Understanding arbitrage : an intuitive approach to financial analysis / Randall S. Billingsley.

Format:

Book

Author/Creator:

Billingsley, Randall S.

Language:

English

Subjects (All):

Arbitrage.

Speculation.

Hedging (Finance).

Physical Description:

1 online resource (xviii, 202 p. ) ill. ;

Edition:

1st edition

Place of Publication:

Upper Saddle River, N.J. : Wharton School Pub., c2006.

Language Note:

English

System Details:

text file

Summary:

Arbitrage is central both to corporate risk management and to a wide range of investment strategies. Thousands of financial executives, managers, and sophisticated investors want to understand it, but most books on arbitrage are far too abstract and technical to serve their needs. Billingsley addresses this untapped market with the first accessible and realistic guide to the concepts and modern practice of arbitrage. It relies on intuition, not advanced math: readers will find basic algebra sufficient to understand it and begin using its methods. The author starts with a lucid introduction to the fundamentals of arbitrage, including the Laws of One Price and One Expected Return. Using realistic examples, he shows how to identify assets and portfolios ripe for exploitation: mispriced commodities, securities, misvalued currencies; interest rate differences; and more. You'll learn how to establish relative prices between underlying stock, puts, calls, and 'riskless' securities like Treasury bills -- and how these techniques support derivatives pricing and hedging. Billingsley then illuminates options pricing, the heart of modern risk management and financial engineering. He concludes with an accessible introduction to the Nobel-winning Modigliani-Miller theory, and its use in analyzing capital structure.

Contents:

Arbitrage, hedging, and the law of one price

Arbitrage in action

Cost of carry pricing

International arbitrage

Put-call parity and arbitrage

Option pricing

Arbitrage and the (ir)relevance of capital structure.

Notes:

Includes bibliographical references (p. 189-192) and index.

Bibliographic Level Mode of Issuance: Monograph