Trading Stategies for Capital Markets


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In order to succeed in the capital markets, professional traders and investors must understand that markets aren't mathematical abstractions, but dynamic, real-time reflectors of the world we live in. You need to know how the capital markets work.Trading Stategies for Capital Markets Review
Benning assumes a mathematically sophisticated reader, who know little about how markets work. So he provides an education. Centred in no small way on the Efficient Market Hypothesis by Markowitz. This is the dominant theoretical framework for modelling financial markets, and whether you subscribe to it or not, you need to be well aware of it. The book suggests, based on plausible reasoning, that markets are weakly efficient. But that volatility can be greater than theoretically assumed.Another key portion of the book covers the Capital Asset Pricing Model.
Black-Scholes option pricing is derived, showing the assumptions on which it was originally based. Other financial instruments are also covered. Like Collateralised Mortgage Obligation (CMO). Alas, no mention of its close relative, the Collateralised Debt Obligation, which has been much in the news in 2007. A curious omission. But the book is still well worth reading.
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