I hope this book could be useful to risk management and valuation junior professionals. This is the book I wish I could have read when I was a junior professional myself. I tried to keep things simple and practical.
This article is an introduction to the so-called modern portfolio theory. It assumes a basic knowledge of linear algebra and multivariable calculus. In the first section we show how to compute the variance and the expected value (mean) of portfolio returns. In the second section we deal with mean-variance constrained optimization problems.
This article is an introduction to option pricing theory. In the first section we deal with the discrete time binomial option pricing model for European options, giving some hints regarding its convergence to Black-Scholes as the continuous time limit. In the second section we show how to use the binomial model for pricing American options, while the last section contains the Python code used for computing the tables in the text.
The Black-Derman-Toy model is a simple no arbitrage model of interest rates. The market term structure of long rates and their volatilities are used to construct a tree of possible future short rates. This tree can then be used to value interest rate sensitive securities.
The slides contain a brief presentation of the model; the R function allows to compute the short rate tree.
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