Abstract
In Part II, a whole array of very workable methods for the valuation and hedging of financial instruments was introduced. We now continue in Part III with the explicit valuation of the most important and common financial instruments. We restrict our considerations to simple (for the most part, plain vanilla) instruments which still represent the largest proportion of all trades in financial markets today. The methods presented in Part II do in fact allow much more complicated instruments than those introduced here to be effectively priced. Seen from this point of view, the application of the material introduced in Part II is much more extensive than its restriction to the instruments defined in Part III might suggest. More involved applications (such as term structure models for Bermudan swaptions or multi-dimensional finite difference schemes for convertible bonds, etc.) often contain so many details specific to the individual implementation, that it is easy to become distracted from the essential ideas. Therefore such complicated examples are not particularly appropriate for discussion in an introductory text. However, Part II enables the reader to develop pricing techniques for quite complex products even if they don’t receive specific treatment in Part III.
This is a preview of subscription content, log in via an institution.
Buying options
Tax calculation will be finalised at checkout
Purchases are for personal use only
Learn about institutional subscriptionsPreview
Unable to display preview. Download preview PDF.
Copyright information
© 2004 Hans-Peter Deutsch
About this chapter
Cite this chapter
Deutsch, HP. (2004). Spot Transactions on Interest Rates. In: Derivatives and Internal Models. Finance and Capital Markets Series. Palgrave Macmillan, London. https://doi.org/10.1057/9781403946089_16
Download citation
DOI: https://doi.org/10.1057/9781403946089_16
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-51542-4
Online ISBN: 978-1-4039-4608-9
eBook Packages: Palgrave Economics & Finance CollectionEconomics and Finance (R0)