"Trading volatility" used to mean dynamic hedging. Not anymore. Today, there are OTC derivatives on realized volatility and exchange-traded derivatives on implied volatility indexes like the VIX. This book is an edited collection offering something for everyone. For institutional investors, there are articles on vol as an asset class. For financial engineers or traders there are articles on the instruments and the mathematics underlying index construction. For theoreticians, there are discussions of risk premiums and fractal geometry, etc. ...

This short book evolved out of lecture notes for a course offered several times over the past few years at New York University. It describes financial engineering models that assume non-constant volatility for pricing equity derivatives. This allows the models to be calibrated to—or at least better fit—observed volatility skew ... Read more

A Levy process is a stochastic process that generalizes a Brownian motion with jumps or other features. Conceivably, they might be used in financial engineering to more accurately model the evolution of underlier values and address issues with volatility skew. Merton proposed their use in financial engineering in 1973, but research has gone well beyond the simple jump-diffusion process he used ... Read more

Do you have a PhD in math or physics? Do you have a strong mastery of the current literature on financial engineering? Do you use Kalman filters and Fourier transforms on the job most days of the week? If you have answered yes to all these questions, you are going to love this book. The rest of you can stop reading now ... Read more