Table Of Contents:
Author's ``Disclaimer'' ix
Introduction x
Derivatives Models on Models xv

Nassim Taleb on Black Swans 1(16)

The Discovery of Fat-Tails in Price Data 17(16)

Edward Thorp on Gambling and Trading 27(6)

Option Pricing and Hedging from Theory to Practice: Know Your Weapon III 33(46)

The Partly Ignored and Forgotten History 34(10)

Discrete Dynamic Delta Hedging under Geometric Brownian Motion 44(6)

Dynamic Delta Hedging Under Jump-Diffusion 50(4)

Equilibrium Models 54(1)

Portfolio Construction and Options Against Options 55(8)

Conclusions 63(8)

Alan Lewis on Stochastic Volatility and Jumps 71(8)

Back to Basics: A New Approach to the Discrete Dividend Problem 79(36)

Jørgen Haug

Alan Lewis

Introduction 79(3)

General Solution 82(5)

Dividend Models 87(2)

Applications 89(12)

Emanuel Derman the Wall Street Quant 101(14)

Closed Form Valuation of American Barrier Options 115(14)

Analytical Valuation of American Barrier Options 115(1)

Numerical Comparison 116(2)

Conclusion 118(3)

Peter Carr, The Wall Street Wizard of Option Symmetry and Volatility 121(8)

Valuation of Complex Barrier Options Using Barrier Symmetry 129(16)

Plain Vanilla Put--Call Symmetry 129(1)

Barrier Put--Call Symmetry 130(2)

Simple, Intuitive and Accurate Valuation of Double Barrier Options 132(5)

Static Hedging in the Real World 137(1)

Conclusion 138(3)

Granger on Cointegration 141(4)

Knock-in/out Margrabe 145(12)

Jøgen Haug

Margrabe Options 145(1)

Knock-in/out Margrabe Options 146(1)

Applications 147(6)

Stephen Ross on APT 153(4)

Resetting Strikes, Barriers, and Time 157(20)

Jørgen Haug

Introduction 157(3)

Reset Strike Barrier Options 160(1)

Reset Barrier Options 161(1)

Resetting Time 162(1)

Conclusion 163(4)

Bruno Dupire the Stochastic Wall Street Quant 167(10)

Asian Pyramid Power 177(20)

Jørgen Haug

William Margrabe

Celia in Derivativesland 177(3)

Calibrating to the Term Structure of Volatility 180(4)

From Geometric to Arithmetic 184(1)

The Dollars 185(6)

Eduardo Schwartz: the Yoga Master of Mathematical Finance 191(6)

Practical Valuation of Power Derivatives 197(26)

Introduction 197(2)

Energy Swaps/Forwards 199(3)

Power Options 202(7)

Still, What About Fat-Tails? 209(2)

Aaron Brown on Gambling, Poker and Trading 211(12)

A Look in the Antimatter Mirror 223(16)

Garbage in, Garbage Out? 223(4)

Conclusion 227(4)

Knut Aase on Catastrophes and Financial Economics 231(8)

Negative Volatility and the Survival of the Western Financial Markets 239(28)

Knut K. Aase

Introduction 239(1)

Negative Volatility
A Direct Approach 240(1)

The Value of a European Call Option for any Value
Positive or Negative
of the Volatility 240(2)

Negative Volatility
The Haug interpretation 242(1)

Chaotic Behavior from Deterministic Dynamics 242(1)

Conclusions 243(4)

Elie Ayache on Option Trading and Modeling 247(20)

Frozen Time Arbitrage 267(20)

Time Measure Arbitrage 268(1)

Time Travel Arbitrage 269(4)

Conclusion 273(4)

Haug on Wilmott and Wilmott on Wilmott 277(10)

Space-time Finance The Relativity Theory's Implications for Mathematical Finance 287(36)

Introduction 287(3)

Time dilation 290(2)

Advanced stage of Space-time Finance 292(1)

Space-time Uncertainty 293(2)

Is High Speed Velocity Possible? 295(4)

Black-Scholes in Special Relativity 299(2)

Relativity and Fat-Tailed Distributions 301(1)

General Relativity and Space-time Finance 302(3)

Was Einstein Right? 305(2)

Traveling Back in Time Using Wormholes 307(1)

Conclusion 308(9)

Andrei Khrennikov on Negative Probabilities 317(6)

Why so Negative about Negative Probabilities? 323(20)

The History of Negative Probability 323(1)

Negative Probabilities in Quantitative Finance 324(3)

Getting the Negative Probabilities to Really Work in Your Favor 327(1)

Hidden Variables in Finance 328(1)

The Future of Negative Probabilities in Quantitative Finance 329(1)

Appendix: Negative Probabilities in CRR Equivalent Trinomial Tree 330(5)

David Bates on Crash and Jumps 335(8)

Hidden Conditions and Coin Flip Blow Up's 343(16)

Blowing Up 343(1)

Coin Flip Blow Up's 344(5)

Peter Jackel on Monte Carlo Simulation 349(10)
Index 359