Financial GeometryA Geometric Approach to Hedging & Risk Management

By Alvin Kuruc

Pearson Education / Financial Times

December 2003

ISBN: 0-273-66196-5

406 Pages, Illustrated, 7 ½" x 9 ¾"

$177.50 paper original

The past thirty years have seen explosive growth in the use of financial deritivatives along with the development of an elegant mathematical theory for their valuation. The theory, based on stochastic calculus, provides a conceptual framework for valuation as well as efficient computational tools.As derivative markets have matured, much of the focus has shifted from the valuation of individual financial instruments to the problems of hedging and risk management of large financial portfolios. The challenge here is to understand the behaviour of a complex set of instruments that may depend on hundreds or thousands of underlying risk factors. Financial Geometry will help you to do so.

Mathematical yet accessible, Financial Geometry provides intuitive geometric metaphors and powerful computational machinery for describing the complex risks of the modern financial world.

Topics covered include:

Marking to market valuation techniques and models risk-factor definition sensitivity and scenario analysis interest rate calculations hedge calculations Value at Risk risk-factor mapping volatility curves and surfaces time effects

Features

Presents mathematical tools for describing the complex multi-factor financial risks of the modern world, helping students to understand how to avoid such losses in organisations. Practical management of financial derivatives, examining problems that have either become more or less standardised and provides detailed formulisms for doing standard risk calculations. Includes mathematical foundations of multifactor hedging and financial risk management with geometric insight and practical relevance. The book also contains intuitive visual metaphors for understanding complex multivariate risk and hedging relationships (one picture is worth a thousand words.) There is no other book that treats the risk management and hedging of diverse portfolios of financial derivatives at this mathematical level.