Each chapter ends with Excel Exercises, Notes, and a Bibliography.
Preface
1. Introduction
1.1. Diversification
1.2. CAPM
1.3. Beta Systematic Risk
1.4. Dividend Discount Model
1.5. An Application of the Capital Asset Pricing Model to Investment Services
Excel Exercise 1.1. Diversification
Case: Managing the Risk of a Pension Fund
Excel Exercise 1.2. CAPM
Case: Quarterly Earnings Report of an Energy Storage Operator
Excel Exercise 1.3. Dividend Discount Model
Case: Valuing REIT
2. Equity Options
2.1. Option Description
2.2. Institutional Framework
2.3. Put Call Parity
2.4. The Main Insight of the Black-Scholes Model
2.5. The Option Behavior and Sensitivity Analysis
2.6. Applications of the Option Model
Excel Exercise 2.1. Cox Ross Rubinstein Model
Case: Private Wealth Management-Designing a Structured Product
Excel Exercise 2.2. Put Call Parity
Case: Proprietary Trading Desk
Excel Exercise 2.3. Black-Scholes Model
Case: Use of Put Options in Hedging
Excel Exercise 2.4. Risk Neutral and Market Probability
Case: Asset Allocation and the Expected Returns of an Option
3. Exotic Options
3.1. Options with Alternative Payoffs at Expiration
3.2. Options with Boundary Conditions
3.3. Early Exercise
3.4. Compound Options
Excel Exercise 3.1. American Stock Option
Case: Valuing Employee Stock Options
Excel Exercise 3.2. Compound Option
Case: Project Financing and Compound Options
Excel Exercise 3.3. Digital Option
Case: IPO Incentive Option and Executive Option Design
Excel Exercise 3.4. Greeks
Case: Valuing an Equity Structured Product from a Term Sheet
4. Bond Mathematics, Treasury Securities, and Swaps
4.1. Bond Mathematics
4.2. Bonds and Bond Markets
4.3. Swap Markets
4.4. Economics of the Yield Curve
4.5. The Bond Model
4.6. Duration and Convexity
4.7. Applications of the Bond Analytics
Excel Exercise 4.1. Effective Duration
Case: Interest Rate Bet Using Effective Duration
Excel Exercise 4.2. Par Curve and Spot Curve
Case: Law of One Price and Marking a Bond Position
Excel Exercise 4.3. Dollar Duration
Case: Transfer Pricing and Hedging at the Treasury Department
Excel Exercise 4.4. Swap
Case: A Hedging Program Designed by the Asset Liability Committee
5. Bond Options
5.1. Interest Rate Movements: Historical Experiences
5.2. Equilibrium Models
5.3. Arbitrage-Free Models
5.4. Key Rate Duration and Dynamic Hedging
Excel Exercise 5.1. Cox, Ingersoll, and Ross Model
Case: Building a Model by Knowing Your Clients
Excel Exercise 5.2. Vasicek Model
Case: Defined Benefits and Asset Management
Excel Exercise 5.3. Ho-Lee Model
Case: Using an Arbitrage-free Model to Determine the Profit Release
Excel Exercise 5.4. Black Bond Option
Case: Proprietary Trading Desk
Excel Exercise 5.5. Swaption
Case: Marking to Market an Illiquid Derivative Position
6. Corporate Bonds-Investment Grade
6.1. Descriptions of a Corporate Bond
6.2. Valuation of a Bond
6.3. Option Adjusted Spreads
6.4. Callable Bond
6.5. Sinking Fund Bond and Putable Bonds
Excel Exercise 6.1. Callable Bond
Case: Funding Working Capital with Debt
Excel Exercise 6.2. Sinking Fund Bond
Case: Securitization and Asset Backed Securities
7. Corporate Bonds-High Yield Bonds
7.1. An Example of a High Yield Bond
7.2. Institutional Framework of Bankruptcy and Bankruptcy Proceedings
7.3. The Fisher Model
7.4. An Actuarial Model
7.5. Historical Experiences and the Estimation of the Parameters of Default Models
7.6. The Reduced Form Model
7.7. The Structural Model
Excel Exercise 7.1. Credit Default Swap
Case: Credit Derivatives, Insurance Premium and Callable Bonds
Excel Exercise 7.2. Ho-Singer Model
Case: Reorganization and Debt Restructuring
8. Other Bonds: Convertible Bonds, MBS, CMO
8.1. Description of a Convertible Bond
8.2. Forced Conversion
8.3. Default Risk
8.4. Mortgage-Backed Securities (Pass Through Certificates)
8.5. Prepayment Modeling and Valuation
8.6. Collateralized Mortgage Obligations (CMO)
Excel Exercise 8.1. Convertible Bonds
Case: Hedging a Convertible Bond Issue
Excel Exercise 8.2. Mortgage-Backed Securities (Level Payment, PSA, IO & PO)
Case: Pricing Guaranteed Investment Contract and the Profit Spread
Index