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Taleb on Risk: Dynamic Hedging Hardcover – 31 Dec 1996

4.0 out of 5 stars 15 customer reviews

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Product details

  • Hardcover: 530 pages
  • Publisher: John Wiley & Sons; 1 edition (31 Dec. 1996)
  • Language: English
  • ISBN-10: 0471152803
  • ISBN-13: 978-0471152804
  • Product Dimensions: 18.6 x 3.3 x 25.4 cm
  • Average Customer Review: 4.0 out of 5 stars  See all reviews (15 customer reviews)
  • Amazon Bestsellers Rank: 251,496 in Books (See Top 100 in Books)
  • See Complete Table of Contents

Product Description

Review

"If pricing is a science and hedging is an art, Taleb is a virtuoso."

-- Bruno Dupire, Head of Swaps and Options Research Paribas Capital Markets

"A tour de force. That rare find book of great practical and theoretical value. Taleb successfully bridges the gap between the academic and the real world. Interesting, provocative, well written. Each chapter worth a fortune to any current or prospective traders." -- Victor Niederhoffer, Chairman Niederhoffer Investments

"Dynamic Hedging bridges the gap between what the best traders know and what the best scholars can prove." -- William Margrabe, President The William Margrabe Group, Inc

"The most comprehensive, insightful, intuitive work on the subject. It is instrumental for both beginners and experienced traders." -- Peter Tselepis, Global Risk Manager Currency Options Trading Banque Indosuez

"This is not merely the best book on how options trade, it is the only book." -- Stan Jonas, Managing Director FIMAT-Societe Generale

From the Back Cover

Dynamic Hedging is the definitive source on derivatives risk. It provides a real–world methodology for managing portfolios containing any nonlinear security. It presents risks from the vantage point of the option market maker and arbitrage operator. The only book about derivatives risk written by an experienced trader with theoretical training, it remolds option theory to fit the practitioner′s environment. As a larger share of market exposure cannot be properly captured by mathematical models, noted option arbitrageur Nassim Taleb uniquely covers both on–model and off–model derivatives risks.

The author discusses, in plain English, vital issues, including:

  • The generalized option, which encompasses all instruments with convex payoff, including a trader′s potential bonus.
  • The techniques for trading exotic options, including binary, barrier, multiasset, and Asian options, as well as methods to take into account the wrinkles of actual, non–bellshaped distributions.
  • Market dynamics viewed from the practitioner′s vantage point, including liquidity holes, portfolio insurance, squeezes, fat tails, volatility surface, GARCH, curve evolution, static option replication, correlation instability, Pareto–Levy, regime shifts, autocorrelation of price changes, and the severe flaws in the value at risk method.
  • New tools to detect risks, such as higher moment analysis, topography exposure, and nonparametric techniques.
  • The path dependence of all options hedged dynamically

Dynamic Hedging is replete with helpful tools, market anecdotes, at–a–glance risk management rules distilling years of market lore, and important definitions. The book contains modules in which the fundamental mathematics of derivatives, such as the Brownian motion, Ito′s lemma, the numeraire paradox, the Girsanov change of measure, and the Feynman–Kac solution are presented in intuitive practitioner′s language.

Dynamic Hedging is an indispensable and definitive reference for market makers, academics, finance students, risk managers, and regulators.

The definitive book on options trading and risk management

"If pricing is a science and hedging is an art, Taleb is a virtuoso." Bruno Dupire, Head of Swaps and Options Research, Paribas Capital Markets

"This is not merely the best book on how options trade, it is the only book." Stan Jonas, Managing Director, FIMAT–Société Générale

"Dynamic Hedging bridges the gap between what the best traders know and what the best scholars can prove." William Margrabe, President, The William Margrabe Group, Inc.

"The most comprehensive, insightful, intuitive work on the subject. It is instrumental for both beginning and experienced traders."

"A tour de force. That rare find, a book of great practical and theoretical value. Taleb successfully bridges the gap between the academic and the real world. Interesting, provocative, well written. Each chapter worth a fortune to any current or prospective derivatives trader." Victor Niederhoffer, Chairman, Niederhoffer Investments

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Top Customer Reviews

By A Customer on 23 Mar. 1999
Format: Hardcover
It is nearly impossible to write a book that is both mathematically rigorous and sufficiently down to earth to be accessible to the professional trader. This book is a step in the right direction. It maintains the mathematical accuracy and depth without bogging the reader down with technical derivation of formulae. At the same time, it is written by a trader whose experience in the real market compels him to constantly question the 'nice' assumptions used to derive these formulae.
Taleb is first a market practitioner who uses models and pricing formulae to enhance trading and not the other way around. If there is a discrepancy between theory and reality he doesn't blame the markets.
The book is very personal and leaves no doubt what the author's opinion is on VAR, continuous hedging and other sacred cows of modern finance. The debacle in the financial markets in 1998 and the apologetic excuses by famous traders and theoreticians indicates that there is more than a grain of truth in Taleb's skepticism.
The importance of this book is that whether one agrees or disagrees with Taleb, it forces the reader to question his basic assumptions and rethink common truths. The book is unique: it is stylish, philosophical, literary, and if one may say so of a hardcore financial book - it is very entertaining.
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Format: Hardcover
This is without a doubt the best book that has ever been written on professional options trading and I simply cant understand why anyone would give a less than glowing review. If there is anything better out there (and i dont mean a pricing book that leaves the reader to infer his own trading realities from the models and hedge ratios that ensue) then I'd love to see it.
Of course this isnt a mathematically rigourous platform to learn the pricing and hedging of option products, Taleb is entirely clear that it wasnt meant to be. Instead it offers one source for a multitude of much, much more intuitive lessons on trading, probability, and market realties offered in a persistently thought provoking, even entertaining style.
As a junior trader I found this a real bonus step up the learning curve (im sure you could realise all of this knowledge elsewhere, but in one place? - never.) I eagerly await seeing any additional material included in the second edition.
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Format: Hardcover
Taleb must be congratulated for writing a book that introduces some basic ideas about options trading to novices. On the other hand, there is nothing in it for the experienced options trader, especially one who understands both the mathematics and real-life issues. Readers lacking either mathematics or real life trading experience may be unduly impressed, which perhaps explains the success of the book. In fact, Taleb is often vague where he should be precise and vice versa. Not atypical for a finance book where outrageous claims are sometimes made on behalf of both practioners and academics in a very young discipline.
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Format: Hardcover Verified Purchase
I saw this book recommended by a number of people and I respect the author from previous works however it was way above my level in terms of maths and application. This book would suit professional risk managers and derivatives traders with a firm grasp of the issues and the math behind them. Not really for the arm-chair enthusiast, except maybe to act as an indication of the real complexities of trading options.
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Format: Hardcover
Taleb's book successfully bridges the gap between well-posited but academic accounts of options theory and the practical knowledge and vernacular that are privy to the best traders. It is thoughtful and interesting, scholarly yet intuitive - and written in such picturesque prose that will at once charm and provoke you! The author makes the point well that market reality at times can be grim and much less forgiving - and certainly much richer - than current theoretical modeling make it out to be and shows how the trader can stack the odds in his or her favor. This book is an invaluable source of ideas for anyone who wants to monetize their empirical research on markets.
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Format: Hardcover Verified Purchase
I All I can say is that this is the best Start for anybody wanting to trade Exotic Options At a retail Level, but also wishing to start a career in any global Financial Center. This Book could change your life I.e ' you will Win or you Will Lose' playing this Game.

Good Luck Everybody the Game is On.
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Format: Hardcover
Taleb has written an insightful piece on derivatives trading, BUT repeated errors in definitions, symbols, and charting makes, what could have been a work of art, this book slightly above average... From a market makers perspective, I recommend Option Market Making, by A Baird...
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Format: Hardcover
Nassim Taleb's book has become mandatory reading for all of the traders at our global derivatives trading house. More than just about options and derivatives, Dynamic Hedging teaches about market behavior better than any "text" I've seen. A must-buy for any trader, regardless of specialty.
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