Structured Finance: The Object Orientated Approach is aimedat both the finance and IT professionals involved in the structuredfinance business with the intention of sharing common concepts andlanguage within the industry. The financial community (structurers,pricers and risk managers) view structured products as collectionsof objects under the so-called replicating portfolio paradigm. TheIT community use object oriented programming (OOP) techniques toimprove the software updating and maintenance process. For themstructured products are collections of objects as well. Despite useof the same object concept, it looks like communicationbetween these different professional functions has beenproblematic. Recently, construction of standard data structuresknown as FpML has begun to lay out a common definition of objects,at least for plain vanilla derivatives, both between IT andfinancial people and across different market players. Along thisline, this book builds upon the concept of object to providefrontier treatment of structured finance issues relevant to bothcommunities engaged in building, pricing and hedging products andpeople engaged in designing and up-dating the correspondingsoftware.
Structured Finance: The Object Orientated Approach will enableyou to:
* decompose a structured product in elementary constituentfinancial objects and risk factors (replicatingportfolio)
* understand the basics of object oriented programming (OOP)applied to the design of structured cash flows objects
* build your own objects and to understand FpML datastructures available for standard products
* gauge risk exposures of the objects in structuredproducts to: risk factors, their volatilities and the correlationamong them (which factor are you long/short? Are you long/shortvolatility? Are you long/short correlation?)
* update your risk management system to accommodate structuredproducts with non linear exposures and to design objects torepresent, price and hedge, counterparty risk