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Interest-Rate Option Models Understanding, Analysing and Using Models for Exotic Interest-Rate Options (Wiley Series in Financial Engineering)
ISBN: 0471979589     Date Published: 1998-05     Author(s): Riccardo Rebonato
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Hardcover
Wiley
546 Pages
 
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06/20/2013 01:30:39
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Editorial Review - Book Description:
The modelling of exotic interest-rate options is such an important and fast-moving area, that the updating of the extremely successful first edition has been eagerly awaited. This edition re-focuses the assessment of various models presented in the first edition, in light of the new developments of modelling imperfect correlation between financial quantities. It also presents a substantial new chapter devoted to this revolutionary modelling method. In this second edition, readers will also find important new data dealing with the securities market and the probabilistic/stochastic calculus tools. Other changes include: a new chapter on the issues arising in the pricing of several classes of exotic interest-rate instruments; and insights from the BDT and the Brennan and Schwartz approaches which can be combined into a new class of `generalised models`. Further details can be found on the links between mean-reversion and calibration for the important classes of models.

Dr Riccardo Rebonato is Director and Head of Research at Barclays Capital. He is responsible for the modelling, trading and risk management of the European exotic interest-rate products. He holds Doctorates in Nuclear Engineering and Science of Materials/Solid State Physics. Before moving into investment banking he was Research Fellow in Physics at Corpus Christi College (Oxford). He has published papers in several academic journals in finance, and is a regular speaker at conferences worldwide.
 
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Total Reviews: (12)
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10 of 10 People found the following review helpful.

Excellent introduction to interest rate option models, October 9, 1999 By A Customer This review is from: Interest-Rate Option Models: Understanding, Analysing and Using Models for Exotic Interest-Rate Options (Wiley Series in Financial Engineering) (Hardcover) By restricting attention to interest-rate option models only, the author manages to give a thorough introduction to the subject, that goes way beyond the short chapters in standard textbooks such as Hull's or Wilmott's (I am not familiar with Miron and Swannell). The first edition (the one that I'm familiar with) does indeed contain a number of irritating typos, many terms are first used then defined later, and the figures in particular can be greatly improved upon (I think they were produced by `Excel', which is not the best tool to produce high-quality figures for a serious technical book), however such glitches are typical of almost all books of such size and technical level. The mathematics is not entirely trivial, but not too sophisticated either (a typical university science/engineering graduate should be able to handle it easily), and the author makes a valiant attempt to explain all relevant concepts from linear algebra to probability theory (I have to add...
 
4 of 4 People found the following review helpful.

Good on Several Levels, July 11, 2001 ByDonald C Huffaker (Elgin, IL United States) - See all my reviews This review is from: Interest-Rate Option Models: Understanding, Analysing and Using Models for Exotic Interest-Rate Options (Wiley Series in Financial Engineering) (Hardcover) Rebonato covers the material on different levels, providing not only full mathematical formulations, but also the English version of the math along with explanations of significance of the topics covered. This book is excellent for those with the mathematical background to understand the math, and is easy to follow for those with less than rigorous mathematical background. I would recommend a good foundation in general option pricing (at least an introduction to Black-Scholes and lattice modeling) prior to reading this book. Futures, Options, and Swaps by Kolb and Options, Futures, and Other Derivatives by Hull would be good preliminary readings. Rebonato does a good job in discussing the various modeling techniques, along with the strengths and weaknesses of each.
 
4 of 4 People found the following review helpful.

A good book for implementation issues., March 26, 1998 By A Customer This review is from: Interest-Rate Option Models: Understanding, Analysing and Using Models for Exotic Interest-Rate Options (Wiley Financial Engineering) (Hardcover) This book provides a comprehensive discussion of the popular term structure models and their applications to derivatives pricing. The mathematics is quite heavy, but is well explained, and throughout the author describes the practical issues of implemention, as well as empirical studies of the various models performance. Overall, a well balanced book spanning both theory and practice. Unfortunately, as other reviewers have pointed out, the book is full of typos (it seems almost one a page) so that the reader has to spend time figuring out what the author really means. For example, in the section describing the pricing of discount bonds using the forward measure, there naturally arise three time parameters (current time, maturity, forward time). These parameters are arbitrarily interchanged in the text, making reading almost impossible. A worse mistake is in the authors description of the Cox-Ingersoll-Ross model where the author simultaneously assumes a zero market price of risk...
 
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