difficulty Level: Intermediate/Advanced Recipe 14 Turtle Soup: The Most Famous Trading Recipe of All 117 Difficulty Level: Intermediate/Advanced Recipe 15 Pairs Trading: One of Your Five a Day! 127 Difficulty Level: Intermediate/Advanced Recipe 16 Double Big MAC-D 135 Difficulty Level: Intermediate/Advanced PART V ENTREE Recipe 17 English Breakfast or All-Day Lunch 151 Difficulty Level: Advanced Recipe 18 Surfing the Waves: Fast Food 159 Difficulty Level: Advanced/Expert PART VI MAIN Recipe 19 Coffee Options and Spreads 173 Difficulty Level: Advanced/Expert Recipe 20 Bonds: Shaken Not Stirred 185 Difficulty Level: Advanced Recipe 21 Buffet: Today’s Special at McDonald’s 193 Difficulty Level: Advanced PART VII DESSERT Recipe 22 Common Cooking Mistakes and How to Avoid Them 203 PART VIII PANTRY Recipe 23 Utensils and Common Ingredients 209 Recipe 24 If You Can’t Stand the Heat: Taking Risks in the Kitchen 221 Index 229

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Book SynopsisIntroduction to Bond Markets provides a comprehensive, authoritative description of the bond markets. The contents describe and define bonds within the context of the capital markets and the different types of bonds that are traded.Table of ContentsForeword xvii Preface xix Preface to the First Edition xxiii About the author xxv 1 Introduction to Bonds 1 Description 4 Outline of market participants 6 Bond analysis 8 Financial arithmetic: the time value of money 8 Present value and discounting 9 Discount factors and boot-strapping the discount function 15 Bond pricing and yield: the traditional approach 18 Bond pricing 18 Bond yield 23 Accrued interest 30 Clean and dirty bond prices 30 Day-count conventions 32 Illustrating bond yield using Excel spreadsheets 33 Bibliography 38 2 The Yield Curve, Spot and Forward Yields 41 The yield curve 42 Yield-to-maturity yield curve 42 The par yield curve 44 The zero-coupon (or spot) yield curve 45 The forward yield curve 49 Theories of the yield curve 50 Spot rates 54 Discount factors and the discount function 55 The boot-strapping method: deriving the theoretical zero-coupon (spot) rate curve 56 Mathematical relationship 60 Implied forward rates 62 Understanding forward rates 69 The term structure of interest rates 70 Bibliography 73 3 Bond Instruments and Interest-rate Risk 75 Duration, modified duration and convexity 76 Duration 77 Properties of Macaulay duration 81 Modified duration 81 Convexity 87 Bibliography 91 4 Floating-rate Notes and other Bond Instruments 93 Floating-rate notes 94 Synthetic convertible note 98 Description 98 Investor benefits 99 Interest differential notes 99 Example of IDN 99 Benefits to investors 100 Convertible quanto note 101 Example of Japanese equity note 102 Bibliography 105 5 The Money Markets 107 Introduction 109 Securities quoted on a yield basis 111 Money market deposits 111 Certificates of deposit 113 cd yields 114 Securities quoted on a discount basis 118 Treasury bills 120 Banker’s acceptances 121 Eligible banker’s acceptance 122 Commercial paper 123 Commercial paper programmes 124 Commercial paper yields 126 Asset-backed commercial paper 127 Repo 132 Definition 133 The classic repo 134 Examples of classic repo 136 The sell/buy-back 141 Examples of sell/buy-back 142 Repo collateral 144 Legal treatment 146 Margin 146 Variation margin 148 5.A Currencies using money market year base of 365 days 148 6 the Eurobond Market 151 Eurobonds 152 Foreign bonds 155 Eurobond instruments 155 Conventional bonds 155 Floating rate notes 156 Zero-coupon bonds 157 Convertible bonds 157 The issue process: market participants 159 The borrowing parties 160 The underwriting lead manager 162 The co-lead manager 163 Investors 164 Fees, expenses and pricing 164 Fees 164 Expenses 165 Pricing 165 Issuing the bond 166 The grey market 168 Alternative issue procedures 168 Covenants 169 Trust services 170 Depositary 170 Paying agent 171 Registrar 172 Trustee 172 Custodian 173 Form of the bond 173 Temporary global form 173 Permanent global bond 174 Definitive form 174 Registered bonds 175 Fiscal agent 176 Listing agent 176 Clearing systems 176 Market associations 178 International Capital Market Association 178 Bloomberg screens 178 Secondary market 180 Settlement 180 Bibliography 181 7 CONVERTIBLE BONDS, MTNs AND WARRANTS 183 Description 184 Analysis 184 Value and premium issues 187 Zero-coupon convertibles 188 Warrants 189 Medium-term notes 190 MTN programme 191 Shelf registration 192 Credit rating 192 Secondary market 192 Issuers and investors 193 MTNs and corporate bonds 193 8 Credit Ratings 197 Credit ratings 199 Purpose of credit ratings 199 Formal credit ratings 200 Credit rating agencies and the 2007–2008 financial market crash 201 9 Inflation-linked Bonds 209 Basic concepts 210 Choice of index 210 Indexation lag 211 Coupon frequency 213 Type of indexation 213 Index-linked bond cash flows and yields 215 TIPS cash flow calculations 216 TIPS price and yield calculations 217 Assessing yields on index-linked bonds 220 Which to hold: indexed or conventional bonds? 221 Inflation-indexed derivatives 222 Market instruments 223 Applications 227 Bibliography 228 10 An Introduction to Asset-backed Securities 229 The concept of securitisation 232 Reasons for undertaking securitisation 233 Benefits of securitisation to investors 236 The process of securitisation 237 Securitisation process 237 SPV structures 239 Credit enhancement 240 Impact on balance sheet 242 Credit rating 243 Redemption mechanism 245 Average life 245 Illustrating the process of securitisation 246 Securitisation post-credit crunch 250 Bloomberg screens 253 Bibliography 259 11 Introduction to Derivative Instruments 261 Interest-rate swaps 262 Characteristics of IR swaps 264 Swap spreads and the swap yield curve 267 Swap duration 270 Summary of IR swap 271 Non-standard swaps 271 Using swaps 273 Cancelling a swap 276 Zero-coupon swap pricing 276 Hedging using bonds and swaps 278 Swaptions 282 Cross-currency swaps 283 Bloomberg screens 284 Futures contracts 288 Description 288 Bond futures contracts 290 Futures pricing 293 Arbitrage-free futures pricing 297 Hedging using futures 299 The hedge ratio 301 Interest-rate options 302 Introduction 302 Definition 303 Option terminology 305 Option premium 306 Pricing options 307 Behaviour of option prices 311 Using options in bond markets 312 Hedging using bond options 314 Exotic options 315 Bibliography 317 12 Introduction to Credit Derivatives 319 Introduction 321 Why use credit derivatives? 323 Classification of credit derivative instruments 325 Definition of a credit event 326 Asset swaps 327 Credit default swaps 330 Impact of the 2007–2008 credit crunch: new CDS contracts and the CDS ‘Big Bang’ 334 Credit-linked notes 338 Total return swaps 341 Synthetic repo 345 Reduction in credit risk 346 Capital structure arbitrage 347 The TRS as a funding instrument 347 Credit options 349 The CDS iTraxx index 350 General applications of credit derivatives 355 Use of credit derivatives by portfolio managers 355 The credit default swap basis 358 A negative basis 358 The basis as market indicator 361 Bibliography 364 13 Approaches to Government Bond Trading And Yield Analysis 365 Introduction 366 The determinants of yield 366 Spread trade risk weighting 367 Identifying yield spread trades 373 Coupon spreads 374 Butterfly trades 376 Basic concepts 376 Putting on the trade 377 Yield gain 379 Convexity gain 380 Bloomberg screens 384 Bond spreads and relative value 386 Bond spreads 388 Summary of a fund manager’s approach to value creation 393 Bibliography 396 14 Risk Management and Value-at-risk 397 Characterising risk 398 Risk management 400 The risk management function 401 Interest-rate risk 402 Value-at-Risk 403 Definition 403 Calculation methods 404 Validity of the variance–covariance (correlation) VaR estimate 406 Assessment of VaR tool 407 VaR methodology for credit risk 408 Modelling VaR for credit risk 409 Time horizon 411 Applications of credit VaR 412 Bibliography 412 Glossary 413 List of abbreviations 421 Index 425

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Book SynopsisFew business activities can match Mergers & Acquisitions (M&A) in terms of the potential for reward and for danger. A successful merger or acquisition can allow a mid-tier company to leap into the top tier, bringing rich rewards to that company, and its employees and shareholders. The failure of a merger can, on the other hand, have a devastating impact, resulting a loss of credibility, destruction of value and in some cases bringing the parties to ruin. Depending on how you measure it, between 50% and 80% of M&A deals fail to attain their objectives, before or even after the deal is done. Practical M&A Execution and Integration is all about maximising your chances of success. Merging, de-merging, acquiring or acquired, if your organisation is involved, or likely to be involved, you will need to manage the process, and following this Handbook will give you a clear, simple framework to get the job done and help your organisation move on and attain the benefits and promise of tTable of ContentsTables and Figures xi Foreword xv Acknowledgments xvii Section A: About Mergers and Acquisitions 1 Chapter 1: Introduction 3 Fundamentals of mergers & acquisitions 5 Types of M&A deals 6 Challenges of M&A deals 11 Reasons for M&A 14 Chapter 2: Role of regulation 21 Regulatory regimes 22 UK anti-trust regime 23 European Union regulation 26 US anti-trust legislation 27 Bid process 28 Section B: Fundamentals of the Deal 31 Chapter 3: Anatomy of a deal 33 M&A Stages 33 Phase 1: Prelude (to a deal) 36 Phase 2: Deal negotiation 40 Phase 3: Pre-change of control 44 Phase 4: Change of control 50 Phase 5: Integration 50 Phase 6: Business as usual 53 Section C: Successful M&A 55 Chapter 4: M&A power 57 Clarity 57 Capacity 61 Speed 76 Chapter 5: M&A process 79 Risk management 80 Planning, management and control 106 Project lifecycle and structure 113 Issue management 133 Risk management practice 138 Reporting 149 Assumption management 152 Dependency management 154 Scope change management 157 Quality management 162 Resource management 164 Cost management 166 Communications management 170 Stakeholder management 173 Chapter 6: M&A people 175 Culture 175 Stakeholders 179 Personnel 179 Section D: Pulling It All Together: Delivering M&A 185 Chapter 7: Timing 187 Managing the integration and change of control period 187 Project organisation and control 197 Section E: Banking M&A 207 What makes banking M&A unique? 207 Planning for the post-merger period 211 Planning to get to the change of control 212 Organisational approach 225 Issue management 229 What if it all goes wrong? 235 Section F: Document Templates and Suggested Tables of Contents 239 Control documents 239 Report templates 245 Project document templates 255 Bibliography 289 About the author 291 Index 293

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Book SynopsisThe International Financial Reporting Standards are quite different from other sets of accounting standards, and are fundamentally different from US-GAAP, in that they are based on principles, and not on detailed rules. Financial Reporting under IFRS:A topic-based approach offers a global perspective on IFRS by presenting the prescribed rationale and principles and illustrating them through numerous examples from large international companies. It aims to develop the fundamental skills necessary to read and use the information contained in all types of financial statements, through examples, activities, questions and answers. The book is broadly divided into three sections. Section one examines the structure of the Balance Sheet and the Income Statement, their links and the accounting mechanisms used to prepare them. Section two deals with the identification, evaluation and reporting of Balance Sheet items. Section three covers the use of financial statements to analyze a firTable of ContentsForeword vii Introduction ix Acknowledgements xiii 1 Financial Statements and Accounting Mechanisms 1 2 Income from Ordinary Activities 37 3 Current Assets 65 4 Non-financial Liabilities 97 5 Non-current Assets125 6 Financing 163 7 Taxation 189 8 Group Accounts 215 9 Financial Analysis and Communication 261 10 The IASB and Development of the IFRS 313 Index 327

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Book SynopsisThe last few years have been a watershed for the commodities, cash and derivatives industry. New regulations and products have led to an explosion in the commodities markets, creating a new asset for investors that includes hedge funds as well as university endowments, and has resulted in substantial growth in spot derivative trading.Trade Review"...the wide range of issues covered in different ways should mean there is something for everyone." (Supply Management, February 5th 2009)Table of ContentsPreface. About the Editor. About the Contributors. 1. Structural Models of Commodity Prices (Craig Pirrong). 1.1 Introduction. 1.2 A Commodity Taxonomy. 1.3 Fundamental Models for Storable Commodities. 1.4 Non-Storable Commodities. 1.5 Summary. 1.6 References. 2. Forward Curve Modelling in Commodity Markets (Svetlana Borovkova, Universiteit Amsterdam, and Helyette Geman). 2.1 Introduction. 2.2 Forward Curve Models for Non-Seasonal Commodities. 2.3 The Seasonal Forward Curve Model and its Extensions. 2.4 Principal Component Analysis of a Forward Curve. 2.5 Forward Curve Indicators. 2.6 Conclusions. 2.7 References. 3. Integrating Physical and Financial Risk Management in Supply Management (Paul R. Kleindorfer). 3.1 Introduction. 3.2 A Primer On Previous Supply Management Contracting Literature. 3.3 A Moddeling Framework and a Simple Illustrative Case. 3.4 Recent Contributions to the Optimal Contracting Literature. 3.5 Some Open Research Questions and Implications for Practice. 3.6 References. 4. The Design of New Derivative Markets (Giovanni Barone-Adesi). 4.1 Introduction. 4.2 Determinants of Success of New Derivative Markets. 4.3 Price Discovery. 4.4 Trading, Clearing and Margining. 4.5 Market Integrity. 4.6 Market Recovery. 4.7 Market Oversight. 4.8 Case Studies. 4.9 Conclusion. 4.10 References. 5 Risk Premia of Electricity Futures: A Dynamic Equilibrium Model (Wolfgang Bühler, University of Mannheim, and Jens Müller-Merbach). 5.1 Introduction. 5.2 The Dynamic Equilibrium Model. 5.3 Comparative Statics. 5.4 Empirical Study. 5.5 Conclusion. 5.6 References. 6. Measuring Correlation Risk for Energy Derivatives (Roza Galeeva, Jiri Hoogland and Alexander Eydeland). 6.1 Introduction. 6.2 Correlation. 6.3 Perturbing the Correlation Matrix. 6.4 Correlation VaR. 6.5 Some Examples. 6.6 Discussion and Conclusions. 6.7 References. 7. Precaution and a Dismal Theorem: Implications for Climate Policy and Climate Research (Gary W. Yohe, Wesleyan University and Richard S. J. Tol). 7.1 Introduction. 7.2 A New Source of Concern: Weitzman’s Dismal Theorem. 7.3 Implications of the "Dismal Theorem". 7.4 Some Concluding Remarks. 7.5 References. 8. Incentives for Investing in Renewables (Falbo Paolo, Felletti Daniele and Stefani Silvana). 8.1 Introduction and Background. 8.2 Subsidies for Energy. 8.3 The Model. 8.4 Statistical Estimations. 8.5 Risk Analysis. 8.6 Conclusions. 8.7 References. 9. Hedging the Risk of an Energy Futures Portfolio (Carol Alexander). 9.1 Mapping Portfolios to Constant Maturity Futures. 9.2 The Portfolio and its Key Risk Factors. 9.3 Identifying the Key Risk Factors. 9.4 Hedging the Portfolio Risk. 9.5 Conclusions. 9.6 References. 10. Spark Spread Options when Commodity Prices are Represented as Time Changed Processes (Elisa Luciano). 10.1 Spark Spread Options. 10.2 Time Change in a Nutshell. 10.3 Time Change and Commodity Prices. 10.4 An Application to PJM Electricity and NYMEX Natural Gas. 10.5 Conclusions and Further Research. 10.6 Appendix A: Modelling Specification in the Multivariate Case. 10.7 Appendix B: Alternative Modelling Specifications in the Univariate Case. 10.8 References. 11. Freight Derivatives and Risk Management: A Review (Manolis G. Kavussanos and Ilias D. Visvikis). 11.1 Introduction. 11.2 Forward Freight Agreements. 11.3 Freight Futures. 11.4 "Hybrid" (Cleared) FFAs. 11.5 Freight Options. 11.6 Empirical Research on Freight Derivatives. 11.7 Conclusion. 11.8 References. 12. Mean-Reversion and Structural Breaks in Crude Oil, Copper, and Shipping (H. Geman and S. Ohana). 12.1 Introduction. 12.2 Fundamentals of Copper, Crude Oil, and Shipping. 12.3 Defining Mean-Reversion. 12.4 Dataset and Unit Root Tests. 12.5 Conclusion. 12.6 References. 13. Managing Agricultural Price Risk in Developing Countries (Julie Dana and Christopher L. Gilbert). 13.1 The Liberalization Context. 13.2 Incidence of Risk Exposure. 13.3 Instruments and Problems. 13.4 Price Risk Management in the Developing Country Supply Chain. 13.5 Concluding Comments. 13.6 References. 14. Gaining Exposure to Emerging Markets in Institutional Portfolios: The Role of Commodities (George A. Martin and Richard Spurgin). 14.1 Introduction. 14.2 Asset Markets and Economic Growth. 14.3 Are Emerging Markets Equity Markets and Commodity Markets Integrated? 14.4 Implications for the Investment Policy of Institutional Investors. 14.5 Conclusion. 14.6 References. 15. Case Studies and Risk Management in Commodity Derivatives Trading (Hilary Till). 15.1 Introduction. 15.2 Institutional Risk Management. 15.3 Proprietary-Trading Risk Management. 15.4 Hedge Fund Risk Management. 15.5 Fund-of-Hedge-Funds Diversification. 15.6 Market Risk Management. 15.7 Conclusion. 15.8 References. Index.

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Book SynopsisA real-world guide to trading equity options this book explains the basic fundamentals of equity options for readers without a specific or deep knowledge of the topic. It shows traders new to equity options how to enhance their equity portfolio with a full range of investment opportunities and tools.Table of ContentsForeword vii Preface: Trading Language and Products ix 1 Option Basics 1 2 Option Specifications 9 3 Exercise and Assignment 13 4 Option Uses 19 5 Option Price and Value 31 6 “Moneyness” 39 7 Pricing Options 43 8 Skew 61 9 Option Pricing Revisited: the “Greeks” 71 10 Basic Option Strategy 95 11 Option Spreads 105 12 The Collar (Fence) 107 13 Long Call Spreads (Bull Call Spreads) 119 14 Long Put Spreads (Bear Put Spreads) 127 15 Short Call Spreads (Bear Call Spreads) 139 16 Short Put Spreads (Bull Put Spreads) 147 17 Selling Naked Puts versus Selling Put Spreads 151 18 Long Verticals versus Short Verticals 157 19 Long Straddles 161 20 Long Strangles 167 21 Short Straddles 173 22 The Iron Butterfly 179 23 Short Strangles 185 24 The Iron Condor 187 25 Calendar Spreads 193 26 Long Call Calendars 195 27 Short Call Calendar Spreads 201 28 Long Put Calendar Spreads 205 29 Short Put Calendar Spreads 209 30 Diagonal Spreads 213 31 Yield Enhancement 219 32 Gamma Trading 223 33 Resources 233 34 Summary 235 Glossary 237 Index 247

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Book SynopsisEvery day, the financial pages provide a complete snapshot of the City, charting how the markets are moving, illustrating trends and providing analysis of key developments and investment values. However, in order to get the most out of those pages, readers need to understand the jargon and technicalities used.Table of ContentsIntroduction. Part I: The Financial Pages. Chapter 1: Introducing the Financial Pages. Chapter 2: Looking at How the Financial Pages Work. Chapter 3: Relating the Financial Pages to the Stock Market. Chapter 4: Using the Pages to Your Advantage. Part II: Using The Financial Pages to Make Basic Investments. Chapter 5: Investing in Shares. Chapter 6: Investing in Bonds. Chapter 7: Investing in Cash Investments. Part III: Delving Deeper into the Financial Pages. Chapter 8: Sharpening Your Understanding. Chapter 9: Watching Out for the Pitfalls. Chapter 10: Monitoring the Market’s Psychology Using Charts. Part IV: Using the Pages for More Advanced Investments. Chapter 11: Going International. Chapter 12: Delving into Derivatives. Chapter 13: Making Money from Commodities. Chapter 14: Investing in Funds and Trusts. Chapter 15: Discovering Hedge Funds, Bonds, and ETFs. Part V: Other Places to Go for Financial Information. Chapter 16: Using the Alternatives. Chapter 17: Understanding Company Accounts. Part VI: The Part of Tens. Chapter 18: Ten Things to Know About a Share. Chapter 19: Ten Ways to Make Your Asset Allocation Fit. Chapter 20: Ten Warning Signs that a Company May Be on the Ropes. Chapter 21: Ten Red-Hot Clues to an Opportunity. Appendix: Glossary. Index.

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Book SynopsisRichard Flavell has a strong theoretical perspective on swaps with considerable practical experience in the actual trading of these instruments. This rare combination makes this welcome updated second edition a useful reference work for market practitioners. Satyajit Das, author of Swaps and Financial Derivatives Library and Traders and Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives Fully revised and updated from the first edition, Swaps and Other Derivatives, Second Edition, provides a practical explanation of the pricing and evaluation of swaps and interest rate derivatives. Based on the author's extensive experience in derivatives and risk management, working as a financial engineer, consultant and trainer for a wide range of institutions across the world this book discusses in detail how many of the wide range of swaps and other derivatives, such as yield curve, index amortisers, inflation-linked, cross-market, volatility, diff and quanto diffs, are priced and hedged. It also describes the modelling of interest rate curves, and the derivation of implied discount factors from both interest rate swap curves, and cross-currency adjusted curves. There are detailed sections on the risk management of swap and option portfolios using both traditional approaches and also Value-at-Risk. Techniques are provided for the construction of dynamic and robust hedges, using ideas drawn from mathematical programming. This second edition has expanded sections on the credit derivatives market its mechanics, how credit default swaps may be priced and hedged, and how default probabilities may be derived from a market strip. It also prices complex swaps with embedded options, such as range accruals, Bermudan swaptions and target accrual redemption notes, by constructing detailed numerical models such as interest rate trees and LIBOR-based simulation. There is also increased discussion around the modelling of volatility smiles and surfaces. The book is accompanied by a CD-ROM where all the models are replicated, enabling readers to implement the models in practice with the minimum of effort.Table of ContentsPreface. List of Worksheets (see the accompanying CD). List of Abbreviations. 1 Swaps and Other Derivatives. 1.1 Introduction. 1.2 Applications of swaps. 1.3 An overview of the swap market. 1.4 The evolution of the swap market. 1.5 Conclusion. 2 Short-term Interest Rate Swaps. Objective. 2.1 Discounting, the time value of money and other matters. 2.2 Forward rate agreements (FRAs) and interest rate futures. 2.3 Short-term swaps. 2.4 Convexity bias in futures. 2.5 Forward valuing a swap. 3 Generic Interest Rate Swaps. Objective. 3.1 Generic interest rate swaps. 3.2 Pricing through comparative advantage. 3.3 The relative pricing of generic IRSs. 3.4 The relationship between the bond and swap markets. 3.5 Implying a discount function. 3.6 Building a blended curve. 4 The Pricing and Valuation of Non-generic Swaps. Objective. 4.1 The pricing of simple non-generic swaps: forward starts. 4.2 Rollercoasters. 4.3 Pricing of simple non-generic swaps: a more complex example. 4.4 Forward valuing as an alternative to discounting-revisited. 4.5 Swap valuation. 5 Asset Packaging. Objective. 5.1 Creation and pricing of a par asset swap. 5.2 Creation and pricing of a par maturity asset swap. 5.3 Discounting, embedded loans and forward valuing. 5.4 Further extensions to asset packaging. 6 Credit Derivatives. Background and objective. 6.1Total return swaps. 6.2 Credit default swaps. 6.3 Pricing and hedging of generic CDSs. 6.4 Modelling a CDS. 6.5 Pricing and valuing non-generic CDSs. 6.6 Basket and portfolio CDSs. 6.7 Credit exposure under swaps. 6.8 Appendix: An outline of the credit modelling of portfolios. 7 More Complex Swaps. Objective. 7.1 Simple mismatch swaps. 7.2 Average rate swaps. 7.3 Compound swaps. 7.4 Yield curve swaps. 7.5 Convexity effects of swaps. 7.6 Appendix: Measuring the convexity effect. 7.6.1 Two approaches to measuring the convexity effect. 7.6.2 A general mismatch swap. 7.6.3 Yield curve swaps. 8 Cross-market and Other Market Swaps. Objective. 8.1 Overnight indexed swaps. 8.2 Cross-market basis swaps. 8.3 Equity and commodity swaps. 8.3.1Commodity swaps. 8.4 Longevity swaps. 8.5 Inflation swaps. 8.6 Volatility swaps. 9 Cross-currency Swaps. Objective. 9.1 Floating-floating cross-currency swaps. 9.2 Pricing and hedging of CCBSs. 9.3 CCBSs and discounting. 9.4 Fixed-floating cross-currency swaps. 9.5 Floating-floating swaps continued. 9.6 Fixed-fixed cross-currency swaps. 9.7 Cross-currency swap valuation. 9.8 Dual-currency swaps. 9.9 Cross-currency equity swaps. 9.10 Conclusion. 9.11 Appendix: Quanto adjustments. 10 OTC Options. Objective. 10.1 Introduction. 10.2 The Black option-pricing model. 10.3 Interest rate volatility. 10.4 Par and forward volatilities. 10.5 Caps, floors and collars. 10.6 Digital options. 10.7 Embedded structures. 10.8 Swaptions. 10.9 Structures with embedded swaptions. 10.10 Options on credit default swaps. 10.11 FX options. 10.12 Hedging FX options. 10.13 Appendix: The SABR model for stochastic volatility. 11 Swapping Structured Products. Objective. 11.1 Introduction. 11.2 Examples of some structured securities. 11.3 Numerical interest rate models. 11.4 Simulation models. 11.5 Appendix: Extensions to numerical trees. 11.5.1 Incorporating a volatility smile. 11.5.2 Hull-White numerical trees. 11.5.3 Extensions to BDT and HW models. 12 Traditional Market Risk Management. Objective. 12.1 Introduction. 12.2 Interest rate risk management. 12.3 Gridpoint risk management-market rates. 12.4 Equivalent portfolios. 12.5 Gridpoint risk management-forward rates 12.6 Gridpoint risk management-zero-coupon rates. 12.7 Yield curve risk management. 12.8 Bond and swap futures. 12.9 Theta risk. 12.10 Risk management of IR option portfolios. 12.11 Hedging of inflation swaps. 12.12 Appendix: Analysis of swap curves. 13 Value-at-Risk. Objective. 13.1 Introduction. 13.2 A very simple example. 13.3 A very simple example extended. 13.4 Multi-factor delta VaR. 13.5 Choice of risk factors and cashflow mapping. 13.6 Estimation of volatility and correlations. 13.7 A running example. 13.8 Simulation methods. 13.9 Shortcomings and extensions to simulation methods. 13.10 Delta-gamma and other methods. 13.11 Spread VaR. 13.12 Equity VaR. 13.13 Shock testing of VaR. 13.14 Stress testing of VaR. 13.15 Appendix: Extreme value theory. 13.15.1 Peaks over threshold: negative exponential. 13.15.2 Peaks over threshold: Generalised Pareto. 13.15.3 Block maxima. Index.

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Book SynopsisThe foreign-exchange market is often referred to as the Slaughterhouse where novice traders go to get ''chopped up''. It is one of egos and money, where millions of dollars are won and lost every day and phones are routinely thrown across hectic trading desks. This palpable excitement has led to the explosion of the retail FX market, which has unfortunately spawned a new breed of authors and gurus more than happy to provide misleading and often downright fraudulent information by promising traders riches while making forex trading ''easy''. Well I''ll let you in on a little secret: there is nothing easy about trading currencies. If you don''t believe me then stop by Warren Buffet''s office and ask him how he could lose $850m betting on the dollar or ask George Soros why his short yen bets cost him $600m not once but twice in 1994. What''s wrong with these guys, don''t they read FX books? In reality, the average client''s trading approach combined with the unscTrade Review"...could help novices avoid much of the pain...a brutall honest appraisal of how currency markets work." (Investors Chronicle, April 24th 2009)Table of ContentsAcknowledgments ix Introduction xi Part I Through the Eyes of a Trader 1 1 On Markets 3 2 The Currency Market 9 3 A Rare Breed 13 4 FX Dealers 19 5 Today’s FX Market 23 6 The Players 27 Part II The Retail Side of Things 33 7 Card Stacking 35 8 Don’t Trust Your FCM 43 9 Third-Party Services 47 10 Fighting Back 51 Part III Joining the 10% 55 11 Becoming a Great Trader 57 12 Picking the Right Approach 63 Part IV FX Trading Tips 73 13 Adapting to the FX Market 75 14 Trading Thin Markets 83 15 Using the Crosses 87 16 All About Stops 93 17 Characteristics of FX Trends 97 18 Trading the FED 103 19 Fading News 109 20 FX Analysts: Who Cares? 113 Part V Dealer Trades 117 21 Trading Against Dealers 119 22 The Big Figure Trade 123 23 The Friday to Sunday Extension 131 24 Sticking it to Your Dealer 137 Part VI The Future 143 25 The End of the Beginning 145 Appendix Trading “How To’s” 149 How to Set Up Your Trading 151 How to Trade Price Action 157 How to Build a Position 163 How to Trade Out of a Losing Position 169 Notes 177 Speaking Like a Dealer 179 FX Glossary 181 Trading Maxims 189 Bibliography 191 CFTC Minimum Finance Requirement 193 Index 209

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Book SynopsisCovers all the theory and practical advice that actuaries need in order to determine the claims reserves for non-life insurance. Describes all the necessary mathematical methods used to estimate loss reserves and shares the authors' practical experience, which is essential in showing which of the methods should be applied in any given situation.Table of ContentsPreface xi Acknowledgement xiii 1 Introduction and Notation 1 1.1 Claims process 1 1.1.1 Accounting principles and accident years 2 1.1.2 Inflation 3 1.2 Structural framework to the claims-reserving problem 5 1.2.1 Fundamental properties of the claims reserving process 7 1.2.2 Known and unknown claims 9 1.3 Outstanding loss liabilities, classical notation 10 1.4 General remarks 12 2 Basic Methods 15 2.1 Chain-ladder method (distribution-free) 15 2.2 Bornhuetter–Ferguson method 21 2.3 Number of IBNyR claims, Poisson model 25 2.4 Poisson derivation of the CL algorithm 27 3 Chain-Ladder Models 33 3.1 Mean square error of prediction 33 3.2 Chain-ladder method 36 3.2.1 Mack model (distribution-free CL model) 37 3.2.2 Conditional process variance 41 3.2.3 Estimation error for single accident years 44 3.2.4 Conditional MSEP, aggregated accident years 55 3.3 Bounds in the unconditional approach 58 3.3.1 Results and interpretation 58 3.3.2 Aggregation of accident years 63 3.3.3 Proof of Theorems 3.17, 3.18 and 3.20 64 3.4 Analysis of error terms in the CL method 70 3.4.1 Classical CL model 70 3.4.2 Enhanced CL model 71 3.4.3 Interpretation 72 3.4.4 CL estimator in the enhanced model 73 3.4.5 Conditional process and parameter prediction errors 74 3.4.6 CL factors and parameter estimation error 75 3.4.7 Parameter estimation 81 4 Bayesian Models 91 4.1 Benktander–Hovinen method and Cape–Cod model 91 4.1.1 Benktander–Hovinen method 92 4.1.2 Cape–Cod model 95 4.2 Credible claims reserving methods 98 4.2.1 Minimizing quadratic loss functions 98 4.2.2 Distributional examples to credible claims reserving 101 4.2.3 Log-normal/Log-normal model 105 4.3 Exact Bayesian models 113 4.3.1 Overdispersed Poisson model with gamma prior distribution 114 4.3.2 Exponential dispersion family with its associated conjugates 122 4.4 Markov chain Monte Carlo methods 131 4.5 Bühlmann–Straub credibility model 145 4.6 Multidimensional credibility models 154 4.6.1 Hachemeister regression model 155 4.6.2 Other credibility models 159 4.7 Kalman filter 160 5 Distributional Models 167 5.1 Log-normal model for cumulative claims 167 5.1.1 Known variances σj 2 170 5.1.2 Unknown variances 177 5.2 Incremental claims 182 5.2.1 (Overdispersed) Poisson model 182 5.2.2 Negative-Binomial model 183 5.2.3 Log-normal model for incremental claims 185 5.2.4 Gamma model 186 5.2.5 Tweedie’s compound Poisson model 188 5.2.6 Wright’s model 199 6 Generalized Linear Models 201 6.1 Maximum likelihood estimators 201 6.2 Generalized linear models framework 203 6.3 Exponential dispersion family 205 6.4 Parameter estimation in the EDF 208 6.4.1 MLE for the EDF 208 6.4.2 Fisher’s scoring method 210 6.4.3 Mean square error of prediction 214 6.5 Other GLM models 223 6.6 Bornhuetter–Ferguson method, revisited 223 6.6.1 MSEP in the BF method, single accident year 226 6.6.2 MSEP in the BF method, aggregated accident years 230 7 Bootstrap Methods 233 7.1 Introduction 233 7.1.1 Efron’s non-parametric bootstrap 234 7.1.2 Parametric bootstrap 236 7.2 Log-normal model for cumulative sizes 237 7.3 Generalized linear models 242 7.4 Chain-ladder method 244 7.4.1 Approach 1: Unconditional estimation error 246 7.4.2 Approach 3: Conditional estimation error 247 7.5 Mathematical thoughts about bootstrapping methods 248 7.6 Synchronous bootstrapping of seemingly unrelated regressions 253 8 Multivariate Reserving Methods 257 8.1 General multivariate framework 257 8.2 Multivariate chain-ladder method 259 8.2.1 Multivariate CL model 259 8.2.2 Conditional process variance 264 8.2.3 Conditional estimation error for single accident years 265 8.2.4 Conditional MSEP, aggregated accident years 272 8.2.5 Parameter estimation 274 8.3 Multivariate additive loss reserving method 288 8.3.1 Multivariate additive loss reserving model 288 8.3.2 Conditional process variance 295 8.3.3 Conditional estimation error for single accident years 295 8.3.4 Conditional MSEP, aggregated accident years 297 8.3.5 Parameter estimation 299 8.4 Combined Multivariate CL and ALR method 308 8.4.1 Combined CL and ALR method: the model 308 8.4.2 Conditional cross process variance 313 8.4.3 Conditional cross estimation error for single accident years 315 8.4.4 Conditional MSEP, aggregated accident years 319 8.4.5 Parameter estimation 321 9 Selected Topics I: Chain-Ladder Methods 331 9.1 Munich chain-ladder 331 9.1.1 The Munich chain-ladder model 333 9.1.2 Credibility approach to the MCL method 335 9.1.3 MCL Parameter estimation 340 9.2 CL Reserving: A Bayesian inference model 346 9.2.1 Prediction of the ultimate claim 351 9.2.2 Likelihood function and posterior distribution 351 9.2.3 Mean square error of prediction 354 9.2.4 Credibility chain-ladder 359 9.2.5 Examples 361 9.2.6 Markov chain Monte Carlo methods 364 10 Selected Topics II: Individual Claims Development Processes 369 10.1 Modelling claims development processes for individual claims 369 10.1.1 Modelling framework 370 10.1.2 Claims reserving categories 376 10.2 Separating IBNeR and IBNyR claims 379 11 Statistical Diagnostics 391 11.1 Testing age-to-age factors 391 11.1.1 Model choice 394 11.1.2 Age-to-age factors 396 11.1.3 Homogeneity in time and distributional assumptions 398 11.1.4 Correlations 399 11.1.5 Diagonal effects 401 11.2 Non-parametric smoothing 401 Appendix A: Distributions 405 A.1 Discrete distributions 405 A.1.1 Binomial distribution 405 A.1.2 Poisson distribution 405 A.1.3 Negative-Binomial distribution 405 A.2 Continuous distributions 406 A.2.1 Uniform distribution 406 A.2.2 Normal distribution 406 A.2.3 Log-normal distribution 407 A.2.4 Gamma distribution 407 A.2.5 Beta distribution 408 Bibliography 409 Index 417

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Book SynopsisOctober 19th 1987 was a day of huge change for the global finance industry. On this day the options market crashed, the Nobel Prize winning Black-Scholes formula failed and volatility smiles were born, and on this day Elie Ayache began his career, on the trading floor of the French Futures and Options Exchange.Table of ContentsIntroduction xv Part I Writing and Event 1 1 Writer of The BLANK Swan 3 1.1 Prediction versus Prescription 3 1.1.1 My private Black Swan 3 1.1.2 Pierre Menard’s trading room 4 1.1.3 Probability, replication, context and beyond 4 1.1.4 Contingency 5 1.1.5 The process of change of contexts 6 1.1.6 Writing the Black Swan 7 1.1.7 Finding the context in The Black Swan 8 1.1.8 Writing backwards 9 1.1.9 Poetry and The Black Swan 10 1.2 Generalizing Prediction 11 1.2.1 Postponing history 11 1.2.2 Incompatible contexts 11 1.2.3 Knowledge as prediction 13 1.2.4 True empiricism 14 1.2.5 Meta-contextual prediction and backward causality 15 1.3 The Derivatives Market 18 1.3.1 Possibility, capacity and the market of contingent claims 18 1.3.2 Market mechanics 19 1.3.3 Price and the implicate ontology 19 1.3.4 Technology of the future 21 1.3.5 Context change and the necessity of jumps 23 1.3.6 The ‘derivative–derivative’ trader 24 1.3.7 Bringing the Black Swan to nest 25 1.3.8 The regime-switching model as a meta-contextual pricing tool 26 1.3.9 ‘Transcendental deduction’ of the derivatives market 27 1.3.10 A return to history 28 2 The Writing of Derivatives 31 2.1 First Steps on the Surface 31 2.1.1 Theoretical speculation versus speculation 32 2.1.2 Rethinking probability 33 2.1.3 Nonarbitrage 34 2.1.4 Writing, difference and deferral 37 2.1.5 Reality of the market: the virtual 38 2.2 Introducing Contingency 40 2.2.1 Derivative writing as an alternative to metaphysics 40 2.2.2 Inverting the logic 41 2.2.3 Present value versus present price 42 2.2.4 Derivative technology 43 2.2.5 From derivatives to contingent claims 45 2.2.6 The medium of contingency 46 2.2.7 Possibility versus capacity 47 2.2.8 Immanent differentiation and univocal contingency 49 2.3 The Pricing Surface 51 2.3.1 Reversibility of pricing and absolute market 51 2.3.2 Price and exchange 54 2.3.3 The two faces of price and reversion to the surface 55 2.3.4 The liquidity and the fold of price 56 2.3.5 The new metaphysics of liquidity and of the past of prices 58 3 The Event of the Market 61 3.1 From States of the World to Market Prices 61 3.1.1 The market, a place of exchange not of prediction 61 3.1.2 Value versus price 63 3.1.3 Elements of financial valuation theory 63 3.1.4 The advent of derivatives and market prices as states of the world 64 3.2 The Black–Scholes–Merton Paradigm 65 3.2.1 Price process and Brownian motion 65 3.2.2 The Black–Scholes revolution and derivative pricing theory 66 3.2.3 The dynamic replication of derivative instruments 67 3.2.4 A universal pricing formula 68 3.3 The Critique of Derivative Pricing Theory 70 3.3.1 The real consequences of derivative pricing theory 70 3.3.2 The very special mode of being of the market 71 3.3.3 The market as given 72 3.3.4 The market as the ‘inversion’ of theory or the ambivalence of price 73 3.4 The Necessity of Meta-Contextual Ascent 75 3.4.1 A new ‘logic’ for a new science 75 3.4.2 New generations, endless generation 77 3.4.3 The necessity of the context and the necessity of its surpassing 77 3.4.4 A meta-contextual pricing tool 79 3.4.5 Technology of the future versus knowledge of the future 82 3.4.6 The performative surpassing of representation and possibility 83 4 Writing and the Market 87 4.1 Pierre Menard 87 4.1.1 The reality of contingency 87 4.1.2 The im-possibility of history 89 4.1.3 Writing history 91 4.1.4 The very sad writing of Pierre Menard 92 4.1.5 The differential definition of writing and the unpredictability of the Quixote 95 4.1.6 The past of possibility 97 4.2 Reading and Writing 100 4.2.1 The significance of replication and the turn to the virtual 100 4.2.2 Writing as forgetting 103 4.2.3 Anti-memory as trading and literary creation 104 4.2.4 The resurfacing of writing 107 4.3 Approaching the Market 108 4.3.1 Univocity of the market 108 4.3.2 Immanence of the market 111 4.3.3 The sense of the market 113 4.3.4 Announcing the genesis of the market 115 4.3.5 Originality of price and of the market 116 4.3.6 The Blank Swan 118 Part II Absolute Contingency and the Return of Speculation 123 5 The Necessity of Contingency 125 5.1 Against Speculation 125 5.1.1 Writing history (reprise) 125 5.1.2 The writer’s (and trader’s) body 126 5.1.3 Beyond possibility, capacity and ethics: a political interlude 128 5.1.4 State of power 129 5.1.5 The absolute 131 5.1.6 Absolute irony 132 5.2 Speculative Materialism 132 5.2.1 Speculative metaphysics 132 5.2.2 The shortcoming of Kant’s critical philosophy 133 5.2.3 Meillassoux’s proposition: the absolute necessity of contingency 134 5.2.4 Is the absolute thinkable? 136 5.2.5 The absolutization of facticity 137 5.2.6 Positively thinking the absolute 138 5.2.7 Chaos, yet not without structure 139 6 Passage to the Future 143 6.1 From Possibility to Inexistence 143 6.1.1 The passing of the possible 144 6.1.2 Factual ontology 145 6.1.3 Cantor’s set theory as meta-ontology 146 6.1.4 Factual derivation of the un-totalization 147 6.1.5 Effective contingency versus absolute contingency 148 6.1.6 Speculative result versus metaphysical result 149 6.2 The Passage 150 6.2.1 The future and the world 150 6.2.2 Passage to the future 151 6.2.3 Gravity of the world 152 6.2.4 The quality of happening 153 6.2.5 Turning the future on 155 6.3 The Future 156 6.3.1 Badiou and Deleuze 156 6.3.2 Ontologizing the passage 157 6.3.3 Cutting to the future 158 6.3.4 A paper rotation 159 6.3.5 Keeping only the future 160 7 Necessity of the Future 163 7.1 A Model World 163 7.1.1 Derivatives world 163 7.1.2 The event of trading the derivative 164 7.1.3 Exchange as fundamental ontology 166 7.1.4 The market as the exchange of knowledge 167 7.1.5 The market as the process of history 168 7.1.6 Arche-exchange 168 7.2 The Implied Absolute 169 7.2.1 The absolute is in the inversion 169 7.2.2 Why derivative pricing is not a human science 171 7.2.3 The implied volatility smile is the absolute truth 173 7.2.4 Implication is faster than thought 174 7.2.5 The market as the last absolute 175 8 Necessity of Writing 177 8.1 Radical Speculation 177 8.1.1 Elevating implication 177 8.1.2 The ‘What?’ question 178 8.1.3 Thinking speculation reflexively 178 8.1.4 Critical speculation 179 8.1.5 Absolute speculation 181 8.1.6 Implication as the radicalization of speculation 182 8.2 The Pricing Alternative 183 8.2.1 Price as a crossing 183 8.2.2 The absolutization of mathematics 183 8.2.3 The mathematics of price 184 8.2.4 Price as the exchange of metaphysics and possibility 186 8.2.5 The ‘letter’ of the necessity of contingency 187 8.2.6 Immanence and materiality of price 188 8.3 From the Market to Work 189 8.3.1 Price is the other of thought 189 8.3.2 Meillassoux’s body 190 8.3.3 The work (of the trader, of the poet) 191 8.3.4 Writing the world 192 Part III Flight to Sydney, Or the Genesis of the Book 195 9 The Mathematics of Price 197 9.1 The Absolute without Thought 197 9.1.1 Mathematical thinkability 197 9.1.2 The absolute without necessity 199 9.1.3 Impossible exchange 201 9.1.4 Writing as nonmetaphysical speculation 203 9.2 The Absolute within Thought 205 9.2.1 Philosophy of the event 205 9.2.2 Necessity as tension 208 9.2.3 The event of thought 209 9.2.4 Deep necessity versus superficial speculation 211 9.2.5 The cohesion of thought 212 10 Barton Fink 217 10.1 The Pledge 217 10.1.1 Passivity of thought and the exchange surface 217 10.1.2 Fiction, fabrication and dynamic programming 219 10.1.3 The first mark on the surface 221 10.1.4 The partition 222 10.2 The Turn 224 10.2.1 The turn of the world 224 10.2.2 The violence in movie-making 225 10.2.3 The probability distribution 228 10.2.4 Partition of the world and shoe distribution 229 10.2.5 The bellhop 232 10.2.6 Time frame and deadline 233 10.2.7 Woman, or the end of the partition 234 10.2.8 The sum total of possibilities and the problem in the head office 235 11 The Narrative Adventure 237 11.1 The Line of Flight 237 11.1.1 The other end of the world 237 11.1.2 The book of derivatives 238 11.1.3 Tour du monde versus point of the world 239 11.1.4 Flight to Sydney, or the retro-adventure 241 11.2 The POINT of the World 243 11.2.1 Flight to the virtual 243 11.2.2 Eternal turn versus eternal return 246 11.2.3 Writing after the departure of possibility 247 11.2.4 The narrative from the point of the world 249 11.2.5 The Australian bank, book and market 250 12 Out of the Box 253 12.1 The Purple Gastropod 253 12.1.1 Quants and the enterprise-wide system 253 12.1.2 Integration versus differentiation 254 12.1.3 How to be Australian 255 12.1.4 Creators of a boîte 257 12.1.5 After dinner 259 12.2 The Point of Return, the Point of Inversion 261 12.2.1 The mark, the market and the point of return of the world 261 12.2.2 Turning the world into a point, inverting the surface 263 12.2.3 Blindness and insight 264 12.2.4 Inverting the world, and the only remaining question 265 12.2.5 From theory to the narrative adventure, to the only remaining book 268 12.3 How to be a Writer 269 12.3.1 My place as a writer 269 12.3.2 My memory of the market 272 12.3.3 Walking on my head 276 12.3.4 Double writer, double trajectory 279 13 The Prestige 283 13.1 Finding the Market, Binding the Book 283 13.1.1 Reversibility between the book and the market 283 13.1.2 Sydney process and writing process 286 13.1.3 Marketing the philosophy book, and my trademark 287 13.1.4 The infinite duration of writing 288 13.1.5 The question of the book, the equation of the book 291 13.2 Absolute Deterritorialization 293 13.2.1 Making the point of the market 293 13.2.2 Head office and blank box 298 13.2.3 The revolutionary and virtual exotic market 300 13.2.4 How the plane of immanence takes precedence 303 14 The Geographical Process 305 14.1 The Field of Ruins 305 14.1.1 Ancient Greece, the market and Australia 305 14.1.2 The market as field of ruins and geographical process 306 14.1.3 The method of the intuition of the market 308 14.1.4 The becoming of the book and the pressing of the ruins 310 14.1.5 The dwelling of the virtual and the implosion of the ruins 313 14.1.6 The book after the market and the cross of history 314 14.1.7 Pulling out the tool, drawing the book and withdrawing in a hotel 318 14.2 Landing on the Market 320 14.2.1 The tool to write the market 320 14.2.2 Reality of the market 325 14.2.3 Absolute exchange 327 14.2.4 Exchange as a category of its own 329 14.2.5 Option volatility smile and exchange 332 14.2.6 The heart of the market 336 Part IV Conversion of Credit into Equity, Or the Genesis of the Market 341 15 History of the Market 343 15.1 The Conversion 343 15.1.1 The significance of the convertible bond 343 15.1.2 Genesis of the market 343 15.1.3 Passivity and activity 344 15.1.4 The moment of the conversion 345 15.2 Possibility versus Contingency 347 15.2.1 Contingent claim versus projected possibility 347 15.2.2 Pricing versus evaluation 347 15.2.3 Price and the stochastic process 348 15.2.4 The meaning of the market and the volatility smile 351 15.2.5 Possibility unmasked and return to the virtual 353 15.2.6 Backward possibility 354 15.3 The Market 357 15.3.1 The privilege of the market 357 15.3.2 The place of the trader 358 15.3.3 The trader as a writer of last resort 360 15.3.4 The end of the flight in possibility 361 15.3.5 Summary 362 16 From Debt to Equity 365 16.1 Deduction of the Contingent Claim 365 16.1.1 Debt, death and contingency 365 16.1.2 The morphing of debt into equity 366 16.1.3 The conversion/conservation of writing 367 16.1.4 Company of the future 368 16.2 Deduction of the Exchange 370 16.2.1 The past of debt and the definition of probability 370 16.2.2 The exchange place as the conversion of face 371 16.2.3 Breaking the circle of representation 372 16.2.4 The market without possibility 373 16.2.5 The market as the medium of contingency 375 16.2.6 The impossible exchange 376 16.3 Deduction of Price 379 16.3.1 Price as the ‘value’ of the contingent claim 379 16.3.2 How does price differentiate? 381 16.3.3 The atemporal pit of price 382 17 The Market and the Philosophy of Difference 385 17.1 The Pit of Price 385 17.1.1 The price of exotics as the key 385 17.1.2 Price as intensive difference 386 17.1.3 Price as meaning 388 17.1.4 Price and the intensive conception of time 390 17.2 The Market and Time 392 17.2.1 The market as noncausal redistribution of probability distributions 392 17.2.2 Creative time 395 17.2.3 Creation as eternal return 397 17.2.4 The single dice-throw 398 17.3 The Market and Difference 403 17.3.1 The pure order of time 403 17.3.2 Internal difference 405 17.3.3 The market as philosophy and conversion as meta-philosophy 406 17.3.4 Immanence and the ontology of multiplicities 409 17.3.5 Reawakening the virtual 411 18 Future of the Market 415 18.1 The Category of Price 415 18.1.1 Price as interface 415 18.1.2 Possibility as a pretext for writing 418 18.1.3 The past of possibility 420 18.1.4 The aleatory point lying at the heart of the contingent claim and the exchange 421 18.1.5 The market, as exchange, is the answer to the impossible exchange 424 18.1.6 Time-to-expiry versus place 426 18.2 The Step Beyond 427 18.2.1 Reactivating the conversion 427 18.2.2 Possibility is only a tool 429 18.2.3 The pricing tool 432 18.2.4 Making money in the market 433 18.2.5 The market as alternative to probability 435 18.2.6 Suppressing possibility 436 18.2.7 Thinking of contingency instead 437 18.2.8 Beyond the financial market 439 18.3 Place and Contingency 440 18.3.1 The sense of place 440 18.3.2 The power of price 442 18.3.3 A life in contingency 443 18.3.4 Success and succession 445 18.3.5 Becoming the market 446 18.4 Conclusion 448 19 Appendix 1 The Logic and Mathematics of Regime Switching 449 A1.1 Description of the Regime-Switching Model 450 A1.1.1 Regimes 450 A1.1.2 Risk-free yield curve 451 A1.1.3 Dividends 451 A1.1.4 Regime probability 452 A1.2 General Backward Equations 452 A1.2.1 Stand-alone default regime 453 A1.2.2 Coupled nondefault regimes 453 A1.2.3 Fixed dividends 454 A1.2.4 Proportional dividends 454 A1.2.5 Vanilla calls 454 A1.3 Credit Default Swaps 454 A1.3.1 Definitions 454 A1.3.2 Value in default 455 A1.3.3 Backward equation 455 A1.4 Calibration 456 A1.5 Recalibration 456 20 Appendix 2 From ‘Being and Time’ to ‘Being and Place’ with Jeff Malpas 459 Bibliography 463 Index 467

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Book SynopsisA step-by-step guide to attracting all the investment funds you will ever need for your next real estate transaction As the sales of Real Estate Investing in Canada have proven, Canadians are looking to real estate investing to build wealth. In his bestselling book Real Estate Investing in Canada, Don R. Campbell introduces the Authentic Canadian Real Estate (ACRE) system, the first system of its kind to show ordinary Canadians how to profit from investing in residential real estate. Told as a narrative, a typical Canadian couple named Richard and Emma successfully buy their first properties and now are ready to leverage their equity into more properties. In order to achieve their goals, they are introduced to a joint-venture specialist and, with his guidance, they learn how joint-venture partnerships work and secrets and strategies for acquiring new properties that only the pros know. Richard and Emma build their portfolio -- and their confidence Table of ContentsMeet the Authors vi Meet the Real Estate Investment Network (REIN) vii Introduction viii Workshop #1: The Potential of JV Money 1 Let’s Get Started 3 What Do the Numbers Really Mean? 7 Get Real: Commit to Chasing Your Own Dream! 8 Commit to Systems, Win-Win Relationships and Follow-Through 11 Making the Leap to JV Deals 13 Acknowledge the Power of JV Money 16 Action Step: What Do You Want JV Money to Achieve for You? 17 Tutorial: What Is Your Personal Belize? 21 Insights from a Veteran Investor / Wade Graham 26 Workshop #2: Systems Make JV Success a Priority 29 Systems: The Foundation of Your Real Estate Investment Strategy 30 The Importance of Relationships 31 The Team Approach is the Only Approach 33 Follow-Through Means Taking Action 35 Don’t Let Analysis Paralysis Hold You Back 36 Action Step: Review Your Real Estate Investment Team 38 Tutorial: Relationships, Systems and Fundamentals 40 Insights from a Veteran Investor / Mark Loeffler 45 Workshop #3: Learn the Principles of JV Wealth Attraction 49 Why Is It Possible to Attract Money to JV Deals? 49 Commit to the Three JV Pillars 52 The Principles of JV Wealth Attraction 54 Action Step: Resolve to Do the Extra 10 Per Cent 62 Tutorial: Practice the Principles 64 Insights from a Veteran Investor / Cindy Wennerstrom 73 Workshop #4: How to Find JV Investors 77 Be a Money Magnet 79 From Circle of Influence to JV Partner 81 Action Step: Approach Your Inner Circle Contacts as JV Investment Gold 85 Tutorial: Recognizing JV Investment Gold 88 Insights from a Veteran Investor / Derek Peever 92 Workshop #5: How to Generate JV Leads with Superior Marketing 97 Solid Oak Marketing Rules 98 Put the Solid Oak Marketing Rules to Work 101 How to Generate Level 1 Leads 105 Generating Leads from Level 2 and Level 3 Investors 107 Action Step: Seek Out Sophisticated JV Investor Insight 109 Tutorial: Market Your Business Better 114 Insights from a Veteran Investor / Jared Hope 124 Workshop #6: How to Choose the Right JV Partner 129 Narrow the JV Field 129 Filter Potential Partners 131 Identify Your Ideal JV Partner 140 How to Present a Deal to a Potential JV Partner 142 Action Step: From Filter to Follow-Through, Always Use a JV Worksheet 148 Tutorial: How to Write a Letter of Intent 154 Insights from a Veteran Investor / Joe Ragona 165 Insights from a Veteran Investor / Monte Dobson 169 Workshop #7: Secure Commitment—Move Your Deal from Talk to Action 173 The Background Check 174 What’s Your Plan B? 178 When a Prospect Says No: Dealing with Rejection 180 Action Step: Real Estate Investment Is about Action 184 Tutorial: Study a Joint-Venture Agreement 186 Insights from a Veteran Investor / Jules & Ange McKenzie 196 Workshop #8: How to Structure JV Deals 199 Ownership Structure: Know Before You Buy 199 Five Canadian-Specific Ownership Structures 200 Action Step: If You Have a Question, Ask It 210 Tutorial: Review the Fundamentals of a JV Agreement 213 Insights from a Veteran Investor / Gary McGowan 219 Insights from a Veteran Investor / Ian Szabo 222 Workshop #9: Closing the Deal—How to Avoid Partner Pitfalls 225 Learn from the Mistakes of Others 226 A Proven System 227 20 Common Landmines to Avoid 229 Take Responsibility for Your Deals 249 Action Step: Walk in the Footsteps of Giants 249 Tutorial: The Top 5 Steps to Avoiding Landmines 251 Insights from a Veteran Investor / Michael Ponte 257 Workshop #10: Duplicating Success 261 The 7 Steps that Unlock the Vault of JV Secrets 261 Practice Makes Perfect 263 Built-in Flexibility 263 Get Your Deal Straight 264 Put Follow-up in Action 268 Make It Your Business to Know the Market 273 Action Step: Follow-up Communication Is Key 274 Tutorial: Taming the Paper Tiger and Using Accounting Strategies that Work 279 Insights from a Veteran Investor / Todd & Danielle Millar 289 Workshop Wrap-Up: Richard and Emma Look Ahead 293 Where to From Here? 293 Insights from a Veteran Investor / Jeff Gunther 296 Appendix A: Property Goldmine Score Card 300 B: REIN Property Analyzer 302 C: Prospective JV Partners—Follow-Up Letter 304 D: Potential-for-Relationship Questionnaire 305 E: Expression of Interest Letter 310 F: Rental Properties Monthly Statement 312 G: Rental Properties Monthly Statement—YTD Summary 314 Index 316

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Book SynopsisThis book presents a major innovation in the interest rate space. It explains a financially motivated extension of the LIBOR Market model which accurately reproduces the prices for plain vanilla hedging instruments (swaptions and caplets) of all strikes and maturities produced by the SABR model.Table of ContentsAcknowledgements xi 1 Introduction 1 I The Theoretical Set-Up 7 2 The LIBOR Market Model 9 3 The SABR Model 25 4 The LMM-SABR Model 51 II Implementation and Calibration 79 5 Calibrating the LMM-SABR Model to Market Caplet Prices 81 6 Calibrating the LMM-SABR Model to Market Swaption Prices 101 7 Calibrating the Correlation Structure 125 III Empirical Evidence 141 8 The Empirical Problem 143 9 Estimating the Volatility of the Forward Rates 159 10 Estimating the Correlation Structure 181 IV Hedging 203 11 Various Types of Hedging 205 12 Hedging against Moves in the Forward Rate and in the Volatility 221 13 (LMM)-SABR Hedging in Practice: Evidence from Market Data 231 14 Hedging the Correlation Structure 247 15 Hedging in Conditions of Market Stress 257 References 271 Index 275

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Book SynopsisLiquidity risk is a topic growing immensely in importance in risk management. It has been much neglected by financial institutions and regulators in recent years and receives, in the course of the sub-prime crisis, sudden and great attention. This book is well-structured and provides a comprehensive and systematic approach to the topic. It will help risk controllers to systematically set up a liquidity risk framework in their bank. Peter NEU, European Risk Team Leader, The Boston Consulting Group, and co author of Liquidity Risk Measurement and Management Mr Duttweiler''s book is a welcome addition to the literature on liquidity risk measurement and management. In addition to his contributions to liquidity risk theory and liquidity pricing, the author provides a good overview of all of the critical elements. Leonard Matz, International Solution Manager, Liquidity Risk and co-author of Liquidity Risk Measurement and Management LiquidTable of ContentsForeword. Preface. Acknowledgements. About the Author. 1 Liquidity and Risk: Some Basics. 1.1 Some understanding of liquidity. 1.2 The meaning of liquidity risk. 2 Liquidity in the Context of Business and Financial Policy. 2.1 Introduction. 2.2 Equilibrium as a tool within financial policy. 2.3 The concept enlarged to fit banks. 3 Liquidity as an Element of Banking Risk. 3.1 Some clarifications. 3.2 The concept of downside risk (VAR) and its circle of relationships. 3.3 LAR: liquidity risk and the missing theoretical concept. 3.4 An attempt at an integrated concept for LAR. 3.5 Summary. 4 A Policy Framework for Liquidity. 4.1 Some thoughts and considerations. 4.2 An overview of elements regarding liquidity policy. 4.3 The elements of a liquidity policy in detail. 4.4 Contingency planning. 4.5 A technical framework supporting liquidity policy. 4.6 The link to liquidity management. 5 Conceptual Considerations on Liquidity Management. 5.1 Introduction. 5.2 From accounting presentation to defining the liquidity balance sheet. 5.3 The liquidity balance sheet and liquidity flows. 6 Quantitative Aspects of Liquidity Management. 6.1 General consideration. 6.2 Liquidity at risk as one determinant of the buffers. 6.3 Defining and quantifying the buffers. 6.4 Limit-related input for liquidity policy. 6.5 Transfer pricing and an alternative concept. 7 The Concept in Practice. 7.1 Introduction. 7.2 Establishing the base. 7.3 Case 1: a shock event (9/11). 7.4 Case 2: a name-related stress (Commerzbank in autumn 2002). 7.5 ‘Subprime’ crisis: a stress in progress. 7.6 Final remarks and considerations. 8 Acting Within the Supervisory Frame. 8.1 High-level risks. 8.2 The regulatory focus set by supervisors. 8.3 Considerations and conclusions for bank management. Bibliography. Index.

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Book SynopsisRecent turbulence in the financial markets has highlighted the need for diversified portfolios with lower correlations between the different investments. Life settlements meet this need, offering investors the prospect of high, stable returns, uncorrelated with the broader financial markets. This book provides readers of all levels of experience with essential information on the process surrounding the acquisition and management of a portfolio of life settlements; the assessment, modelling and mitigation of the associated longevity, interest rate and credit risks; and practical approaches to financing and risk management structures. It begins with the history of life insurance and looks at how the need for new financing sources has led to the growth of the life settlements market in the United States. The authors provide a detailed exploration of the mathematical formulae surrounding the generation of mortality curves, drawing a parallel between the tools deployed in the creTable of ContentsIntroduction by Con Keating. 1 Life Insurance: Primary and Secondary Markets. Introduction. 1.1 History, application and termination of life insurance policies. 1.1.1 History: Early life insurance. 1.1.2 Modern insurance. 1.1.3 Insurance moves to America. 1.1.4 Summary. 1.1.5 Applications of life insurance. 1.1.6 The parties involved in a life insurance policy. 1.1.7 Life insurance and life assurance. 1.1.8 Termination and surrender of life insurance policies. 1.2 Life Insurance policy types and underwriting. 1.2.1 Universal life. 1.2.2 Variable universal life. 1.2.3 Term insurance. 1.2.4 Endowment insurance. 1.2.5 Whole life. 1.2.6 Policy riders. 1.3 Development of the viatical settlement and life settlement markets. 1.3.1 History and inception. 1.3.2 Negative sentiments. 1.3.3 Market size. 1.3.4 Institutional involvement. 1.4 The parties involved in a life settlement transaction. 1.5 The life settlement process. 1.6 Legal issues. 1.7 Other issues. 2 Mortality and Credit Structures, Valuation and Risk. Introduction. 2.1 CDS and CDO contracts. 2.1.1 CDS. 2.1.2 CDO. 2.1.3 Synthetic and cash flow CDOs. 2.1.4 Life policy CDOs. 2.2 Valuation approach and data. 2.2.1 Approach. 2.2.2 Data. 2.3 The poisson process. 2.4 Single life mortality calculations. 2.4.1 Corporate mortality: CDS contracts and bond pricing. 2.4.2 Generic life policy valuation. 2.4.3 Mortality adjustments. 2.4.4 Risk analysis in the life assurance context – mortality curve stresses. 2.5 Correlation and portfolio calculations. 2.5.1 Copulas. 2.5.2 Bivariate copulas. 2.5.3 Gaussian copula and correlation in CDO structures. 2.5.4 Correlation in life insurance. 2.6 Rating transactions. 2.7 Risk management of a structured life settlements portfolio. 2.7.1 Risk managing a book of traded financial assets. 2.7.2 Risk managing a portfolio of mortality risks in an insurance company. 2.7.3 Risk managing a life settlements portfolio. 2.7.4 Current risk management software. 3 Structured Products and Securitization. 3.1 Securitization. 3.1.1 Other examples: Synthetic securitization. 3.1.2 Prestructures. 3.2 Structured products. 3.2.1 Mortgage structures. 3.2.2 Other examples. 3.3 The risks of structured products. 3.3.1 Problems with correlations and volatility. 3.3.2 Pricing structures. 3.4 Modelling. 3.4.1 Implied models. 3.4.2 Parametric models. 3.4.3 Realized moments. 3.5 Life Settlement pool (LSP). 3.5.1 Volatility in LSPs. 3.5.2 Correlation in LSPs. 3.5.3 Credit risks. 3.5.4 LSP: Examples. 3.5.5 Other risks. 3.5.6 Due diligence. 3.6 Conclusion. 4 Examples of LSP Securitization: A Principal Protected Fund. Introduction. 4.1 A simple example. 4.2 Other pool examples. 4.2.1 Assumptions. 4.2.2 Statically managed fund. 4.2.3 A Managed pool. 4.2.4 Looking at risks. 4.2.5 Leveraged reinvested pools. 4.3 Group policies. 4.4 Conclusion. 4.4.1 Administration. 4.4.2 Modelling. Appendix: Sample product description outline. A4.1 Introduction. A4.2 Product description. A4.3 Marketing assessment. A4.4 Modelling and pricing. A4.5 Administration and accounting. A4.6 Conclusion. 5 Capital Markets Products: Principal Protection. Introduction. 5.1 Bond constructions. 5.2 A zero coupon bond. 5.3 A coupon bond. 5.4 A convertible bond. 5.4.1 The convertible is exercised. 5.4.2 The convertible is not exercised. 5.5 Principal protection. 5.6 Longevity bonds. 5.6.1 The longevity bonds: Principal at risk. 5.6.2 Longevity bonds: Coupons at risk. 5.6.3 The inverse longevity bond. 5.7 Sharia compliant bonds. 5.8 Power bonds. 5.9 CIOs and PACs, TACs and VADAMSs. 5.9.1 A collateralized insurance obligation. 5.9.2 PAC. 5.9.3 PAC bond – breaching the boundaries by 40%. 5.10 Equity-linked notes. 5.11 Conclusion. 6 Structured Financing: Guaranteed Loan repayment. Introduction. 6.1 Project financing: Commercial and industrial uses. 6.1.1 Purchase of a restaurant chain. 6.1.2 Leasing. 6.1.3 Balance sheet restructuring. 6.2 Retail product. 6.2.1 Principal reduced mortgages. 6.2.2 Credit enhancement for the retail borrower. 6.3 Reverse mortgage or equity reversal programme. 6.3.1 Home lease programme. 6.4 Asset swaps. 6.4.1 Simple review. 6.4.2 The sub-prime swap. 6.4.3 Risks of this transaction. 6.5 The pension swap. 6.6 A New CPPI product. 6.6.1 The initial CPPI study. 6.6.2 Allocation process. 6.7 Conclusion. 7 Life Settlement Derivatives. Introduction. 7.1 Longevity bonds. 7.2 Asset Swap. 7.2.1 Deterministic mortality swap. 7.2.2 Mortality swap: Single payment. 7.2.3 Mortality swap: Multiple periods. 7.3 Mortality curves. 7.3.1 The forward mortality rate. 7.3.2 Interest rates. 7.3.3 Interest rate swap. 7.3.4 Forward rate agreements. 7.3.5 Mortality rate. 7.4 Futures and forwards. 7.5 Options. 7.5.1 Review of option pricing models used to price mortality options. 7.5.2 Options on longevity bond future. 7.5.3 Options on the longevity spot bond. 7.5.4 Put option on the longevity of the pool. 7.5.5 Mortality caps, floors and swaptions. 7.5.6 Interest rate caps. 7.5.7 Interest rate swaption. 7.5.8 Mortality caps. 7.6 Synthetic pools. 7.7 Conclusion. 8 Hedging. Introduction. 8.1 Hedging longevity or extension risk. 8.1.1 Longevity bonds. 8.1.2 Asset swaps. 8.1.3 Annuity hedging. 8.1.4 Single premium annuity. 8.1.5 80% runoff with no annuity vs. an annuity. 8.1.6 40% runoff with no annuity. 8.1.7 40% runoff with single premium annuity. 8.1.8 80% runoff with an annuity payout per year. 8.1.9 Summary. 8.2 Hedging with inverse longevity bond. 8.2.1 Hedging with a surety bond. 8.2.2 Hedging with an insurance wrap. 8.2.3 Over-collateralization. 8.2.4 Hedging with a mortality swap. 8.3 Futures-forwards. 8.4 Options. 8.4.1 Bond options. 8.4.2 Put option on the longevity. 8.5 Caps, floors and swaptions. 8.5.1 Caps. 8.5.2 Swaptions. 8.6 Hedging liquidity risk. 8.6.1 Establishing a reserve. 8.6.2 Establishing a liquidity provider. 8.6.3 Partial portfolio sale. 8.6.4 Borrow against the portfolio. 8.7 Hedging credit risk. 8.7.1 Diversification. 8.7.2 Credit risk. 8.7.3 Hedging efficiency. 8.8 HER (Hedge efficiency ratio) for an inverse longevity bond. 8.8.1 Theory. 8.8.2 Hedging effectiveness. 8.8.3 Effectiveness of a hedge: the calculation. 8.8.4 Risks. 8.8.5 HER for an annuity. 8.8.6 HER for an inverse longevity bond. 8.8.7 HER for a mortality swap. 8.9 Conclusion. Appendix. Bibliography. Index.

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Book SynopsisThe comprehensive guide to working more effectively within the multi-commodity market. The Handbook of Multi-Commodity Markets and Products is the definitive desktop reference for traders, structurers, and risk managers who wish to broaden their knowledge base.Table of ContentsPreface xix Acknowledgements xxiii About the Editors xxv List of Contributors xxvii Part One Commodity Markets and Products Chapter 1 Oil Markets and Products 3 Cristiano Campi and Francesco Galdenzi 1.1 Introduction 3 1.2 Risk Management for Corporations: Hedging Using Derivative Instruments 4 1.2.1 Crude Oil and Oil Products Risk Management for Corporations 4 1.2.2 Aviation: Risk Profile and Hedging Strategies 11 1.2.3 Shipping: Risk Profile and Hedging Strategies 20 1.2.4 Land Transportation: Risk Profile and Hedging Strategies 27 1.2.5 Utilities: Risk Profile and Hedging Strategies 32 1.2.6 Refineries: Risk Profile and Hedging Strategies 35 1.2.7 Industrial Consumers: Risk Profile and Hedging Strategies 40 1.3 Oil Physical Market Hedging and Trading 41 1.3.1 The Actors, Futures and OTC Prices 41 1.3.2 The Most Commonly Used Financial Instruments 45 1.3.3 How to Monitor and Manage Risk 49 1.3.4 How to Create a Market View 52 1.3.5 Trading Strategies to Maximize a Market View 54 Further Reading 66 Chapter 2 Coal Markets and Products 67 Lars Schernikau 2.1 Introduction 67 2.2 Source of Coal – Synopsis of the Resource Coal 72 2.2.1 The Fundamentals of Energy Sources and Fossil Fuels 72 2.2.2 Process of Coal Formation 74 2.2.3 Coal Classification 74 2.2.4 Reserves and Resources 79 2.2.5 Coal Mining and Production 83 2.3 Use of Coal – Power Generation and More 90 2.3.1 Steam Coal and its Role in Power Generation 91 2.3.2 Coal-Fired Power Plant Technologies 93 2.3.3 Cement and Other Industry 95 2.3.4 Alternatives to Coal: Shale Gas and Other 95 2.3.5 Future Trend: CtL and Coal Bed Methane 101 2.4 Overview of Worldwide Steam Coal Supply and Demand 102 2.4.1 Atlantic Demand Market: Europe at its Core 102 2.4.2 Pacific Demand Market: China, India, Japan, Taiwan, Korea and SEA 104 2.4.3 Steam Coal Supply Regions: ID, AU, USA, SA, RU, CO and Others 107 2.4.4 Seaborne Freight 116 2.4.5 Geopolitical and Policy Environment 118 2.5 The Global Steam Coal Trade Market and its Future 121 2.5.1 Current and Future Market Dynamics of the Coal Trade 121 2.5.2 Future Steam Coal Price Trends 125 2.5.3 Future Source of Energy: What Role Will Coal Play? 127 2.6 Concluding Words 129 Abbreviations and Definitions 130 Acknowledgements 132 References 132 Chapter 3 Natural Gas Markets and Products 135 Mark Cummins and Bernard Murphy 3.1 Physical Natural Gas Markets 135 3.1.1 Physical Structure 141 3.1.2 Natural Gas Market Hubs and Main Participants 146 3.1.3 Liquefied Natural Gas 147 3.1.4 Shale Gas 149 3.2 Natural Gas Contracting and Pricing 154 3.2.1 Natural Gas Price Formation 155 3.3 Financial Natural Gas Markets 158 3.3.1 Exchange-Based Markets 158 3.3.2 Natural Gas Futures 159 3.3.3 Natural Gas Options 172 3.3.4 OTC Markets and Products 179 References 180 Chapter 4 Electricity Markets and Products 181 Stefano Fiorenzani, Bernard Murphy and Mark Cummins 4.1 Market Structure and Price Components 181 4.1.1 Spot and Forward Markets 181 4.1.2 Supply and Demand Interaction 183 4.1.3 Electricity Derivatives 186 4.1.4 Power Price Models 189 4.1.5 Spot Price Analysis (IPEX Case) 196 4.1.6 Forward Price Analysis (EEX Case) 200 4.2 Renewables, Intra-Day Trading and Capacity Markets 205 4.2.1 Renewables Expansion Targets 205 4.2.2 Growth in Intra-Day Trading 206 4.2.3 Implications for Future Price Volatility and Price Profiles 207 4.2.4 Reforms and Innovations in Capacity Markets 209 4.2.5 Provision and Remuneration of Flexibility – Storage Assets 212 4.3 Risk Measures for Power Portfolios 216 4.3.1 Value-Based Risk Measures 216 4.3.2 Flow-Based Risk Measures 218 4.3.3 Credit Risk for Power Portfolios 220 References 221 Further Reading 221 Chapter 5 Emissions Markets and Products 223 Marc Chesney, Luca Taschini and Jonathan Gheyssens 5.1 Introduction 223 5.2 Climate Change and the Economics of Externalities 224 5.2.1 The Climate Change Issue 224 5.2.2 The Economics of Externality and GHG Pollution 226 5.3 The Kyoto Protocol 227 5.3.1 The United Nations Framework Convention on Climate Change 227 5.3.2 The Conference of Parties and the Subsidiary Bodies 229 5.3.3 The Kyoto Protocol 229 5.3.4 The Road to Paris 231 5.4 The EU ETS 232 5.4.1 Institutional Features 232 5.4.2 Allocation Criteria 234 5.4.3 Market Players and the Permit Markets 236 5.4.4 The Future of the EU ETS 238 5.5 Regional Markets: A Fragmented Landscape 239 5.5.1 Regional Markets 239 5.5.2 Voluntary Markets 240 5.6 A New Asset Class: CO2 Emission Permits 241 5.6.1 Macroeconomic Models 242 5.6.2 Econometric Investigation of CO2 Permit Price Time-Series 243 5.6.3 Stochastic Equilibrium Models 251 Abbreviations 252 References 252 Chapter 6 Weather Risk and Weather Derivatives 255 Alessandro Mauro 6.1 Introduction 255 6.2 Identification of Volumetric Risk 257 6.2.1 Weather Events on the Demand Curve 258 6.2.2 Weather Events on the Supply Curve 260 6.2.3 Risk Measurement and Weather-at-Risk 262 6.3 Atmospheric Temperature and Natural Gas Market 264 6.3.1 Characterization of the Air Temperature Meteorological Variable 264 6.3.2 Degree Days 267 6.3.3 Volumetric Risk in the Natural Gas Market 270 6.4 Modification of Weather Risk Exposure with Weather Derivatives 272 6.4.1 Weather Derivatives for Temperature-Related Risk 273 6.5 Conclusions 276 Nomenclature 277 References 277 Chapter 7 Industrial Metals Markets and Products 279 Alessandro Porru 7.1 General Overview 279 7.1.1 Brief History of the LME 280 7.1.2 Non-ferrous Metals 282 7.1.3 Other Metals 291 7.1.4 LME Instruments 292 7.1.5 OTC Instruments 298 7.1.6 A New Player: The Investor 301 7.2 Forward Curves 305 7.2.1 Building LME’s Curves in Practice 308 7.2.2 Interpolation 313 7.2.3 LME, COMEX and SHFE Copper Curve and Arbitrage 314 7.2.4 Contango Limit… 318 7.2.5 …and No-Limit Backwardation 324 7.2.6 Hedging the Curve in Practice 328 7.3 Volatility 337 7.3.1 A European Disguised as an American 338 7.3.2 LME’s Closing Volatilities 339 7.3.3 Sticky Strike, Sticky Delta and Skew 342 7.3.4 Building the Surface in Practice 345 7.3.5 Considerations on Vega Hedging 348 Acknowledgements 352 References 353 Further Reading 353 Chapter 8 Freight Markets and Products 355 Manolis G. Kavussanos, Ilias D. Visvikis and Dimitris N. Dimitrakopoulos 8.1 Introduction 355 8.2 Business Risks in Shipping 356 8.2.1 The Sources of Risk in the Shipping Industry 356 8.2.2 Market Segmentation in the Shipping Industry 358 8.2.3 Empirical Regularities in Freight Rate Markets 359 8.2.4 Traditional Risk Management Strategies 365 8.3 Freight Rate Derivatives 366 8.3.1 Risk Management in Shipping 366 8.3.2 The Underlying Indices of Freight Rate Derivatives 366 8.3.3 The Freight Derivatives Market 372 8.3.4 Examples of Freight Derivatives Trading 380 8.4 Pricing, Hedging and Freight Rate Risk Measurement 382 8.4.1 Pricing and Hedging Effectiveness of Freight Derivatives 382 8.4.2 Value-at-Risk (VaR) in Freight Markets 384 8.4.3 Expected Shortfall (ES) in Freight Markets 389 8.4.4 Empirical Evidence on Freight Derivatives 390 8.5 Other Derivatives for the Shipping Industry 393 8.5.1 Bunker Fuel Derivatives 393 8.5.2 Vessel Value Derivatives 395 8.5.3 Foreign Exchange Rate Derivatives Contracts 395 8.5.4 Interest Rate Derivatives Contracts 396 8.6 Conclusion 396 Acknowledgements 396 References 397 Chapter 9 Agricultural and Soft Markets 399 Francis Declerk 9.1 Introduction: Stakes and Objectives 399 9.1.1 Stakes 399 9.1.2 Objectives 399 9.2 Agricultural Commodity Specificity and Futures Markets 400 9.2.1 Agricultural Commodity Specificity 400 9.2.2 Volatility of Agricultural Markets 402 9.2.3 Forward Contract and Futures Contract 402 9.2.4 Major Agricultural Futures Markets and Contracts 404 9.2.5 Roles of Futures Markets 405 9.2.6 Institutions Related to Futures Markets 406 9.2.7 Commodity Futures Contracts 406 9.2.8 The Operators 408 9.2.9 Monitoring Hedging: Settlement 409 9.2.10 Accounting and Tax Rules 409 9.3 Demand and Supply, Price Determinants and Dynamics 409 9.3.1 Supply and Demand for Agricultural Commodities: The Determinants 409 9.3.2 Agricultural Market Prices, Failures and Policies 413 9.3.3 The Price Dynamics of Seasonal and Storable Agricultural Commodities 416 9.3.4 The Features of Major Agricultural and Soft Markets 417 9.4 Hedging and Basis Management 466 9.4.1 Short Hedging for Producers 466 9.4.2 Long Hedging for Processors 469 9.4.3 Management of Basis Risk 471 9.5 The Financialization of Agricultural Markets and Hunger: Speculation and Regulation 480 9.5.1 Factors Affecting the Volatility of Agricultural Commodity Prices 480 9.5.2 Financialization: Impact of Non-commercial Traders on Market Price 483 9.5.3 The Financialization of Grain Markets and Speculation 484 9.5.4 Bubble or Not, Agricultural Commodities have Become an Asset Class 489 9.5.5 Price Volatility and Regulation 490 9.5.6 Ongoing Research about Speculation and Regulation 493 9.6 Conclusion about Hedging and Futures Contracts 493 9.6.1 Hedging Process 493 9.6.2 Key Success Factors for Agricultural Commodity Futures Contracts 494 9.6.3 Conclusion and Prospects 495 References 495 Further Reading 496 Glossary, Quotations and Policy on Websites 497 Chapter 10 Foreign Exchange Markets and Products 499 Antonio Castagna 10.1 The FX Market 499 10.1.1 FX Rates and Spot Contracts 499 10.1.2 Outright and FX Swap Contracts 500 10.1.3 FX Option Contracts 504 10.1.4 Main Traded FX Options Structures 507 10.2 Pricing Models for FX Options 509 10.2.1 The Black–Scholes Model 510 10.3 The Volatility Surface 511 10.4 Barrier Options 512 10.4.1 A Taxonomy of Barrier Options 512 10.5 Sources of FX Risk Exposure 513 10.6 Hedging FX Exposures Embedded in Energy and Commodity Contracts 517 10.6.1 FX Forward Exposures and Conversions 518 10.6.2 FX-Linked Energy Contracts 522 10.7 Typical Hedging Structures for FX Risk Exposure 533 10.7.1 Collar Plain Vanilla 533 10.7.2 Leveraged Forward 536 10.7.3 Participating Forward 538 10.7.4 Knock-Out Forward 540 10.7.5 Knock-In Forward 543 10.7.6 Knock-In Knock-out Forward 545 10.7.7 Resettable Forward 548 10.7.8 Range Resettable Forward 550 References 553 Part Two Quantitative Topics Chapter 11 An Introduction to Stochastic Calculus with Matlab® Examples 557 Laura Ballotta and Gianluca Fusai 11.1 Brownian Motion 558 11.1.1 Defining Brownian Motion 558 11.2 The Stochastic Integral and Stochastic Differential Equations 566 11.2.1 Introduction 566 11.2.2 Defining the Stochastic Integral 567 11.2.3 The It Stochastic Integral as a Mean Square Limit of Suitable Riemann–Stieltjes Sums 567 11.2.4 A Motivating Example: Computing ∫0tW(s)dW(s) 568 11.2.5 Properties of the Stochastic Integral 569 11.2.6 Itˆo Process and Stochastic Differential Equations 571 11.2.7 Solving Stochastic Integrals and/or Stochastic Differential Equations 573 11.3 Introducing Itȏ’s Formula 575 11.3.1 A Fact from Ordinary Calculus 576 11.3.2 Itˆo’s Formula when Y = g(x), g(x) ∈ C2 576 11.3.3 Guiding Principle 577 11.3.4 Itˆo’s Formula when Y(t) = g(t, X), g(t, X) ∈ C1,2 577 11.3.5 The Multivariate Itˆo’s Lemma when Z = g(t, X, Y) 578 11.4 Important SDEs 581 11.4.1 The Geometric Brownian Motion GBM(𝜇, 𝜎) 581 11.4.2 The Vasicek Mean-Reverting Process 588 11.4.3 The Cox–Ingersoll–Ross (CIR) Model 595 11.4.4 The Constant Elasticity of Variance (CEV) Model 604 11.4.5 The Brownian Bridge 607 11.4.6 The Stochastic Volatility Heston Model (1987) 611 11.5 Stochastic Processes with Jumps 618 11.5.1 Preliminaries 618 11.5.2 Jump Diffusion Processes 623 11.5.3 Time-Changed Brownian Motion 628 11.5.4 Final Remark: Lévy Processes 632 References 633 Further Reading 633 Chapter 12 Estimating Commodity Term Structure Volatilities 635 Andrea Roncoroni, Rachid Id Brik and Mark Cummins 12.1 Introduction 635 12.2 Model Estimation Using the Kalman Filter 635 12.2.1 Description of the Methodology 636 12.2.2 Case Study: Estimating Parameters on Crude Oil 642 12.3 Principal Components Analysis 646 12.3.1 PCA: Technical Presentation 647 12.3.2 Case Study: Risk Analysis on Energy Markets 651 12.4 Conclusion 655 Appendix 655 References 657 Chapter 13 Nonparametric Estimation of Energy and Commodity Price Processes 659 Gianna Fig`a-Talamanca and Andrea Roncoroni 13.1 Introduction 659 13.2 Estimation Method 660 13.3 Empirical Results 663 References 672 Chapter 14 How to Build Electricity Forward Curves 673 Ruggero Caldana, Gianluca Fusai and Andrea Roncoroni 14.1 Introduction 673 14.2 Review of the Literature 674 14.3 Electricity Forward Contracts 675 14.4 Smoothing Forward Price Curves 677 14.5 An Illustrative Example: Daily Forward Curve 679 14.6 Conclusion 684 References 684 Chapter 15 GARCH Models for Commodity Markets 687 Eduardo Rossi and Filippo Spazzini 15.1 Introduction 687 15.2 The GARCH Model: General Definition 690 15.2.1 The ARCH(q) Model 692 15.2.2 The GARCH(p,q) Model 693 15.2.3 The Yule–Walker Equations for the Squared Process 695 15.2.4 Stationarity of the GARCH(p,q) 696 15.2.5 Forecasting Volatility with GARCH 698 15.3 The IGARCH(p,q) Model 699 15.4 A Permanent and Transitory Component Model of Volatility 700 15.5 Asymmetric Models 702 15.5.1 The EGARCH(p,q) Model 702 15.5.2 Other Asymmetric Models 704 15.5.3 The News Impact Curve 706 15.6 Periodic GARCH 707 15.6.1 Periodic EGARCH 708 15.7 Nesting Models 708 15.8 Long-Memory GARCH Models 713 15.8.1 The FIGARCH Model 716 15.8.2 The FIEGARCH Model 719 15.9 Estimation 720 15.9.1 Likelihood Computation 720 15.10 Inference 722 15.10.1 Testing for ARCH Effects 722 15.10.2 Test for Asymmetric Effects 723 15.11 Multivariate GARCH 725 15.11.1 BEKK Parameterization of MGARCH 726 15.11.2 The Dynamic Conditional Correlation Model 726 15.12 Empirical Applications 727 15.12.1 Univariate Volatility Modelling 727 15.12.2 A Simple Risk Measurement Application: A Bivariate Example with Copulas 733 15.13 Software 740 References 748 Chapter 16 Pricing Commodity Swaps with Counterparty Credit Risk: The Case of Credit Value Adjustment 755 Marina Marena, Gianluca Fusai and Chiara Quaglini 16.1 Introduction 755 16.1.1 Energy Company Strategies in Derivative Instruments 755 16.2 Company Energy Policy 756 16.2.1 Commodity Risk 756 16.2.2 Credit Risk 757 16.3 A Focus on Commodity Swap Contracts 758 16.3.1 Definition and Main Features of a Commodity Swap 758 16.4 Modelling the Dynamics of Oil Spot Prices and the Forward Curve 760 16.4.1 The Schwartz and Smith Pricing Model 760 16.5 An Empirical Application 764 16.5.1 The Commodity Swap Features 764 16.5.2 Calibration of the Theoretical Schwartz and Smith Forward Curve 765 16.5.3 The Monte Carlo Simulation of Oil Spot Prices 772 16.5.4 The Computation of Brent Forward Curves at Any Given Valuation Date 773 16.6 Measuring Counterparty Risk 777 16.6.1 CVA Calculation 779 16.6.2 Swap Fixed Price Adjustment for Counterparty Risk 782 16.6.3 Right- and Wrong-Way Risk 784 16.7 Sensitivity Analysis 788 16.8 Accounting for Derivatives and Credit Value Adjustments 788 16.8.1 Example of Hedge Effectiveness 791 16.8.2 Accounting for CVA 796 16.9 Conclusions 797 References 798 Further Reading 798 Chapter 17 Pricing Energy Spread Options 801 Fred Espen Benth and Hanna Zdanowicz 17.1 Spread Options in Energy Markets 801 17.2 Pricing of Spread Options with Zero Strike 805 17.3 Issues of hedging 813 17.4 Pricing of Spread Options with Nonzero Strike 815 17.4.1 Kirk’s Approximation Formula 817 17.4.2 Approximation by Margrabe Based on Taylor Expansion 820 17.4.3 Other Pricing Methods 823 Acknowledgement 824 References 825 Chapter 18 Asian Options: Payoffs and Pricing Models 827 Gianluca Fusai, Marina Marena and Giovanni Longo 18.1 Payoff Structures 832 18.2 Pricing Asian Options in the Lognormal Setting 833 18.2.1 Moment Matching 835 18.2.2 Lower Price Bound 844 18.2.3 Monte carlo simulation 845 18.3 A Comparison 856 18.4 The Flexible Square-Root Model 858 18.4.1 General Setup 861 18.4.2 Numerical Results 870 18.4.3 A Case Study 871 18.5 Conclusions 874 References 874 Chapter 19 Natural Gas Storage Modelling 877 A´lvaro Cartea, James Cheeseman and Sebastian Jaimungal 19.1 Introduction 877 19.2 A Simple Model of Storage, Futures Prices, Spot Prices And Convenience Yield 878 19.3 Valuation of Gas Storage 880 19.3.1 Least-Squares Monte Carlo 881 19.3.2 LSMC Greeks 883 19.3.3 Extending the LSMC to Price Gas Storage 883 19.3.4 Toy Storage Model 884 19.3.5 Storage LSMC 888 19.3.6 Swing Options 890 19.3.7 Closed-Form Storage Solution 891 19.3.8 Monte Carlo Convergence 892 19.3.9 Simulated Storage Operations 894 19.3.10 Storage Value 897 References 899 Chapter 20 Commodity-Linked Arbitrage Strategies and Portfolio Management 901 Viviana Fanelli 20.1 Commodity-Linked Arbitrage Strategies 902 20.1.1 The Efficient Market Hypothesis 902 20.1.2 Risk Arbitrage Opportunities in Commodity Markets 903 20.1.3 Basic Quantitative Trading Strategies 906 20.1.4 A General Statistical Arbitrage Trading Methodology 914 20.2 Portfolio Optimization with Commodities 921 20.2.1 Commodities as an Asset Class 921 20.2.2 Commodity Futures Return Characteristics 923 20.2.3 Risk Premiums in Commodity Markets 925 20.2.4 Commodities as a Portfolio Diversifier 928 20.2.5 Risk–Return Optimization in Commodity Portfolios 929 Symbols 936 References 936 Chapter 21 Econometric Analysis of Energy and Commodity Markets: Multiple Hypothesis Testing Techniques 939 Mark Cummins 21.1 Introduction 939 21.2 Multiple Hypothesis Testing 940 21.2.1 Generalized Familywise Error Rate 941 21.2.2 Per-Familywise Error Rate 942 21.2.3 False Discovery Proportion 942 21.2.4 False Discovery Rate 943 21.2.5 Single-Step and Stepwise Procedures 943 21.3 Energy–Emissions Market Interactions 943 21.3.1 Literature Review 943 21.3.2 Data Description 944 21.3.3 Testing Framework 945 21.3.4 Empirical Results 950 21.4 Emissions Market Interactions 953 21.4.1 Testing Framework and Data 953 21.4.2 Empirical Results 955 21.5 Quantitative Spread Trading in Oil Markets 956 21.5.1 Testing Framework and Data 956 21.5.2 Optimal Statistical Arbitrage Model 957 21.5.3 Resampling-Based MHT Procedures 959 21.5.4 Empirical Results 964 References 964 Appendix A Quick Review of Distributions Relevant in Finance with Matlab® Examples 967 Laura Ballotta and Gianluca Fusai Index 1005

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Book SynopsisThis book is essential in understanding, investing and risk managing the holy grail of investments - structured products. The book begins by introducing structured products by way of a basic guide so that readers will be able to understand a payoff graphic, read a termsheet or assess a payoff formula, before moving on to the key asset classes and their peculiarities. Readers will then move on to the more advanced subjects such as structured products construction and behaviour during their lifetime. It also explains how to avoid important pitfalls in products across all asset classes, pitfalls that have led to huge losses over recent years, including detailed coverage of counterparty risk, the fall of Lehman Brothers and other key aspects of the financial crisis related to structured products. The second part of the book presents an original approach to implementing structured products in a portfolio. Key features include: A comprehensive list of factors an investor neeTable of ContentsDisclaimer x Foreword xi Acknowledgements xiii Goal of this book xv Who should be interested xvii Content summary xviii Part I Individual Structured Products 1 1 Introduction 3 2 Generalities About Structured Products 7 2.1 A Definition by Analogy 7 2.2 Buyers, Sellers and Reasons for Investing in Structured Products 9 2.3 Reading a Payoff Diagram 14 2.4 Reading a Payoff Formula 16 2.5 Reading a Term-Sheet 19 3 The Categories of Structured Products 33 3.1 Capital Guaranteed Products 34 3.2 Yield Enhancement 43 3.3 Participation 53 4 Behavior of Structured Products During their Lifetime 71 4.1 Main Valuation and Risk Measures 71 4.2 Capital Guarantee 78 4.3 Yield Enhancement 88 4.4 Participation Products 98 4.5 Other Participation Products 108 5 Common Special Features of Structured Products 117 5.1 Quanto Options 117 5.2 Barrier Options 121 5.3 Autocall and Callable Options 124 5.4 Rolling Products and Products Without Fixed Maturity 134 5.5 Conditional and Accumulating Coupons 136 6 Functionality Options of Structured Products 139 6.1 Physical or Cash Delivery with Equity-Based Products 139 6.2 Clean Price and Dirty Price 140 6.3 Lending Values 140 6.4 Issue Minimum/Maximum Size and Liquidity 142 6.5 Funding Rates and Counterparty/Credit Risk 145 7 Foreign Exchange, Fixed Income and Commodity Products 151 7.1 FX-Based Structures 151 7.2 Fixed Income Structures 168 7.3 Commodity Structures 187 8 Recent Developments 207 8.1 Customized Index Products 207 8.2 Actively Managed Certificates 210 8.3 Electronic Trading Platforms 213 Part II Structured Products in a Portfolio Context 217 9 Introduction to Part II 219 10 Classical Theory and Structured Products 223 10.1 Distribution of Returns Shapes 223 10.2 Classical Portfolio Management Theories 227 10.3 Classical Theory and Structured Products 230 10.4 Conclusion 233 11 Structured Solution Proposal 235 11.1 Preferred Distribution of Return Investment Process 235 11.2 Distribution Classes: The Return Distribution Cube 238 11.3 An Investor’s Utility (Value) Curve 240 11.4 Questionnaire 246 12 Return Distributions of Structured Products 259 12.1 Procedure and Data 259 12.2 Capital Guaranteed Products 264 12.3 Yield Enhancement Products 274 12.4 Participation Products 289 12.5 Conclusion: Product Classification 298 13 Structured Portfolio Construction 301 13.1 Portfolio Construction Process 301 13.2 Constructing a Structured Product Portfolio in Theory 302 13.3 Preferred Return Distribution Process Versus Classic Portfolio Management 305 13.4 Investor Portfolios 311 14 Final Words 317 Appendix A: Glossary of Terms 321 Appendix B: Distribution of Returns: An Intuitive Explanation 333 Appendix C: Questionnaire 337 Appendix D: List of Figures 341 Appendix E: List of Tables 345 Appendix F: Index Information 349 Appendix G: Issuer and Product-Related Websites 351 Bibliography 353 Index 355

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Book SynopsisHedge Fund Analysis and Modeling Using Excel and VBA is a practical and implementation driven text that will guide readers through real modeling and analysis exercises for hedge funds, enabling them to identify risk and return factors across their investments.Table of ContentsPreface xi 1 The Hedge Fund Industry 1 1.1 What Are Hedge Funds? 1 1.2 The Structure of a Hedge Fund 4 1.2.1 Fund Administrators 5 1.2.2 Prime Brokers 5 1.2.3 Custodian, Auditors and Legal 6 1.3 The Global Hedge Fund Industry 7 1.3.1 North America 8 1.3.2 Europe 10 1.3.3 Asia 11 1.4 Specialist Investment Techniques 12 1.4.1 Short Selling 12 1.4.2 Leverage 14 1.4.3 Liquidity 15 1.5 New Developments for Hedge Funds 16 1.5.1 UCITS III Hedge Funds 16 1.5.2 The European Passport 19 1.5.3 Restrictions on Short Selling 20 2 Major Hedge Fund Strategies 23 2.1 Single- and Multi-Strategy Hedge Funds 23 2.2 Fund of Hedge Funds 25 2.3 Hedge Fund Strategies 27 2.3.1 Tactical Strategies 28 2.3.1.1 Global Macro 28 2.3.1.2 Managed Futures 31 2.3.1.3 Long/Short Equity 36 2.3.1.4 Pairs Trading 38 2.3.2 Event-Driven 42 2.3.2.1 Distressed Securities 42 2.3.2.2 Merger Arbitrage 46 2.3.3 Relative Value 49 2.3.3.1 Equity Market Neutral 49 2.3.3.2 Convertible Arbitrage 50 2.3.3.3 Fixed Income Arbitrage 54 2.3.3.3.1 Capital Structure Arbitrage 56 2.3.3.3.2 Swap-Spread Arbitrage 57 2.3.3.3.3 Yield Curve Arbitrage 58 3 Hedge Fund Data Sources 61 3.1 Hedge Fund Databases 61 3.2 Major Hedge Fund Indices 65 3.2.1 Non-investable and Investable Indices 66 3.2.2 Dow Jones Credit Suisse Hedge Fund Indexes 68 3.2.2.1 Liquid Alternative Betas 70 3.2.3 Hedge Fund Research 73 3.2.4 HedgeFund.net 77 3.2.5 FTSE Hedge 77 3.2.5.1 FTSE Hedge Momentum Index 78 3.2.6 Greenwich Alternative Investments 79 3.2.6.1 GAI Investable Indices 80 3.2.7 Morningstar Alternative Investment Center 83 3.2.7.1 MSCI Hedge Fund Classification Standard 83 3.2.7.2 MSCI Investable Indices 85 3.2.8 EDHEC Risk and Asset Management Research Centre (www.edhec-risk.com) 86 3.3 Database and Index Biases 88 3.3.1 Survivorship Bias 89 3.3.2 Instant History Bias 90 3.4 Benchmarking 91 3.4.1 Tracking Error 92 Appendix A: Weighting Schemes 95 4 Statistical Analysis 99 4.1 Basic Performance Plots 99 4.1.1 Value Added Monthly Index 99 4.1.2 Histograms 102 4.2 Probability Distributions 105 4.2.1 Populations and Samples 106 4.3 Probability Density Function 107 4.4 Cumulative Distribution Function 108 4.5 The Normal Distribution 109 4.5.1 Standard Normal Distribution 110 4.6 Visual Tests for Normality 111 4.6.1 Inspection 111 4.6.2 Normal Q-Q Plot 112 4.7 Moments of a Distribution 114 4.7.1 Mean and Standard Deviation 114 4.7.2 Skewness 117 4.7.3 Excess Kurtosis 119 4.7.4 Data Analysis Tool: Descriptive Statistics 120 4.8 Geometric Brownian Motion 122 4.8.1 Uniform Random Numbers 125 4.9 Covariance and Correlation 126 4.10 Regression Analysis 131 4.10.1 Ordinary Least Squares 131 4.10.1.1 Coefficient of Determination 133 4.10.1.2 Residual Plots 134 4.10.1.3 Jarque–Bera Normality Test 135 4.10.1.4 Data Analysis Tool: Regression 138 4.11 Portfolio Theory 142 4.11.1 Mean–Variance Analysis 142 4.11.2 Solver: Portfolio Optimisation 145 4.11.3 Efficient Portfolios 148 5 Risk-Adjusted Return Metrics 151 5.1 The Intuition behind Risk-Adjusted Returns 152 5.1.1 Risk-Adjusted Returns 154 5.2 Common Risk-Adjusted Performance Ratios 157 5.2.1 The Sharpe Ratio 160 5.2.2 The Modified Sharpe Ratio 162 5.2.3 The Sortino Ratio 163 5.2.4 The Drawdown Ratio 167 5.3 Common Performance Measures in the Presence of a Market Benchmark 170 5.3.1 The Information Ratio 172 5.3.2 The M-Squared Metric 173 5.3.3 The Treynor Ratio 174 5.3.4 Jensen’s Alpha 178 5.4 The Omega Ratio 181 6 Asset Pricing Models 185 6.1 The Risk-Adjusted Two-Moment Capital Asset Pricing Model 185 6.1.1 Interpreting H 189 6.1.2 Static Alpha Analysis 191 6.1.3 Dynamic Rolling Alpha Analysis 193 6.2 Multi-factor Models 195 6.3 The Choice of Factors 196 6.3.1 A Multi-Factor Framework for a Risk-Adjusted Hedge Fund Alpha League Table 202 6.3.2 Alpha and Beta Separation 208 6.4 Dynamic Style Based Return Analysis 210 6.5 The Markowitz Risk-Adjusted Evaluation Method 214 7 Hedge Fund Market Risk Management 223 7.1 Value-at-Risk 223 7.2 Traditional Measures 226 7.2.1 Historical Simulation 226 7.2.2 Parametric Method 229 7.2.3 Monte Carlo Simulation 230 7.3 Modified VaR 233 7.4 Expected Shortfall 236 7.5 Extreme Value Theory 239 7.5.1 Block Maxima 240 7.5.2 Peaks over Threshold 241 References 245 Important Legal Information 249 Index 251

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Book Synopsis* The book's content is focused on quantitative methods of tackling valuation problems, supplying sound theoretical frameworks for the pricing and hedging of counterparty risk, linking particular models to particular 'concrete' financial situations.Table of ContentsIgnition xv Abbreviations and Notation xxiii PART I COUNTERPARTY CREDIT RISK, COLLATERAL AND FUNDING 1 Introduction 3 1.1 A Dialogue on CVA 3 1.2 Risk Measurement: Credit VaR 3 1.3 Exposure, CE, PFE, EPE, EE, EAD 5 1.4 Exposure and Credit VaR 7 1.5 Interlude: P and Q 7 1.6 Basel 8 1.7 CVA and Model Dependence 9 1.8 Input and Data Issues on CVA 10 1.9 Emerging Asset Classes: Longevity Risk 11 1.10 CVA and Wrong Way Risk 12 1.11 Basel III: VaR of CVA and Wrong Way Risk 13 1.12 Discrepancies in CVA Valuation: Model Risk and Payoff Risk 14 1.13 Bilateral Counterparty Risk: CVA and DVA 15 1.14 First-to-Default in CVA and DVA 17 1.15 DVA Mark-to-Market and DVA Hedging 18 1.16 Impact of Close-Out in CVA and DVA 19 1.17 Close-Out Contagion 20 1.18 Collateral Modelling in CVA and DVA 21 1.19 Re-Hypothecation 22 1.20 Netting 22 1.21 Funding 23 1.22 Hedging Counterparty Risk: CCDS 25 1.23 Restructuring Counterparty Risk: CVA-CDOs and Margin Lending 26 2 Context 31 2.1 Definition of Default: Six Basic Cases 31 2.2 Definition of Exposures 32 2.3 Definition of Credit Valuation Adjustment (CVA) 35 2.4 Counterparty Risk Mitigants: Netting 37 2.5 Counterparty Risk Mitigants: Collateral 38 2.5.1 The Credit Support Annex (CSA) 39 2.5.2 The ISDA Proposal for a New Standard CSA 40 2.5.3 Collateral Effectiveness as a Mitigant 40 2.6 Funding 41 2.6.1 A First Attack on Funding Cost Modelling 42 2.6.2 The General Funding Theory and its Recursive Nature 42 2.7 Value at Risk (VaR) and Expected Shortfall (ES) of CVA 43 2.8 The Dilemma of Regulators and Basel III 44 3 Modelling the Counterparty Default 47 3.1 Firm Value (or Structural) Models 47 3.1.1 The Geometric Brownian Assumption 47 3.1.2 Merton’s Model 48 3.1.3 Black and Cox’s (1976) Model 50 3.1.4 Credit Default Swaps and Default Probabilities 54 3.1.5 Black and Cox (B&C) Model Calibration to CDS: Problems 55 3.1.6 The AT1P Model 57 3.1.7 A Case Study with AT1P: Lehman Brothers Default History 58 3.1.8 Comments 60 3.1.9 SBTV Model 61 3.1.10 A Case Study with SBTV: Lehman Brothers Default History 62 3.1.11 Comments 64 3.2 Firm Value Models: Hints at the Multiname Picture 64 3.3 Reduced Form (Intensity) Models 65 3.3.1 CDS Calibration and Intensity Models 66 3.3.2 A Simpler Formula for Calibrating Intensity to a Single CDS 70 3.3.3 Stochastic Intensity: The CIR Family 72 3.3.4 The Cox-Ingersoll-Ross Model (CIR) Short-Rate Model for r 72 3.3.5 Time-Inhomogeneous Case: CIR++ Model 74 3.3.6 Stochastic Diffusion Intensity is Not Enough: Adding Jumps. The JCIR(++) Model 75 3.3.7 The Jump-Diffusion CIR Model (JCIR) 76 3.3.8 Market Incompleteness and Default Unpredictability 78 3.3.9 Further Models 78 3.4 Intensity Models: The Multiname Picture 78 3.4.1 Choice of Variables for the Dependence Structure 78 3.4.2 Firm Value Models? 80 3.4.3 Copula Functions 80 3.4.4 Copula Calibration, CDOs and Criticism of Copula Functions 86 PART II PRICING COUNTERPARTY RISK: UNILATERAL CVA 4 Unilateral CVA and Netting for Interest Rate Products 89 4.1 First Steps towards a CVA Pricing Formula 89 4.1.1 Symmetry versus Asymmetry 90 4.1.2 Modelling the Counterparty Default Process 91 4.2 The Probabilistic Framework 92 4.3 The General Pricing Formula for Unilateral Counterparty Risk 94 4.4 Interest Rate Swap (IRS) Portfolios 97 4.4.1 Counterparty Risk in Single IRS 97 4.4.2 Counterparty Risk in an IRS Portfolio with Netting 100 4.4.3 The Drift Freezing Approximation 102 4.4.4 The Three-Moments Matching Technique 104 4.5 Numerical Tests 106 4.5.1 Case A: IRS with Co-Terminal Payment Dates 106 4.5.2 Case B: IRS with Co-Starting Resetting Date 108 4.5.3 Case C: IRS with First Positive, Then Negative Flow 108 4.5.4 Case D: IRS with First Negative, Then Positive Flows 109 4.5.5 Case E: IRS with First Alternate Flows 113 4.6 Conclusions 120 5 Wrong Way Risk (WWR) for Interest Rates 121 5.1 Modelling Assumptions 122 5.1.1 G2++ Interest Rate Model 122 5.1.2 CIR++ Stochastic Intensity Model 123 5.1.3 CIR++ Model: CDS Calibration 124 5.1.4 Interest Rate/Credit Spread Correlation 126 5.1.5 Adding Jumps to the Credit Spread 126 5.2 Numerical Methods 127 5.2.1 Discretization Scheme 128 5.2.2 Simulating Intensity Jumps 128 5.2.3 “American Monte Carlo” (Pallavicini 2006) 128 5.2.4 Callable Payoffs 128 5.3 Results and Discussion 129 5.3.1 WWR in Single IRS 129 5.3.2 WWR in an IRS Portfolio with Netting 129 5.3.3 WWR in European Swaptions 130 5.3.4 WWR in Bermudan Swaptions 130 5.3.5 WWR in CMS Spread Options 132 5.4 Contingent CDS (CCDS) 132 5.5 Results Interpretation and Conclusions 133 6 Unilateral CVA for Commodities with WWR 135 6.1 Oil Swaps and Counterparty Risk 135 6.2 Modelling Assumptions 137 6.2.1 Commodity Model 137 6.2.2 CIR++ Stochastic-Intensity Model 139 6.3 Forward versus Futures Prices 140 6.3.1 CVA for Commodity Forwards without WWR 141 6.3.2 CVA for Commodity Forwards with WWR 142 6.4 Swaps and Counterparty Risk 142 6.5 UCVA for Commodity Swaps 144 6.5.1 Counterparty Risk from the Payer’s Perspective: The Airline Computes Counterparty Risk 145 6.5.2 Counterparty Risk from the Receiver’s Perspective: The Bank Computes Counterparty Risk 148 6.6 Inadequacy of Basel’s WWR Multipliers 148 6.7 Conclusions 151 7 Unilateral CVA for Credit with WWR 153 7.1 Introduction to CDSs with Counterparty Risk 153 7.1.1 The Structure of the Chapter 155 7.2 Modelling Assumptions 155 7.2.1 CIR++ Stochastic-Intensity Model 156 7.2.2 CIR++ Model: CDS Calibration 157 7.3 CDS Options Embedded in CVA Pricing 158 7.4 UCVA for Credit Default Swaps: A Case Study 160 7.4.1 Changing the Copula Parameters 160 7.4.2 Changing the Market Parameters 164 7.5 Conclusions 164 8 Unilateral CVA for Equity with WWR 167 8.1 Counterparty Risk for Equity Without a Full Hybrid Model 167 8.1.1 Calibrating AT1P to the Counterparty’s CDS Data 168 8.1.2 Counterparty Risk in Equity Return Swaps (ERS) 169 8.2 Counterparty Risk with a Hybrid Credit-Equity Structural Model 172 8.2.1 The Credit Model 172 8.2.2 The Equity Model 174 8.2.3 From Barrier Options to Equity Pricing 176 8.2.4 Equity and Equity Options 179 8.3 Model Calibration and Empirical Results 180 8.3.1 BP and FIAT in 2009 181 8.3.2 Uncertainty in Market Expectations 186 8.3.3 Further Results: FIAT in 2008 and BP in 2010 188 8.4 Counterparty Risk and Wrong Way Risk 191 8.4.1 Deterministic Default Barrier 193 8.4.2 Uncertainty on the Default Barrier 198 9 Unilateral CVA for FX 205 9.1 Pricing with Two Currencies: Foundations 206 9.2 Unilateral CVA for a Fixed-Fixed CCS 210 9.2.1 Approximating the Volatility of Cross Currency Swap Rates 216 9.2.2 Parameterization of the FX Correlation 218 9.3 Unilateral CVA for Cross Currency Swaps with Floating Legs 224 9.4 Why a Cross Currency Basis? 226 9.4.1 The Approach of Fujii, Shimada and Takahashi (2010) 227 9.4.2 Collateral Rates versus Risk-Free Rates 228 9.4.3 Consequences of Perfect Collateralization 229 9.5 CVA for CCS in Practice 230 9.5.1 Changing the CCS Moneyness 234 9.5.2 Changing the Volatility 235 9.5.3 Changing the FX Correlations 235 9.6 Novations and the Cost of Liquidity 237 9.6.1 A Synthetic Contingent CDS: The Novation 238 9.6.2 Extending the Approach to the Valuation of Liquidity 241 9.7 Conclusions 243 PART III ADVANCED CREDIT AND FUNDING RISK PRICING 10 New Generation Counterparty and Funding Risk Pricing 247 10.1 Introducing the Advanced Part of the Book 247 10.2 What We Have Seen Before: Unilateral CVA 249 10.2.1 Approximation: Default Bucketing and Independence 250 10.3 Unilateral Debit Valuation Adjustment (UDVA) 250 10.4 Bilateral Risk and DVA 251 10.5 Undesirable Features of DVA 253 10.5.1 Profiting From Own Deteriorating Credit Quality 253 10.5.2 DVA Hedging? 253 10.5.3 DVA: Accounting versus Capital Requirements 254 10.5.4 DVA: Summary and Debate on Realism 255 10.6 Close-Out: Risk-Free or Replacement? 256 10.7 Can We Neglect the First-to-Default Time? 257 10.7.1 A Simplified Formula without First-to-Default: The Case of an Equity Forward 258 10.8 Payoff Risk 258 10.9 Collateralization, Gap Risk and Re-Hypothecation 259 10.10 Funding Costs 262 10.11 Restructuring Counterparty Risk 263 10.11.1 CVA Volatility: The Wrong Way 263 10.11.2 Floating Margin Lending 264 10.11.3 Global Valuation 265 10.12 Conclusions 266 11 A First Attack on Funding Cost Modelling 269 11.1 The Problem 269 11.2 A Closer Look at Funding and Discounting 271 11.3 The Approach Proposed by Morini and Prampolini (2010) 272 11.3.1 The Borrower’s Case 273 11.3.2 The Lender’s Case 274 11.3.3 The Controversial Role of DVA: The Borrower 275 11.3.4 The Controversial Role of DVA: The Lender 276 11.3.5 Discussion 277 11.4 What Next on Funding? 278 12 Bilateral CVA–DVA and Interest Rate Products 279 12.1 Arbitrage-Free Valuation of Bilateral Counterparty Risk 281 12.1.1 Symmetry versus Asymmetry 285 12.1.2 Worsening of Credit Quality and Positive Mark-to-Market 285 12.2 Modelling Assumptions 286 12.2.1 G2++ Interest Rate Model 286 12.2.2 CIR++ Stochastic Intensity Model 288 12.2.3 Realistic Market Data Set for CDS Options 289 12.3 Numerical Methods 290 12.4 Results and Discussion 291 12.4.1 Bilateral VA in Single IRS 292 12.4.2 Bilateral VA in an IRS Portfolio with Netting 296 12.4.3 Bilateral VA in Exotic Interest Rate Products 301 12.5 Conclusions 302 13 Collateral, Netting, Close-Out and Re-Hypothecation 305 13.1 Trading Under the ISDA Master Agreement 306 13.1.1 Mathematical Setup and CBVA Definition 306 13.1.2 Collateral Delay and Dispute Resolutions 308 13.1.3 Close-Out Netting Rules 308 13.1.4 Collateral Re-Hypothecation 309 13.2 Bilateral CVA Formula under Collateralization 310 13.2.1 Collecting CVA Contributions 310 13.2.2 CBVA General Formula 312 13.2.3 CCVA and CDVA Definitions 312 13.3 Close-Out Amount Evaluation 313 13.4 Special Cases of Collateral-Inclusive Bilateral Credit Valuation Adjustment 314 13.5 Example of Collateralization Schemes 315 13.5.1 Perfect Collateralization 315 13.5.2 Collateralization Through Margining 316 13.6 Conclusions 316 14 Close-Out and Contagion with Examples of a Simple Payoff 319 14.1 Introduction to Close-Out Modelling and Earlier Work 319 14.1.1 Close-Out Modelling: Context 319 14.1.2 Legal Documentation on Close-Out 320 14.1.3 Literature 320 14.1.4 Risk-Free versus Replacement Close-Out: Practical Consequences 321 14.2 Classical Unilateral and Bilateral Valuation Adjustments 322 14.3 Bilateral Adjustment and Close-Out: Risk-Free or Replacement? 323 14.4 A Quantitative Analysis and a Numerical Example 323 14.4.1 Contagion Issues 326 14.5 Conclusions 329 15 Bilateral Collateralized CVA and DVA for Rates and Credit 331 15.1 CBVA for Interest Rate Swaps 332 15.1.1 Changing the Margining Frequency 332 15.1.2 Inspecting the Exposure Profiles 334 15.1.3 A Case Where Re-Hypothecation is Worse than No Collateral at All 335 15.1.4 Changing the Correlation Parameters 336 15.1.5 Changing the Credit Spread Volatility 337 15.2 Modelling Credit Contagion 340 15.2.1 The CDS Price Process 340 15.2.2 Calculation of Survival Probability 341 15.2.3 Modelling Default-Time Dependence 344 15.3 CBVA for Credit Default Swaps 345 15.3.1 Changing the Copula Parameters 345 15.3.2 Inspecting the Contagion Risk 347 15.3.3 Changing the CDS Moneyness 347 15.4 Conclusions 349 16 Including Margining Costs in Collateralized Contracts 351 16.1 Trading Under the ISDA Master Agreement 352 16.1.1 Collateral Accrual Rates 352 16.1.2 Collateral Management and Margining Costs 353 16.2 CBVA General Formula with Margining Costs 355 16.2.1 Perfect Collateralization 356 16.2.2 Futures Contracts 357 16.3 Changing the Collateralization Currency 357 16.3.1 Margining Cost in Foreign Currency 357 16.3.2 Settlement Liquidity Risk 358 16.3.3 Gap Risk in Single-Currency Contracts with Foreign-Currency Collaterals 359 16.4 Conclusions 359 17 Funding Valuation Adjustment (FVA)? 361 17.1 Dealing with Costs of Funding 361 17.1.1 Central Clearing, CCPs and this Book 362 17.1.2 High Level Features 362 17.1.3 Single-Deal (Micro) vs. Homogeneous (Macro) Funding Models 363 17.1.4 Previous Literature on Funding and Collateral 364 17.1.5 Including FVA along with Credit and Debit Valuation Adjustment 365 17.1.6 FVA is not DVA 365 17.2 Collateral- and Funding-Inclusive Bilateral Valuation Adjusted Price 366 17.3 Funding Risk and Liquidity Policies 367 17.3.1 Funding, Hedging and Collateralization 367 17.3.2 Liquidity Policies 368 17.4 CBVA Pricing Equation with Funding Costs (CFBVA) 372 17.4.1 Iterative Solution of the CFBVA Pricing Equation 373 17.4.2 Funding Derivative Contracts in a Diffusion Setting 374 17.4.3 Implementing Hedging Strategies via Derivative Markets 377 17.5 Detailed Examples 378 17.5.1 Funding with Collateral 378 17.5.2 Collateralized Contracts Priced by a CCP 379 17.5.3 Dealing with Own Credit Risk: FVA and DVA 380 17.5.4 Deriving Earlier Results on FVA and DVA 381 17.6 Conclusions: FVA and Beyond 382 18 Non-Standard Asset Classes: Longevity Risk 385 18.1 Introduction to Longevity Markets 385 18.1.1 The Longevity Swap Market 385 18.1.2 Longevity Swaps: Collateral and Credit Risk 386 18.1.3 Indexed Longevity Swaps 390 18.1.4 Endogenous Credit Collateral and Funding-Inclusive Swap Rates 390 18.2 Longevity Swaps: The Payoff P391 18.3 Mark-to-Market for Longevity Swaps 394 18.4 Counterparty and Own Default Risk, Collateral and Funding 397 18.5 An Example of Modelling Specification from Biffis et al. (2011) 401 18.6 Discussion of the Results in Biffis et al. (2011) 404 19 Conclusions and Further Work 409 19.1 A Final Dialogue: Models, Regulations, CVA/DVA, Funding and More 409 Bibliography 415 Index 423

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Book SynopsisIn Frequently Asked Questions in Islamic Finance, industryexpert Brian Kettell answers some of the most frequently askedquestions from his many years experience in working and teaching inIslamic finance and banking.Table of ContentsPreface. Introduction. 1 The Islamic Banking Timeline (1890-2010). 2 Frequently Asked Questions. 3 Why is Interest (Riba) Forbidden to Muslims? 4 Derivatives and Islamic Finance. 5 How do you Establish an Islamic Bank? 6 Islamic Banking and Finance Qualifications. 7 How Much Arabic do you Need to Know to Work in the Industry? 8 Test Your Knowledge. 9 Further Reading. Crossword. Appendix Answers to Chapter 8. Test Your Knowledge. Index.

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Book SynopsisThe recent turbulence in the global financial markets has drawn attention to an alternative system of financial intermediation: Islamic banking and finance, which has so far remained on the sidelines of the unrest. Islamic Finance in a Nutshell is a quick and easy guide to understanding the fundamentals of Islamic Finance and how the Islamic Financial markets work. Designed as a quick read for practitioners needing to pick up the basics of the industry, it will enable readers to understand the differences Islamic and Western finance. Starting with the rise of Islamic finance, the book highlights the key areas which practitioners need to grasp to understand the marketplace including financial statement analysis, Sharia'a law, making money in the absence of interest and regulation. The book also provides readers with a basic guide to Arab terminology and a guide to the top financial institutions within the Islamic markets. This is an ideal guide for anyone with an inteTable of ContentsIntroduction vii 1 What is Islamic Banking? 1 2 If Islamic Banks Cannot Charge Interest 23How Do They Make Money? 3 Sharia’a Law 83It is Not Only Lawyers Who Need to Know About It 4 Sharia’a Boards 97Roles, Responsibility and Membership 5 Financial Statement Analysis for Islamic Banks 121 6 The Islamic Banking Infrastructure 167 Appendix 1 How Much Arabic do You Need to Know to Work in the Islamic Banking Industry? 199 Appendix 2 Thee Top 500 Islamic Financial Institutions 235 Crossword 333 Index 335

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