The recent financial crisis brought to light many of the
misunderstandings and misuses of exotic derivatives. With market
participants on both the buy and sell-side having been found guilty
of not understanding the products they were dealing with, never
before has there been a greater need for clarification and
explanation.
Exotic Options and Hybrids is a practical guide to
structuring, pricing and hedging complex exotic options and hybrid
derivatives that will serve readers through the recent crisis, the
road to recovery, the next bull market and beyond. Written by
experienced practitioners, it focuses on the three main parts of a
derivative's life: the structuring of a product, its pricing
and its hedging.
Divided into four parts, the book covers a multitude of
structures, encompassing many of the most up-to-date and promising
products from exotic equity derivatives and structured notes to
hybrid derivatives and dynamic strategies. Based on a realistic
setting from the heart of the business, inside a derivatives
operation, the practical and intuitive discussions of these aspects
make these exotic concepts truly accessible.
Adoptions of real trades are examined in detail, and all of the
numerous examples are carefully selected so as to highlight
interesting and significant aspects of the business. The
introduction of payoff structures is accompanied by scenario
analysis, diagrams and lifelike sample term sheets. Readers learn
how to spot where the risks lie to pave the way for sound valuation
and hedging of such products. There are also questions and
accompanying discussions dispersed in the text, each exploited to
illustrate one or more concepts from the context in which they are
set.
The applications, the strengths and the limitations of various
models are highlighted, in relevance to the products and their
risks, rather than the model implementations. Models are
de-mystified in separately dedicated sections, but their
implications are alluded to throughout the book in an intuitive and
non-mathematical manner.
By discussing exotic options and hybrids in a practical,
non-mathematical and highly intuitive setting, this book will blast
through the misunderstanding of exotic derivatives, enabling
practitioners to fully understand and correctly structure, price
and hedge theses products effectively, and stand strong as the only
book in its class to make these "exotic" concepts truly
accessible.
