Applied Quantitative Finance for Equity Derivatives: Fifth Edition

In its fifth edition, this book presents the most significant equity derivatives models used these days. It is not a book around esoteric or cutting-edge models, but rather a book on relatively simple and standard models, viewed from the angle of a practitioner.A few key subjects explained in this book are:cash dividends for European, American, or exotic optionsadvanced finite difference techniques: grid stretching, payoff smoothing, the solution of the linear complementary problem under negative rates, and explicit super-time-stepping schemes.issues of the Dupire local volatility model and possible fixesNon-parametric regression for American options in Monte-Carlo, randomized simulationsthe particle method for stochastic-local-volatility model with quasi-random numbersNumerical methods for the variance and volatility swaps, including some popular variations around those.quadratures for options under stochastic volatility modelsVIX options and dividend derivativesbackward/forward representation of exotics.arbitrage-free representations for implied volatilities.The January 2025 fifth edition all in color brings the following minor updates:vanilla option pricing under the spot piecewise-lognormal model has been reworked and now include newer approximations.Asian option pricing also includes newer approximations.Time-dependent piecewise-constant stochastic volatility vanilla pricing, calibration and simulation.a small section on forward variance model calibration. Read more