Table Of Content_________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
An Arbitrage Guide to Financial Markets
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Robert Dubil
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An Arbitrage Guide to Financial Markets
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Wiley Finance Series
HedgeFunds:QuantitativeInsights
Franc¸ois-SergeLhabitant
ACurrencyOptionsPrimer
ShaniShamah
NewRiskMeasuresinInvestmentandRegulation
GiorgioSzego¨ (Editor)
ModellingPricesinCompetitiveElectricityMarkets
DerekBunn(Editor)
Inflation-indexedSecurities:Bonds,SwapsandOtherDerivatives,2ndEdition
MarkDeacon,AndrewDerryandDariushMirfendereski
EuropeanFixedIncomeMarkets:Money,BondandInterestRates
JonathanBatten,ThomasFetherstonandPeterSzilagyi(Editors)
GlobalSecuritisationandCDOs
JohnDeacon
AppliedQuantitativeMethodsforTradingandInvestment
ChristianL.Dunis,JasonLawsandPatrickNaim(Editors)
CountryRiskAssessment:AGuidetoGlobalInvestmentStrategy
MichelHenryBouchet,EphraimClarkandBertrandGroslambert
CreditDerivativesPricingModels:Models,PricingandImplementation
PhilippJ.Scho¨nbucher
HedgeFunds:AResourceforInvestors
SimoneBorla
AForeignExchangePrimer
ShaniShamah
TheSimpleRules:RevisitingtheArtofFinancialRiskManagement
ErikBanks
OptionTheory
PeterJames
Risk-adjustedLendingConditions
WernerRosenberger
MeasuringMarketRisk
KevinDowd
AnIntroductiontoMarketRiskManagement
KevinDowd
BehaviouralFinance
JamesMontier
AssetManagement:EquitiesDemystified
ShantaAcharya
AnIntroductiontoCapitalMarkets:Products,Strategies,Participants
AndrewM.Chisholm
HedgeFunds:MythsandLimits
Franc¸ois-SergeLhabitant
TheManager’sConciseGuidetoRisk
JihadS.Nader
SecuritiesOperations:AGuidetoTradeandPositionManagement
MichaelSimmons
Modeling,MeasuringandHedgingOperationalRisk
MarceloCruz
MonteCarloMethodsinFinance
PeterJa¨ckel
BuildingandUsingDynamicInterestRateModels
KenKortanekandVladimirMedvedev
StructuredEquityDerivatives:TheDefinitiveGuidetoExoticOptionsandStructuredNotes
HarryKat
AdvancedModellinginFinanceUsingExcelandVBA
MaryJacksonandMikeStaunton
OperationalRisk:MeasurementandModelling
JackKing
InterestRateModelling
JessicaJamesandNickWebber
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An Arbitrage Guide to Financial Markets
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Robert Dubil
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LibraryofCongressCataloging-in-PublicationData
Dubil,Robert.
Anarbitrageguidetofinancialmarkets/RobertDubil.
p.cm.—(Wileyfinanceseries)
Includesbibliographicalreferencesandindexes.
ISBN0-470-85332-8(cloth:alk.paper)
1.Investments—Mathematics.. 2.Arbitrage. 3.Risk. I.Title. II.Series.
HG4515.3.D82004
332.6—dc22 2004010303
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AcataloguerecordforthisbookisavailablefromtheBritishLibrary
ISBN0-470-85332-8
ProjectmanagementbyOriginator,GtYarmouth,Norfolk(typesetin10/12ptTimes)
PrintedandboundinGreatBritainbyT.J.InternationalLtd,Padstow,Cornwall
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inwhichatleasttwotreesareplantedforeachoneusedforpaperproduction.
To Britt, Elsa, and Ethan
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Contents
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1 The Purpose and Structure of Financial Markets 1
1.1 Overview 1
1.2 Risk sharing 2
1.3 The structure of financial markets 8
1.4 Arbitrage: Pure vs. relative value 12
1.5 Financial institutions: Asset transformers and broker-dealers 16
1.6 Primary and secondary markets 18
1.7 Market players: Hedgers vs. speculators 20
1.8 Preview of the book 22
Part One SPOT 25
2 Financial Math I—Spot 27
2.1 Interest-rate basics 28
Present value 28
Compounding 29
Day-count conventions 30
Rates vs. yields 31
2.2 Zero, coupon and amortizing rates 32
Zero-coupon rates 32
Coupon rates 33
Yield to maturity 35
Amortizing rates 38
Floating-rate bonds 39
2.3 The term structure of interest rates 40
Discounting coupon cash flows with zero rates 42
Constructing the zero curve by bootstrapping 44
2.4 Interest-rate risk 49
Duration 51
Portfolio duration 56
Description:A very clear way of presenting the complex material. This is my favorite book with advanced coverage. Author uses a lot of examples with actual numbers so that it's easier to understand what the numbers are and what they mean.
