Exotic-option Books

good functional book. keeps things simple

This book does a very nice job of both explaining how exotic options work and one's motivation for using complex derivatives. Good graphs, appropriate use of equations, and plenty of actual market-based examples.

While developments in this industry move very fast, this book remains one of my favourites for covering the basics of structured derivatives.

On such a topic, it is very easy to get carried away with complex mathematics and jargon, but this author handles the task very well. Topics such as quantifying risk, measuring swap valuations and understanding complex options are explained in a way most of us will understand.

This book is not for the beginner, but is more aimed at those with an average or above average understanding of derivatives.

This book is a collection of articles on the use of Levy processes in the modelling, analysis and pricing of exotic markets and options, such as Asian options of American type, exotic derivatives of game type, etc. There is a lot of exotic mathematics and, clearly, the use of Levy processes is suitable for today's exotic applications but also for mathematicians and probabilists who are bored with some of the less exotic stochastic process models. There are several open problems in Levy processes, for instance we understand little about multidimensional processes reflected on some convex set, let alone their stochastic control. I am sure that one can dream of exotic applications of these models as well.

The book is worth reading if you are interested in Levy processes. The only dissapointment is that it lacks an exotic cover. Had it, for example, a picture of an exotic landscape on some exotic island with an exotic human being sipping an exotic pina colada (with low fat ingredients), the book would have been even more exotic.

Weert's book is an advanced foray into the use and pricing of exotic options. Where these are broadly defined to be those options whose payoffs can't be duplicated by normal options.

The main dependencies of option pricing are studied. Above all, the interest rate. Though for those knowing calculus, the text says that this is merely the partial derivative of the option price with respect to the interest rate. See how simple life gets, if you know calculus.

Option strategies like call and put spreads are explained. These may be familiar terms to you, if you have used normal options. But elaborations arise when dealing with exotics.

The text seems to deliberately minimise the complex maths involved in modelling pricing. Perhaps out of a desire to attract a broad readership?

This book is written by the two well-known applied mathematicians - Marco Avellaneda of the Courant Institute and Peter Laurence of the University of Rome. Avellaneda has been involved in financial mathematics for a number of years, while Laurence's interest in this subject is more recent. The book can serve as a useful introduction to the quantitative analysis in financial markets. As such, it covers a lot of ground stretching from an exposition of the standard Black-Scholes theory to an interesting description of the HJM framework. In addition to the standard material, it contains several original results developed by the authors themselves. The first printing had so many typos that its study was difficult for a novice. Most of these typos had been corrected in the second printing. In its present form, the book can be strongly recommended to a general reader with interest in the mathematical finance.

This book is written by the two well-known applied mathematicians - Marco Avellaneda of the Courant Institute and Peter Laurence of the University of Rome. Avellaneda has been involved in financial mathematics for a number of years, while Laurence's interest in this subject is more recent. The book can serve as a useful introduction to the quantitative analysis in financial markets. As such, it covers a lot of ground stretching from an exposition of the standard Black-Scholes theory to an interesting description of the HJM framework. In addition to the standard material, it contains several original results developed by the authors themselves. The first printing had so many typos that its study was difficult for a novice. Most of these typos had been corrected in the second printing. In its present form, the book can be strongly recommended to a general reader with interest in the mathematical finance.

This book is no doubt written in haste and typos are galore. I have read this book in its entirety and I highly recommend it. Concepts well covered include Binomial trees, Brownian motion and stochastic calculus, APT, HJM formulation, etc. It is a great stepping stone to get to Duffy's book. A second edition would be a great idea.

This is a surprisingly sloppy book written by a known academic in the financial engineering world. That is Marco Avellaneda. At first sight, this book is a good idea. It is suppose to bridge the gap between literature that are too simplified for quants and the high level books that are too mathematically rigorous for pratitioners. However this book is presented in such a sloopy manner that any profit driven company would sack these two authors. There are typo mistakes in almost every page and some fundamental errors. There are numerical examples there are completely wrong. On top of that, who writes a quant book without giving any exercises. The authors should comprehend that mistakes in quantitative books can be very misleading to the reader especially if the reader is trying to learn. If you don't have a Ph.D. in Math, don't read this book. It might do more harm than good.

Obviously I followed the wrong review. Those who feel that thetypos are immaterial are misleading. I lost many hours trying tounderstand what the book was doing in many places only to realize that the book was just wrong. So, if you don't have a lot of spare time, and don't wish to be an editor, please do yourself a favor and skip this book. END

This could be a good book if it weren't for all of the errors. The typos, inconsistent formulas, and algebraic mistakes make you wonder if the author was awake when he wrote this book.

I have read P.G. Zhang's extoic options with great interest. It provides the readers with overview of the extoic options commonly seen in the markets. However, most readers will be turned off by the complicated calculation of the pricing of the extoic options. But it's still give you an overview of the extoic options. It's a good buy

I read the first draft of this book and I like to talk to the author Peter Zhang. If any one has his e-mail please let me know, thanks. It is the second time to send the e-mail request.

Hello, I bought the book "Exotic Options of Zhang" few days ago. I'm a french reader working in a big french Broker firm. I note some mistakes in the two first parts of your book. Here is the list. Page 8: In the table MQTIF -> MATIF Marche A Terme International de France Page 11: In the footnote CAC 40 (or 240) is now for "Cotation Assistee en Continue" instead of "Compagnie des Agents de Change" Page 28: "Fisher Black... now a partner at Goldman Sachs..." In fact, I think he is resting in peace now ! Page 35: In the footnote A wrong "r" replaces the greek letter sigma, and confusion in the stochastic process between the Brownian and the process dz(t). Page 51: In Appendix (A2.4) dz(t) instead of z(t) Page 60: Equation (3.5) No "S" term in the pricing formula of the future option. Page 66: I think that the model of Heston for stochastic volatility is more accurate to deal with. Page 75: "An option's theta is always positive because there is always more possibility..." I think it's only true for call option, indeed the case of deep in the money put is different. Page 100 & 101 : Figure 4.6 & 4.7 Confusion in the trees between payoffs and values of option. Text says .." $5.61 because it is larger than the corresponding value $4.78.." and the tree shows in fact a value of 5.16 at node G. In Fig 4.6, the node in the first step with the value $5.61 is inferior to the value of the european case $6.04 (Fig 4.5) ? In fig 4.7 , no final price for the option, the final node is blank. Page 102 : "In Example 4.3 and 4.4, the European and American Put option prices are..." instead of "Example 4.4 and 4.5" Page 114 : At the top of the page "...asset price in (2.4) or (4.3)." instead of "...asset price in (2.4) or (5.3)." Page 118 & 119 : In example 5.4 & 5.5 1) "+ N(0.1372) " instead of "x N(0.1372)". 2) exp(-0.07) = 0.9324 and not 0.9236 ?! 3) Finally the price of the call C is not $20.117. 3 bis) Missing sign equal "=" (replaced by a minus "-" ?!) 4) Same problem for the put. 5) In Example 5.5 reference to example 5.3 and 5.2 instead of 5.4 ! Page 120 : Equation (5.13) "t* - s" instead of "t* s" in the denominator Page 121 : Example 5.6 I think the same kind of problem in the numerical application of the formula. Page 123 : "The Asian call option prices become higher with more frequent obsrevations as shown in Table 5.1" obsrevations -> observations higher -> lower ... I think ?!! Page 124 : Example 5.7 You note "yield on the undelying asset is zero" but you write next "g = 0.03" You write twice T sa_mu,n-j ? Impossible to find your result for the correlation 0.883 ???? except if in (5.18) the second term (r-g-.5*s*s) is not squared ! Page 125 : Example 5.9 WRONG ONE MORE TIMES How do you find 0.4583 for te ??? Page 126 : Example 5.10 The value of Dcg1 and Dcg2 are swapped in the price of the call. Idem for the put , where the litteral equation and its application are false (Minus sign, exponential disappears,...) ! Page 127 : In Equation 5.22 Miss a starting parenthese "(" Page 135 : In Equation 6.2, the second SUM sign is in fact a MULTIPLICATION sign, isnt'it? I continue my interested [and careful ;-) ] reading... Michel KUREK EMAIL: MKUREK@COMPUSERVE.COM

This could have been a very valuable addition to my growing list of books on derivative pricing. As many other readers have mentioned, there are so many typos as to make it nearly worthless to the reader. The author, publisher or editor owes every purchaser of this book a complete errata sheet (could be as large as the book itself). I did find the section on the distribution of the correlation coefficient very interesting.

I was recommended couple of books for my course and this was one among them. Though it touches the topic, the contents are brief and if you want more detail, this is not the right one.

Seydel is at a level of sophistication comparable to Wilmott et al. (2000). Indeed, it makes a lot of sense to read both books side-by-side. While Wilmott focuses exclusively on "differential equation methods" of financial engineering, Seidel takes a more balanced approach. The two books complement each other well.

The main part of this book is focused on methods of how to value american vanilla options. He does this only in the diffusion transformed version of B&S. He starts with the equation in this form, without mentioning much of how to get there, and why. And thats typical for the rest of the book aswell, much of it is "cookery book form" (even if the book contains lots of usefull references in the endchapter). He discusses several ways of solving PDE:s, mainly implicit/explicit/Crank N and then there is a very introductory chapter on FEM. The discussion on stability issues is to brief (and not to understandable), I'd say (Tavella does this much more elegant). In the endchapter he discusses how to value exotic options (using asian as a case), and concludes that the methods ealier in the book isnt of much use, but as the author says this is an introductory book.

During my painful thesis writting, I read this book in order to get some relaxation together with Hull's book. If you are a rocket scientist, such as a struggeling ph.d candidata like me, you will find Hull's book is useful but simplified. This book is quite helpful to me because I used PDE. Statistic, SDE, numerical method here and there and in the book, Seydel shows how to put these skills together and how to solve problems.

There are only four chapters on weather derivatives themselves and these seem, at a glance, to be mainly re-writes of material that is already available on the internet, e.g. one written by Enron, one by Southern Company Energy Marketing.

Nevertheless, the contributors are key players in the market and this book serves as a useful summary of the available literature. I would have liked to see some advanced material, including explanation of more sophisticated pricing models, but that is perhaps best left to a subsequent text.

The book is certainly not cheap, though it is not unreasonably priced - especially when compared to the amount of money companies are throwing away through failing to manage their weather risks...

Weather and energy derivatives constitute a 'hot' topic in the derivatives market with new articles, reviews and websites sprouting everywhere. So, this book may seem a timely publication on the topic, given the fact that there are very few publications available on this topic.

However, unless you know nothing about the subject, I do not recommend to buy this book: timeliness seems to be its only quality.

Most articles are descriptive of products and markets and contain little information of interest to risk managers / traders / insurance professionals working in the field. The article on options is a general article on Black Scholes with little or no relevance to energy or weather derivatives.

In brief, it looks as if this book were written for purely commercial purposes. Definitely not worth its high price.

Since my first review, a number of people have asked for more comments on this book. I have therefore written a more detailed review:

This book contains a series of articles covering developments in the areas of Insurance Derivatives, Securitisation and Weather Derivatives. The Weather Derivatives section comprises four articles written by key industry players. It serves as a useful introduction to the weather derivatives market for the newcomer.

The first article provides a broad introduction to weather derivative instruments, contrasting them with weather insurance products. It looks at the weather risk market in terms of the energy chain, from producers through to consumers. The article gives an overview of the most common type of weather derivative presently traded, those based on "degree days". Finally, valuation of weather derivatives is touched on.

The second article presents the current state of the weather derivatives market and summarises the types of deal that have been entered into to date.

The final two articles provide a more in-depth analysis of pricing degree day instruments and cover issues such as: · Establishing correlations between revenue streams and temperature variables; · Use of historical data to extrapolate valuations, including a brief look at the appropriate selection of data and `de-trending' issues; · Introduction to stochastic temperature modelling; · Using value at risk techniques in the context of weather derivatives.

Some of the articles in the book are freely available in the public domain, and this may deter potential purchasers interested in weather derivatives from buying the book. In addition, the book would benefit from some advanced articles covering the use of more sophisticated valuation techniques. As it stands, however, this book is a useful introduction for newcomers to this rapidly growing market, with well chosen articles that provide a good basic grounding.

Dr. Nelken has compiled a series of articles
by a variety of authors dealing with particularly
diverse aspects of exotic options.

Although some of the papers contain useful
information, the book does not deserve to
be called a "handbook": it is more like a
loose compilation, thus making it useless
as a reference.

I ordered the book in 1998 at my local
bookstore and felt cheated after the
first browsing. The extra star is there
to praise the occasional pearl of wisdom
you will encounter while reading through
all 15 chapters.

Finally, the cover advertises with
"valuable software included", referring
to a demo (!) of EXOTICOP (c). I strongly
disagree: the program is nothing more
than a black-scholes type exotics pricer
with a primitive interface, barely touching
the level of an undergraduate paper.
To add insult to injury, some of the
input parameters are frozen in the
demo version.

To put it in dealer's phraseology, this
book is a big yours.