Download or read book Arbitrage Free Pricing of Interest Rate Contingent Claims written by Bjorn Flesaker and published by . This book was released on 1990 with total page 246 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Arbitrage Pricing of Contingent Claims written by Sigrid Müller and published by Springer Science & Business Media. This book was released on 2013-03-13 with total page 160 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Arbitrage Theory in Continuous Time written by Tomas Björk and published by . This book was released on 1998-09 with total page 325 pages. Available in PDF, EPUB and Kindle. Book excerpt: This text provides an accessible introduction to the classical mathematical underpinnings of modern finance. Professor Bjork concentrates on the probabilistic theory of continuous arbitrage pricing of financial derivatives.

Download or read book Vasicek and Beyond written by L. P. Hughston and published by . This book was released on 1996 with total page 408 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Arbitrage pricing of contingent claims written by and published by . This book was released on 1985 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Arbitrage Opportunities in Arbitrage free Models of Bond Pricing written by David Backus and published by . This book was released on 1996 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: Mathematical models of bond pricing are used by both academics and Wall Street practitioners, with practitioners introducing time-dependent parameters to fit arbitrage-free models to selected asset prices. We show, in a simple one-factor setting, that the ability of such models to reproduce a subset of security prices need not extend to state-contingent claims more generally. The popular Black-Derman-Toy model, for example, overprices call options on long bonds relative to those on short bonds when interest rates exhibit mean reversion. We argue, more generally, that the additional parameters of arbitrage-free models should be complemented by close attention to fundamentals, which might include mean reversion, multiple factors, stochastic volatility, and/or non-normal interest rate distributions

Download or read book The Pricing of the Intersected Contingent Claims and the Fixed Rate Mortgage written by Chia-Wen Lee and published by . This book was released on 1992 with total page 638 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Risk Neutral Valuation written by Nicholas H. Bingham and published by Springer Science & Business Media. This book was released on 2013-06-29 with total page 306 pages. Available in PDF, EPUB and Kindle. Book excerpt: With a simple approach accessible to a wide audience, this book aims for the heart of mathematical finance: the fundamental formula of arbitrage pricing theory. This method of pricing discounts everything and takes expected values under the equivalent martingale measure. The authors approach is simple and excludes unnecessary proofs of measure-theoretic probability, instead, it favors techniques and examples of proven interest to financial practitioners.

Download or read book Pricing Interest Rate Contingent Claims in Markets with Uncertain Volatility written by Pawel Lewicki and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We consider a financial market where the volatility of the interest rate is not known exactly, but rather it is assumed to lie within two a-priori known bounds. These bounds represent the extreme values of the volatility implied by traded options. In this market, the interest rate process which allows no arbitrage and fits exactly the initial term structure of the forward interest rates, is not determined uniquely: for each volatility path in a band between the minimal and maximal volatility, there exists a different interest rate process. The asking and the bidding prices in our model are functions of the time, the interest rate, and the accumulated volatility, and they satisfy a new non-linear partial differential pricing equation. In this equation, the volatility used for pricing a claim is chosen dynamically: it is either the minimal or the maximal volatility depending on the claim's curvature with respect to both the interest rate and the accumulated volatility. We compare our model to the standard Ho-Lee model. We illustrate the effectiveness of our pricing scheme with numerical calculations for a calendar spread.

Download or read book Unified Treatment of Average Rate Contingent Claims with Applications written by Dilip B. Madan and published by . This book was released on 1999 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: This article studies the valuation of average-rate contingent claims (both arithmetic and geometric), whose importance in corporate risk management is increasing rapidly. Arbitrage--free characterizations are provided for such option--like Asian claims. When the spot price is governed by a one-dimensional Markov diffusion, we examine analytically the response of the average-rate option claim to a change in (i) the underlying spot price; (ii) the average-to-date price dependence; (iii) the riskiness of the asset; (iv) the strike price; (v) the interest rate; and (vi) the dividend/convenience yield. Our analysis yields the distinctive outcome that the upper bound on the average-rate call option delta can depart significantly from the classic unity. Depending on the structure of the risk-neutral density, a lower average-rate option premium (relative to the traditional option) is also internally consistent. Marking a sharp contrast from convention, the average-rate call can be decreasing in the interest rate. In extending the above general characterizations to higher dimensional contexts, we offer tractable valuation formulas for (1) options on the average interest rate with stochastic volatility; (2) catastrophe insurance option contract; and (3) options on the average commodity futures price [with stochastic convenience yield and stochastic interest rate]. Each valuation formula is rich in its economic content and yet amenable to empirical implementation. This paper has developed a cohesive framework for the valuation of average-rate contingent securities.

Download or read book Discrete time Continuous state Interest Rate Models written by Michael A. Sullivan and published by . This book was released on 2000 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: "We show how to implement arbitrage-free models of the short-term interest rate in discrete-time setting that allows continuum of rates at any particular date. Discrete time allows approximate pricing of interest rate contingent claims that cannot be valued in continuous-timemodels. It is usually associated with discrete states, with possible interest rates restricted to a limited number of outcomes, as in the lattice model of Hull and White (1994). We develop a method for approximating the prices of contingent claims without that restriction. We usenumerical integration to evaluate the risk-neutral expectations that define those prices, and function approximation to efficiently summarize the information. The procedure is simpleand flexible. We illustrate its properties in the extended Vasicek model of Hull and Whiteand show it to be an effective alternative to lattice methods"--Office of the Comptroller of the Currency web site.

Download or read book Extended Yield curve based Interest Rate Contingent Claim Pricing Models written by Eduardo Antonio Duarte Canabarro and published by . This book was released on 1993 with total page 205 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Arbitrage Pricing and Equilibrium Pricing written by Elyes Jouini and published by . This book was released on 2015 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: The problem of fair pricing of contingent claims is well understood in the contex of an arbitrage free, complete financial market, with perfect information: the so-called arbitrage approach permits to construct a unique valuation operator compatible with observed price processes. In the more realistic context of partial information, the equilibrium analysis permits to construct a unique valuation operator which only depends on some particular price processes as well as on the dividends process. In this paper we present these two approaches and we explore their links and the conditions under which they are compatible ; In particular, we derive from the equilibrium conditions some links between the price processes paramaters and those of the dividend processes paramaters.

Download or read book Modeling Fixed Income Securities and Interest Rate Options written by Robert A. Jarrow and published by Stanford University Press. This book was released on 2002 with total page 376 pages. Available in PDF, EPUB and Kindle. Book excerpt: This text seeks to teach the basics of fixed-income securities in a way that requires a minimum of prerequisites. Its approach - the Heath Jarrow Morton model - under which all other models are presented as special cases, aims to enhance understanding while avoiding repetition.

Download or read book Option Pricing with Differential Interest Rates written by Yaacov Z. Bergman and published by . This book was released on 2000 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The classic Option Pricing Model is generalized to a more realistic, imperfect, dynamically incomplete capital market with different interest rates for borrowing and for lending and a return differential between long and short positions in stock. It is found that in the absence of arbitrage opportunities, the equilibrium price of any contingent claim must lie within an arbitrage-band. The boundaries of an arbitrage-band are computed as solutions to a quasi-linear partial differential equation, and, in general, each end- point of such a band depends on both interest rates for borrowing and for lending. This, in turn, implies that the vector of concurrent equilibrium prices of different contingent claims--even claims that are written on different underlying assets--must lie within a computable arbitrage- oval in the price space.

Download or read book The Oxford Guide to Financial Modeling written by Thomas S. Y. Ho and published by Oxford University Press. This book was released on 2004-01-15 with total page 762 pages. Available in PDF, EPUB and Kindle. Book excerpt: The essential premise of this book is that theory and practice are equally important in describing financial modeling. In it the authors try to strike a balance in their discussions between theories that provide foundations for financial models and the institutional details that provide the context for applications of the models. The book presents the financial models of stock and bond options, exotic options, investment grade and high-yield bonds, convertible bonds, mortgage-backed securities, liabilities of financial institutions--the business model and the corporate model. It also describes the applications of the models to corporate finance. Furthermore, it relates the models to financial statements, risk management for an enterprise, and asset/liability management with illiquid instruments. The financial models are progressively presented from option pricing in the securities markets to firm valuation in corporate finance, following a format to emphasize the three aspects of a model: the set of assumptions, the model specification, and the model applications. Generally, financial modeling books segment the world of finance as "investments," "financial institutions," "corporate finance," and "securities analysis," and in so doing they rarely emphasize the relationships between the subjects. This unique book successfully ties the thought processes and applications of the financial models together and describes them as one process that provides business solutions. Created as a companion website to the book readers can visit www.thomasho.com to gain deeper understanding of the book's financial models. Interested readers can build and test the models described in the book using Excel, and they can submit their models to the site. Readers can also use the site's forum to discuss the models and can browse server based models to gain insights into the applications of the models. For those using the book in meetings or class settings the site provides Power Point descriptions of the chapters. Students can use available question banks on the chapters for studying.

Download or read book Arbitrage Pricing of American Contingent Claims in Incomplete Markets a Convex Optimization Approach written by Teemu Pennanen and published by . This book was released on 2004 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: