:: Collaborations ::

:: Bonds, Futures and Options ::

Interest Rate Management

Rudi Zagst

Springer Verlag

A very promising book on interest rate theory, written with special care and precision.
Rudi Zagst manages to give an all-inclusive presentation of the topic, putting special emphasis on measuring and hedging financial risks. This makes the book unique among others, in exposing the reader to the entire financial engineering process -from mathematical modelling and pricing to the risk and asset management of a complete portfolio.

The book starts with a succinct and rigorous introduction on stochastic calculus and mathematical finance. The interest rate market is presented in part II. Major models, various interest-rate derivatives and different pricing methods are reviewed. The last part of the book deals with the measurement and management of risks, emerging from an interest-rate market. Various risk measures are discussed here, along with interesting methods for short-and long-term hedging.

Broadly speaking, this book is more on the mathematical “side” of the topic, although it gradually adopts a more finance-oriented approach. Trying to compare it with other popular textbooks, I would claim that it follows closer the style of Bingham and Kiesel’s “Risk-Neutral Valuation” and Kennedy and Hunt’s “Financial Derivatives in Theory and Practice”, while it is quite different from more “practical” monographs, such as John Hull’s “Options, Futures and other Derivatives” and Paul Wilmott's “Derivatives”.

“Interest rate management” is mostly recommended to graduate and PhD students in mathematics or finance. Although not really a beginner's book, it could serve as a good reference for those who want to get a feeling of how concrete mathematical tools can be applied to real-world financial problems.

Reviewed by Nikos Thomaidis, PhD Student, University of Aegean, Chios Island, Greece. Click here to buy this book at Amazon.co.uk.

Got a recommendation? Send it to us!

Back for more