[下载]Structured.Finance.The.Object.Oriented.Approach [推广有奖]

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1 Structured Finance: A Primer 1
1.1 Introduction 1
1.2 Arbitrage-free valuation and replicating portfolios 2
1.3 Replicating portfolios for derivatives 3
1.3.1 Linear derivatives 3
1.3.2 Nonlinear derivatives 3
1.4 No-arbitrage and pricing 5
1.4.1 Univariate claims 5
1.4.2 Multivariate claims 7
1.5 The structuring process 8
1.5.1 The basic objects 9
1.5.2 Risk factors, moments and dimensions 9
1.5.3 Risk management 11
1.6 A tale of two bonds 13
1.6.1 Contingent coupons and repayment plans 13
1.6.2 Exposure to the risky asset 14
1.6.3 Exposure to volatility 14
1.6.4 Hedging 15
1.7 Structured finance and object-oriented programming 15
References and further reading 17
2 Object-Oriented Programming 19
2.1 Introduction 19
2.2 What is OOP (object-oriented programming)? 19
2.3 Analysis and design 20
2.3.1 A simple example 20
2.4 Modelling 25
2.4.1 The unified modelling language (UML) 25
2.4.2 An object-oriented programming language: Java 26
2.5 Main ideas about OOP 27
2.5.1 Abstraction 27
2.5.2 Classes 28
2.5.3 Attributes and operations: the Encapsulation principle 28
vi Contents
2.5.4 Responsibilities 29
2.5.5 Inheritance 29
2.5.6 Abstract classes 34
2.5.7 Associations 34
2.5.8 Message exchanging 37
2.5.9 Collections 37
2.5.10 Polymorphism 37
References and further reading 42
3 Volatility and Correlation 45
3.1 Introduction 45
3.2 Volatility and correlation: models and measures 45
3.2.1 Implied information 47
3.2.2 Parametric models 47
3.2.3 Realized (cross)moments 47
3.3 Implied probability 48
3.4 Volatility measures 50
3.4.1 Implied volatility 50
3.4.2 Parametric volatility models 51
3.4.3 Realized volatility 54
3.5 Implied correlation 55
3.5.1 Forex markets implied correlation 55
3.5.2 Equity “average” implied correlation 56
3.5.3 Credit implied correlation 56
3.6 Historical correlation 57
3.6.1 Multivariate GARCH 57
3.6.2 Dynamic correlation model 58
3.7 Copula functions 59
3.7.1 Copula functions: the basics 59
3.7.2 Copula functions: examples 60
3.7.3 Copulas and survival copulas 61
3.7.4 Copula dualities 62
3.8 Conditional probabilities 63
3.9 Non-parametric measures 64
3.10 Tail dependence 65
3.11 Correlation asymmetry 66
3.11.1 Correlation asymmetry: finance 66
3.11.2 Correlation asymmetry: econometrics 68
3.12 Non-exchangeable copulas 68
3.13 Estimation issues 70
3.14 Lévy processes 71
References and further reading 72
4 Cash Flow Design 75
4.1 Introduction 75
4.2 Types of bonds 76
4.2.1 Floaters and reverse floaters 76
Contents vii
4.2.2 Convertible bonds 76
4.2.3 Equity-linked notes 76
4.2.4 Inflation-linked bonds 77
4.2.5 Asset-backed securities 77
4.3 Time and scheduler issues 78
4.3.1 Payment date conventions 78
4.3.2 Day count conventions and accrual factors 79
4.4 JScheduler 80
4.4.1 Date handling in Java 80
4.4.2 Data models 85
4.4.3 Design patterns 98
4.4.4 The factory method pattern 99
4.5 Cash flow generator design 99
4.5.1 UML’s activity diagram 100
4.5.2 An important guideline to the data model for
derivatives: FpML 103
4.5.3 UML’s sequence diagram 109
4.6 The cleg class 110
References and further reading 111
5 Convertible Bonds 113
5.1 Introduction 113
5.2 Object-oriented structuring process 113
5.2.1 Financial asset class 114
5.3 Contingent repayment plans 114
5.3.1 Payoff class 115
5.4 Convertible bonds 117
5.4.1 Exercise class 117
5.5 Reverse convertible bonds 121
5.6 Barriers 121
5.6.1 Contingent convertibles: Co.Cos 121
5.6.2 Contingent reverse convertibles 122
5.6.3 Introducing barriers in the Payoff class 123
5.6.4 Parisian options: a short description 123
5.7 Pricing issues 125
5.7.1 Valuation methods for barrier options: a primer 125
5.7.2 The strategy pattern 126
5.7.3 The option class 127
5.7.4 Option pricing: a Lego-like approach 129
References and further reading 135
6 Equity-Linked Notes 137
6.1 Introduction 137
6.2 Single coupon products 137
6.2.1 Crash protection 138
6.2.2 Reducing funding cost 141
6.2.3 Callability/putability: compound options 142
viii Contents
6.3 Smoothing the payoff: Asian options 150
6.3.1 Price approximation by “moment matching” 151
6.3.2 Variable frequency sampling and seasoning process 152
6.4 Digital and cliquet notes 153
6.4.1 Digital notes 153
6.4.2 Cliquet notes 154
6.4.3 Forward start options 154
6.4.4 Reverse cliquet notes 155
6.5 Multivariate notes 156
6.5.1 The AND/OR rule 156
6.5.2 Altiplanos 157
6.5.3 Everest 158
6.5.4 Basket notes 160
6.6 Monte Carlo method 161
6.6.1 Major components of a Monte Carlo algorithm 161
6.6.2 Monte Carlo integration 162
6.6.3 Sampling from probability distribution functions 163
6.6.4 Error estimates 164
6.6.5 Variance reduction techniques 165
6.6.6 Pricing an Asian option with JMC program 169
References and further reading 175
7 Credit-Linked Notes 177
7.1 Introduction 177
7.2 Defaultable bonds as structured products 177
7.2.1 Expected loss 178
7.2.2 Credit spreads 178
7.3 Credit derivatives 179
7.3.1 Asset swap spread 180
7.3.2 Total rate of return swap 181
7.3.3 Credit default swap 182
7.3.4 The FpML representation of a CDS 184
7.3.5 Credit spread options 187
7.4 Credit-linked notes 187
7.5 Credit protection 188
7.6 Callable and putable bonds 190
7.7 Credit risk valuation 191
7.7.1 Structural models 191
7.7.2 Reduced form models 193
7.8 Market information on credit risk 196
7.8.1 Security-specific information: asset swap spreads 196
7.8.2 Obligor-specific information: equity and CDS 197
References and further reading 201
8 Basket Credit Derivatives and CDOs 203
8.1 Introduction 203
8.2 Basket credit derivatives 203
Contents ix
8.3 Pricing issues: models 204
8.3.1 Independent defaults 204
8.3.2 Dependent defaults: the Marshall–Olkin model 205
8.3.3 Dependent defaults: copula functions 207
8.3.4 Factor models: conditional independence 207
8.4 Pricing issues: algorithms 211
8.4.1 Monte Carlo simulation 211
8.4.2 The generating function method 212
8.5 Collateralized debt obligations 213
8.5.1 CDO: general structure of the deal 213
8.5.2 The art of tranching 215
8.5.3 The art of diversification 217
8.6 Standardized CDO contracts 219
8.6.1 CDX and i-Traxx 220
8.6.2 Implied correlation 221
8.6.3 “Delta hedged equity” blues 222
8.7 Simulation-based pricing of CDOs 224
8.7.1 The CABS (asset-backed security) class 225
8.7.2 Default time generator 227
8.7.3 The waterfall scheme 228
References and further reading 230
9 Risk Management 233
9.1 Introduction 233
9.2 OTC versus futures style derivatives 234
9.3 Value-at-risk & Co. 235
9.3.1 Market risk exposure mapping 236
9.3.2 The distribution of profits and losses 237
9.3.3 Risk measures 238
9.4 Historical simulation 239
9.4.1 Filtered historical simulation 240
9.4.2 A multivariate extension: a GARCH+DCC filter 241
9.4.3 Copula filters 242
9.5 Stress testing 242
9.5.1 Sources of information 243
9.5.2 Consistent scenarios 243
9.5.3 Murphy’s machines 246
9.6 Counterparty risk 247
9.6.1 Effects of counterparty risk 247
9.6.2 Dependence problems 253
9.6.3 Risk mitigating agreements 254
9.6.4 Execution risk and FpML 258
References and further reading 259
Appendix A Eclipse 261
Appendix B XML 265
Index 283