Interest Rate Modeling. Volume 3: Products and Risk Management Review

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(More customer reviews)I have read the vol 1 and vol 3. This review is for vol 3 only. After reading vol 1 (pls refer to my review for Vol 1) I was very impressed with the theoretical coverage and numerical tips, given by the authors who are probably the best quants on the street. Having this in mind I was expecting the same excitement and detail coverage for a wide range of vol products in vol 3. Now I have briefly finished reading vol 3, I have to say my feeling of vol 3 is mixed. I love the theortical treatment very well, the mapping in chap 16, the spread options in chap 17, the different improvements of regression in chap 18, the bermudans in 19, etc. The good thing is the subject is talked in detail with proofs and some implementation tips, and it is hard to find such material in other quant books. However, I feel something is missing. Some real trade examples maybe would fill some blanks. Just how to vega hedge a perticular CLE in real life, for example? I know there is no simple answer but would love to see how the big banks are doing it. I was expecting the authors discuss the hedging strategy for various type of vol products, 1 by 1, in detail, but I was a bit disappointed. Another pity I feel is the lack of discussion of forward vol and certain 2nd-order derivative profiles for the callables. Such as negative volga for accretor callables, I think every vol trader on the street knows this is ugly, however the authors didn't talk about it. Maybe the focus of this book is mainly about pricing models but not hedging/managing a vol book. Well, there are really too many things to cover I guess so can't expect a perfect book. Overall I would still highly recommend this book for quants and vol traders.

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Table of contents for all three volumes (full details at andersen-piterbarg-book.com)Volume I. Foundations and Vanilla Models Part I. Foundations
Introduction toArbitrage Pricing Theory
Finite Difference Methods
Monte Carlo Methods
Fundamentals of Interest Rate Modelling
Fixed Income Instruments
Part II. Vanilla Models
Yield Curve Construction and Risk Management
Vanilla Models with Local Volatility
Vanilla Models with Stochastic Volatility I
Vanilla Models with Stochastic Volatility II
Volume II. Term Structure Models Part III. Term Structure Models
One-Factor Short Rate Models I
One-Factor Short Rate Models II
Multi-Factor Short Rate Models
The Quasi-Gaussian Model with Local and Stochastic Volatility
The Libor Market Model I
The Libor Market Model II
Volume III. Products and Risk Management Part IV. Products
Single-Rate Vanilla Derivatives
Multi-Rate Vanilla Derivatives
Callable Libor Exotics
Bermudan Swaptions
TARNs, Volatility Swaps, and Other Derivatives
Out-of-Model Adjustments
Part V. Risk management
Fundamentals of Risk Management
Payoff Smoothing and Related Methods
Pathwise Differentiation
Importance Sampling and Control Variates
Vegas in Libor Market Models
Appendix
Markovian Projection

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