Practical methods of financial engineering and risk management : [electronic resource] tools for modern financial professionals / Rupak Chatterjee.

Contents at a Glance -- Contents -- Series Editors� Foreword -- About the Author -- About the Technical Reviewer -- Acknowledgments -- Introduction -- Chapter 1: Financial Instruments -- Bloomberg Market Data Screens -- Cash Instruments -- Fed Funds -- Eurodollar Deposits -- US Treasury Bills, Notes, and Bonds -- Repo and Reverse Repo -- Equity indexes -- Dow Jones -- S & P 500 -- NASDAQ Composite Index -- Commercial Paper -- LIBOR -- Spot Forex -- Key Rates -- Prime Rate -- Federal Funds Target Rate -- Discount Rate -- Gold Futures and SwapsCrude Oil -- Fed Funds Futures -- 90-Day Eurodollar Futures -- 10-Year Treasury Note Futures -- Swaps -- Swap Valuation -- Swap Spreads -- Swap Futures -- Derivatives and Structured Products -- Dynamic Hedging and Replication -- Implied Volatility -- Caps and Floors -- Market Implied Volatility Quotes for Caps and Floors -- ATM Strike strike -- Swaptions -- Mortgage-Backed Securities -- Bloomberg Price Quotes: 30Y MBS -- Appendix: Daycount Conventions -- Problems -- Further Reading -- Chapter 2: Building a Yield Curve Overview of Yield Curve ConstructionCash LIBOR Rates -- 90D Eurodollar Futures -- Swaps -- Generic Discount Factors -- Problems -- Problem 2.1: Build a Simple Yield Curve -- Further Reading -- Chapter 3: Statistical Analysis of Financial Data -- Tools in Probability Theory -- Moments of a Distribution -- Creating Random Variables and Distributions -- The Inverse Transform Method -- Creating a Density Function: Histograms and Frequencies -- Excel Histogram-Creating Method: Static Data -- Excel Histogram-Creating Method: Dynamic Data Normalization of a HistogramMixture of Gaussians: Creating a Distribution with High Kurtosis -- Random Variable Approach -- Density Approach -- Skew Normal Distribution: Creating a Distribution with Skewness -- Calibrating Distributions through Moment Matching -- Calibrating a Mixed Gaussian Distribution to Equity Returns -- Fitting by Hand -- Chi-Squared Fitting -- Calibrating a Generalized Student�s- t Distribution to Equity Returns -- Calibrating a Beta Distribution to Recovery Rates of Defaulted Bonds -- Basic Risk Measures Calculating VaR and CVaR from Financial Return DataThe Term Structure of Statistics -- The Term Structure of the Mean -- The Term Structure of Skew -- The Term Structure of Kurtosis -- The Term Structure of Volatility -- The Term Structure of “Up� Volatility -- The Term Structure of “Down� Volatility -- Autocorrelation -- Dynamic Portfolio Allocation -- Modern Portfolio Theory -- Key Problems with Modern Portfolio Theory -- Generic Rules to Dynamic Portfolio Allocation with Volatility Targets -- Appendix. Joint Distributions and Correlation

Rupak Chatterjee, former director of the multi-asset quantitative research group at Citi, introduces finance professionals and advanced students to the latest concepts, tools, valuation techniques, and analytic measures being deployed by the more discerning and responsive Wall Street practitioners, on all operational scales from day trading to institutional strategy, to model and analyze more faithfully the real behavior and risk exposure of financial markets in the cold light of the post-2008 realities. The book assumes a working knowledge of calculus, statistics, and Excel, but it teaches techniques from statistical analysis, probability, and stochastic processes sufficient to enable the reader to calibrate probability distributions and create the simulations that are used on Wall Street to valuate various financial instruments correctly, model the risk dimensions of trading strategies, and perform the numerically intensive analysis of risk measures required by various regulatory agencies.