'Visual quantitative finance: a new look at option pricing, risk management, and structured securities'

Preface   xiChapter 1  Introduction   1Growth in Structured Securities   2Growing Emphasis on Low Volatility and Dividends   3Criticisms of Structured Securities   4Demand for Quantitative Skills   5Direction of Quantitative Finance   6When I Realized It Might Be Easier   8Try Again   10The Spreadsheet   10Visualizing the Result   14What It Means and Why It Works: A Nontechnical Overview   17It Doesn\'t Get Too Complicated   18An Integrated View of Risk Management   18Endnotes   19Chapter 2  Random Variables and Option Pricing   21Random Variables   22Building the Spreadsheet   28Correcting the Mistake   36Optional: Additional Resources   41Chapter 3  An Overview of Option Pricing Methods   43The Black-Scholes Formula   43Black-Scholes Assumptions   48The Binomial Option Pricing Method   49Monte Carlo Methods   51Putting Visual Quant in Context   52Additional Reading, Advanced Topics, and Resources   57Endnotes   60Chapter 4  Value-at-Risk and Conditional Value-at-Risk   61How Likely Is Something?   62Value-at-Risk   66Multiple Stock VaR   68Stock and Option VaR   68Conditional Value-at-Risk   69Chapter 5  Full Black-Scholes Model   77Adding Functionality to the Model   79Stock Return Mean (Cell G3)   79Stock Return Standard Deviation (Cell G4)   82Discount Factor   84Stock Price Median   85Summary of New Formulas   88Pricing Put Options   88Effects of Assumption Changes   93Endnote   96Chapter 6  The Lognormal Distribution and Calc Engine   97Definition of the Lognormal Distribution   98The Forward Equation   99Cross Reference: Stochastic Differential Equations   100The Backward Equation   102The Calc Engine   104Assigning Probabilities   107Setting the Stock Price Range   110Visualizing Option Pricing As Normal or Lognormal   112Chapter 7  Investment Profiles and Synthetic Annuities   115What Is a Synthetic Annuity, and How Does It Work?   117The Investment Profile   119Assigning Probabilities Using Implied Volatility   120Using Options to Reshape the Investment Profile   123Adjusting the Profile for Behavioral Finance   125Concentrated Stock Example   128The Synthetic Annuity in Turbulent Markets   138Chapter 8  Stock-Only Investment Profile   145The Purpose and Context of the Model   145The Stock-Only Investment Profile   146The Calc Engine   151The Stock-Only Profit Calculation   157Adding the Chart   159Test: Stock-Only Investment Profile   162Chapter 9  Adding Options to the Model   167Long Put Profit   168Short Put   169Expected Values   170Black-Scholes Add-In   173The Heading Formulas   175Delta Formulas   176Time Value and Total Premium Formulas   176Chapter 10  Option Investment Profiles   179Long Call Option Investment Profile   179Short Call Option   190Long Put Option   192Short Put Option   194Chapter 11  Covered Calls, Condors, and SynAs   197Covered Call Investment Profile   198Put-Call Parity   200Iron Condor Investment Profile   205Synthetic Annuity (SynA) Investment Profile   209Adding a Customized Utility Function   223Endnotes   225Chapter 12  Understanding Price Changes   227Investing in XYZ   227Attribution: Explaining Why the Option Price Changed   238Endnote   245Chapter 13  The Greeks   247The Option Greeks   248Calculating Greeks: Formulas, Models, and Platforms   249Delta   252Theta   257Vega   262Introduction to Chapters 14, \"Tracking Performance,\" and 15, \"Covered Synthetic Annuities\"   265Chapter 14  Tracking Performance   269Tracking Template   270TradeStation Platform   274Putting It All Together: Synthetic Annuity Overview   282Chapter 15  Covered Synthetic Annuities   285Covered Synthetic Annuity (CSynA)   286Example: Deere & Company   289The Standard CSynA   304Supplemental Material: The CBOE S&P 500 BuyWrite Index   311BXM Study by Callan Associates   312Index   315