Download or read book Indifference Pricing written by René Carmona and published by Princeton University Press. This book was released on 2009-01-18 with total page 427 pages. Available in PDF, EPUB and Kindle. Book excerpt: This is the first book about the emerging field of utility indifference pricing for valuing derivatives in incomplete markets. René Carmona brings together a who's who of leading experts in the field to provide the definitive introduction for students, scholars, and researchers. Until recently, financial mathematicians and engineers developed pricing and hedging procedures that assumed complete markets. But markets are generally incomplete, and it may be impossible to hedge against all sources of randomness. Indifference Pricing offers cutting-edge procedures developed under more realistic market assumptions. The book begins by introducing the concept of indifference pricing in the simplest possible models of discrete time and finite state spaces where duality theory can be exploited readily. It moves into a more technical discussion of utility indifference pricing for diffusion models, and then addresses problems of optimal design of derivatives by extending the indifference pricing paradigm beyond the realm of utility functions into the realm of dynamic risk measures. Focus then turns to the applications, including portfolio optimization, the pricing of defaultable securities, and weather and commodity derivatives. The book features original mathematical results and an extensive bibliography and indexes. In addition to the editor, the contributors are Pauline Barrieu, Tomasz R. Bielecki, Nicole El Karoui, Robert J. Elliott, Said Hamadène, Vicky Henderson, David Hobson, Aytac Ilhan, Monique Jeanblanc, Mattias Jonsson, Anis Matoussi, Marek Musiela, Ronnie Sircar, John van der Hoek, and Thaleia Zariphopoulou. The first book on utility indifference pricing Explains the fundamentals of indifference pricing, from simple models to the most technical ones Goes beyond utility functions to analyze optimal risk transfer and the theory of dynamic risk measures Covers non-Markovian and partially observed models and applications to portfolio optimization, defaultable securities, static and quadratic hedging, weather derivatives, and commodities Includes extensive bibliography and indexes Provides essential reading for PhD students, researchers, and professionals

Download or read book Option Pricing in Incomplete Markets written by Yoshio Miyahara and published by World Scientific. This book was released on 2012 with total page 200 pages. Available in PDF, EPUB and Kindle. Book excerpt: This volume offers the reader practical methods to compute the option prices in the incomplete asset markets. The [GLP & MEMM] pricing models are clearly introduced, and the properties of these models are discussed in great detail. It is shown that the geometric L(r)vy process (GLP) is a typical example of the incomplete market, and that the MEMM (minimal entropy martingale measure) is an extremely powerful pricing measure. This volume also presents the calibration procedure of the [GLP \& MEMM] model that has been widely used in the application of practical problem

Download or read book Handbooks in Operations Research and Management Science Financial Engineering written by John R. Birge and published by Elsevier. This book was released on 2007-11-16 with total page 1026 pages. Available in PDF, EPUB and Kindle. Book excerpt: The remarkable growth of financial markets over the past decades has been accompanied by an equally remarkable explosion in financial engineering, the interdisciplinary field focusing on applications of mathematical and statistical modeling and computational technology to problems in the financial services industry. The goals of financial engineering research are to develop empirically realistic stochastic models describing dynamics of financial risk variables, such as asset prices, foreign exchange rates, and interest rates, and to develop analytical, computational and statistical methods and tools to implement the models and employ them to design and evaluate financial products and processes to manage risk and to meet financial goals. This handbook describes the latest developments in this rapidly evolving field in the areas of modeling and pricing financial derivatives, building models of interest rates and credit risk, pricing and hedging in incomplete markets, risk management, and portfolio optimization. Leading researchers in each of these areas provide their perspective on the state of the art in terms of analysis, computation, and practical relevance. The authors describe essential results to date, fundamental methods and tools, as well as new views of the existing literature, opportunities, and challenges for future research.

Download or read book Introduction to the Economics and Mathematics of Financial Markets written by Jaksa Cvitanic and published by MIT Press. This book was released on 2004-02-27 with total page 528 pages. Available in PDF, EPUB and Kindle. Book excerpt: An innovative textbook for use in advanced undergraduate and graduate courses; accessible to students in financial mathematics, financial engineering and economics. Introduction to the Economics and Mathematics of Financial Markets fills the longstanding need for an accessible yet serious textbook treatment of financial economics. The book provides a rigorous overview of the subject, while its flexible presentation makes it suitable for use with different levels of undergraduate and graduate students. Each chapter presents mathematical models of financial problems at three different degrees of sophistication: single-period, multi-period, and continuous-time. The single-period and multi-period models require only basic calculus and an introductory probability/statistics course, while an advanced undergraduate course in probability is helpful in understanding the continuous-time models. In this way, the material is given complete coverage at different levels; the less advanced student can stop before the more sophisticated mathematics and still be able to grasp the general principles of financial economics. The book is divided into three parts. The first part provides an introduction to basic securities and financial market organization, the concept of interest rates, the main mathematical models, and quantitative ways to measure risks and rewards. The second part treats option pricing and hedging; here and throughout the book, the authors emphasize the Martingale or probabilistic approach. Finally, the third part examines equilibrium models—a subject often neglected by other texts in financial mathematics, but included here because of the qualitative insight it offers into the behavior of market participants and pricing.

Download or read book Applied Conic Finance written by Dilip Madan and published by Cambridge University Press. This book was released on 2016-10-13 with total page 205 pages. Available in PDF, EPUB and Kindle. Book excerpt: This is a comprehensive introduction to the brand new theory of conic finance, also referred to as the two-price theory, which determines bid and ask prices in a consistent and fundamentally motivated manner. Whilst theories of one price classically eliminate all risk, the concept of acceptable risks is critical to the foundations of the two-price theory which sees risk elimination as typically unattainable in a modern financial economy. Practical examples and case studies provide the reader with a comprehensive introduction to the fundamentals of the theory, a variety of advanced quantitative models, and numerous real-world applications, including portfolio theory, option positioning, hedging, and trading contexts. This book offers a quantitative and practical approach for readers familiar with the basics of mathematical finance to allow them to boldly go where no quant has gone before.

Download or read book Optimization Methods for Gas and Power Markets written by Enrico Edoli and published by Springer. This book was released on 2016-04-30 with total page 210 pages. Available in PDF, EPUB and Kindle. Book excerpt: As power and gas markets are becoming more and more mature and globally competitive, the importance of reaching maximum potential economic efficiency is fundamental in all the sectors of the value chain, from investments selection to asset optimization, trading and sales. Optimization techniques can be used in many different fields of the energy industry, in order to reduce production and financial costs, increase sales revenues and mitigate all kinds of risks potentially affecting the economic margin. For this reason the industry has now focused its attention on the general concept of optimization and to the different techniques (mainly mathematical techniques) to reach it. Optimization Methods for Gas and Power Markets presents both theoretical elements and practical examples for solving energy optimization issues in gas and power markets. Starting with the theoretical framework and the basic business and economics of power and gas optimization, it quickly moves on to review the mathematical optimization problems inherent to the industry, and their solutions – all supported with examples from the energy sector. Coverage ranges from very long-term (and capital intensive) optimization problems such as investment valuation/diversification to asset (gas and power) optimization/hedging problems, and pure trading decisions. This book first presents the readers with various examples of optimization problems arising in power and gas markets, then deals with general optimization problems and describes the mathematical tools useful for their solution. The remainder of the book is dedicated to presenting a number of key business cases which apply the proposed techniques to concrete market problems. Topics include static asset optimization, real option evaluation, dynamic optimization of structured products like swing, virtual storage or virtual power plant contracts and optimal trading in intra-day power markets. As the book progresses, so too does the level of mathematical complexity, providing readers with an appreciation of the growing sophistication of even common problems in current market practice. Optimization Methods for Gas and Power Markets provides a valuable quantitative guide to the technicalities of optimization methodologies in gas and power markets; it is essential reading for practitioners in the energy industry and financial sector who work in trading, quantitative analysis and energy risk modeling.

Download or read book Stochastic Finance written by Hans Föllmer and published by Walter de Gruyter GmbH & Co KG. This book was released on 2016-07-25 with total page 608 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book is an introduction to financial mathematics. It is intended for graduate students in mathematics and for researchers working in academia and industry. The focus on stochastic models in discrete time has two immediate benefits. First, the probabilistic machinery is simpler, and one can discuss right away some of the key problems in the theory of pricing and hedging of financial derivatives. Second, the paradigm of a complete financial market, where all derivatives admit a perfect hedge, becomes the exception rather than the rule. Thus, the need to confront the intrinsic risks arising from market incomleteness appears at a very early stage. The first part of the book contains a study of a simple one-period model, which also serves as a building block for later developments. Topics include the characterization of arbitrage-free markets, preferences on asset profiles, an introduction to equilibrium analysis, and monetary measures of financial risk. In the second part, the idea of dynamic hedging of contingent claims is developed in a multiperiod framework. Topics include martingale measures, pricing formulas for derivatives, American options, superhedging, and hedging strategies with minimal shortfall risk. This fourth, newly revised edition contains more than one hundred exercises. It also includes material on risk measures and the related issue of model uncertainty, in particular a chapter on dynamic risk measures and sections on robust utility maximization and on efficient hedging with convex risk measures. Contents: Part I: Mathematical finance in one period Arbitrage theory Preferences Optimality and equilibrium Monetary measures of risk Part II: Dynamic hedging Dynamic arbitrage theory American contingent claims Superhedging Efficient hedging Hedging under constraints Minimizing the hedging error Dynamic risk measures

Download or read book From Stochastic Calculus to Mathematical Finance written by Yu. Kabanov and published by Springer Science & Business Media. This book was released on 2007-04-03 with total page 659 pages. Available in PDF, EPUB and Kindle. Book excerpt: Dedicated to the Russian mathematician Albert Shiryaev on his 70th birthday, this is a collection of papers written by his former students, co-authors and colleagues. The book represents the modern state of art of a quickly maturing theory and will be an essential source and reading for researchers in this area. Diversity of topics and comprehensive style of the papers make the book attractive for PhD students and young researchers.

Download or read book Advanced Modelling in Mathematical Finance written by Jan Kallsen and published by Springer. This book was released on 2016-12-01 with total page 508 pages. Available in PDF, EPUB and Kindle. Book excerpt: This Festschrift resulted from a workshop on “Advanced Modelling in Mathematical Finance” held in honour of Ernst Eberlein’s 70th birthday, from 20 to 22 May 2015 in Kiel, Germany. It includes contributions by several invited speakers at the workshop, including several of Ernst Eberlein’s long-standing collaborators and former students. Advanced mathematical techniques play an ever-increasing role in modern quantitative finance. Written by leading experts from academia and financial practice, this book offers state-of-the-art papers on the application of jump processes in mathematical finance, on term-structure modelling, and on statistical aspects of financial modelling. It is aimed at graduate students and researchers interested in mathematical finance, as well as practitioners wishing to learn about the latest developments.

Download or read book Arbitrage Theory in Continuous Time written by Tomas Björk and published by OUP Oxford. This book was released on 2009-08-06 with total page 600 pages. Available in PDF, EPUB and Kindle. Book excerpt: The third edition of this popular introduction to the classical underpinnings of the mathematics behind finance continues to combine sound mathematical principles with economic applications. Concentrating on the probabilistic theory of continuous arbitrage pricing of financial derivatives, including stochastic optimal control theory and Merton's fund separation theory, the book is designed for graduate students and combines necessary mathematical background with a solid economic focus. It includes a solved example for every new technique presented, contains numerous exercises, and suggests further reading in each chapter. In this substantially extended new edition Bjork has added separate and complete chapters on the martingale approach to optimal investment problems, optimal stopping theory with applications to American options, and positive interest models and their connection to potential theory and stochastic discount factors. More advanced areas of study are clearly marked to help students and teachers use the book as it suits their needs.

Download or read book Foundations of Reinforcement Learning with Applications in Finance written by Ashwin Rao and published by CRC Press. This book was released on 2022-12-16 with total page 658 pages. Available in PDF, EPUB and Kindle. Book excerpt: Foundations of Reinforcement Learning with Applications in Finance aims to demystify Reinforcement Learning, and to make it a practically useful tool for those studying and working in applied areas — especially finance. Reinforcement Learning is emerging as a powerful technique for solving a variety of complex problems across industries that involve Sequential Optimal Decisioning under Uncertainty. Its penetration in high-profile problems like self-driving cars, robotics, and strategy games points to a future where Reinforcement Learning algorithms will have decisioning abilities far superior to humans. But when it comes getting educated in this area, there seems to be a reluctance to jump right in, because Reinforcement Learning appears to have acquired a reputation for being mysterious and technically challenging. This book strives to impart a lucid and insightful understanding of the topic by emphasizing the foundational mathematics and implementing models and algorithms in well-designed Python code, along with robust coverage of several financial trading problems that can be solved with Reinforcement Learning. This book has been created after years of iterative experimentation on the pedagogy of these topics while being taught to university students as well as industry practitioners. Features Focus on the foundational theory underpinning Reinforcement Learning and software design of the corresponding models and algorithms Suitable as a primary text for courses in Reinforcement Learning, but also as supplementary reading for applied/financial mathematics, programming, and other related courses Suitable for a professional audience of quantitative analysts or data scientists Blends theory/mathematics, programming/algorithms and real-world financial nuances while always striving to maintain simplicity and to build intuitive understanding To access the code base for this book, please go to: https://github.com/TikhonJelvis/RL-book

Download or read book Markov Decision Processes with Applications to Finance written by Nicole Bäuerle and published by Springer Science & Business Media. This book was released on 2011-06-06 with total page 393 pages. Available in PDF, EPUB and Kindle. Book excerpt: The theory of Markov decision processes focuses on controlled Markov chains in discrete time. The authors establish the theory for general state and action spaces and at the same time show its application by means of numerous examples, mostly taken from the fields of finance and operations research. By using a structural approach many technicalities (concerning measure theory) are avoided. They cover problems with finite and infinite horizons, as well as partially observable Markov decision processes, piecewise deterministic Markov decision processes and stopping problems. The book presents Markov decision processes in action and includes various state-of-the-art applications with a particular view towards finance. It is useful for upper-level undergraduates, Master's students and researchers in both applied probability and finance, and provides exercises (without solutions).

Download or read book Market Theory and the Price System written by Israel Mayer Kirzner and published by Ludwig von Mises Institute. This book was released on 2007 with total page 340 pages. Available in PDF, EPUB and Kindle. Book excerpt: Israel Kirzner's outstanding book on price theory is back in print. It is been very difficult to obtain it for decades, even though it is surely the best textbook on Austrian price theory ever written. The prose is crystal clear and the organization exceptional. He takes the reader through the foundations of individual action, exchange, utility, demand and supply, production, and the market process itself. Had it been in print, it would have schooled generations in Austrian price theory, and it is surely useful in the classroom today, or for general reading. Not a collection of essays, it is an integrated presentation from top to bottom, written early in Kirzner's post-doctoral career.

Download or read book Stochastic Analysis And Applications To Finance Essays In Honour Of Jia an Yan written by Tusheng Zhang and published by World Scientific. This book was released on 2012-07-17 with total page 465 pages. Available in PDF, EPUB and Kindle. Book excerpt: This volume is a collection of solicited and refereed articles from distinguished researchers across the field of stochastic analysis and its application to finance. The articles represent new directions and newest developments in this exciting and fast growing area. The covered topics range from Markov processes, backward stochastic differential equations, stochastic partial differential equations, stochastic control, potential theory, functional inequalities, optimal stopping, portfolio selection, to risk measure and risk theory.It will be a very useful book for young researchers who want to learn about the research directions in the area, as well as experienced researchers who want to know about the latest developments in the area of stochastic analysis and mathematical finance.

Download or read book Financial Markets Theory written by Emilio Barucci and published by Springer. This book was released on 2017-06-08 with total page 843 pages. Available in PDF, EPUB and Kindle. Book excerpt: This work, now in a thoroughly revised second edition, presents the economic foundations of financial markets theory from a mathematically rigorous standpoint and offers a self-contained critical discussion based on empirical results. It is the only textbook on the subject to include more than two hundred exercises, with detailed solutions to selected exercises. Financial Markets Theory covers classical asset pricing theory in great detail, including utility theory, equilibrium theory, portfolio selection, mean-variance portfolio theory, CAPM, CCAPM, APT, and the Modigliani-Miller theorem. Starting from an analysis of the empirical evidence on the theory, the authors provide a discussion of the relevant literature, pointing out the main advances in classical asset pricing theory and the new approaches designed to address asset pricing puzzles and open problems (e.g., behavioral finance). Later chapters in the book contain more advanced material, including on the role of information in financial markets, non-classical preferences, noise traders and market microstructure. This textbook is aimed at graduate students in mathematical finance and financial economics, but also serves as a useful reference for practitioners working in insurance, banking, investment funds and financial consultancy. Introducing necessary tools from microeconomic theory, this book is highly accessible and completely self-contained. Advance praise for the second edition: "Financial Markets Theory is comprehensive, rigorous, and yet highly accessible. With their second edition, Barucci and Fontana have set an even higher standard!"Darrell Duffie, Dean Witter Distinguished Professor of Finance, Graduate School of Business, Stanford University "This comprehensive book is a great self-contained source for studying most major theoretical aspects of financial economics. What makes the book particularly useful is that it provides a lot of intuition, detailed discussions of empirical implications, a very thorough survey of the related literature, and many completely solved exercises. The second edition covers more ground and provides many more proofs, and it will be a handy addition to the library of every student or researcher in the field."Jaksa Cvitanic, Richard N. Merkin Professor of Mathematical Finance, Caltech "The second edition of Financial Markets Theory by Barucci and Fontana is a superb achievement that knits together all aspects of modern finance theory, including financial markets microstructure, in a consistent and self-contained framework. Many exercises, together with their detailed solutions, make this book indispensable for serious students in finance."Michel Crouhy, Head of Research and Development, NATIXIS

Download or read book Inside and Outside Liquidity written by Bengt Holmstrom and published by MIT Press. This book was released on 2013-01-11 with total page 263 pages. Available in PDF, EPUB and Kindle. Book excerpt: Two leading economists develop a theory explaining the demand for and supply of liquid assets. Why do financial institutions, industrial companies, and households hold low-yielding money balances, Treasury bills, and other liquid assets? When and to what extent can the state and international financial markets make up for a shortage of liquid assets, allowing agents to save and share risk more effectively? These questions are at the center of all financial crises, including the current global one. In Inside and Outside Liquidity, leading economists Bengt Holmström and Jean Tirole offer an original, unified perspective on these questions. In a slight, but important, departure from the standard theory of finance, they show how imperfect pledgeability of corporate income leads to a demand for as well as a shortage of liquidity with interesting implications for the pricing of assets, investment decisions, and liquidity management. The government has an active role to play in improving risk-sharing between consumers with limited commitment power and firms dealing with the high costs of potential liquidity shortages. In this perspective, private risk-sharing is always imperfect and may lead to financial crises that can be alleviated through government interventions.

Download or read book Finance Theory and Asset Pricing written by Frank Milne and published by Oxford University Press, USA. This book was released on 2003 with total page 250 pages. Available in PDF, EPUB and Kindle. Book excerpt: Finance Theory and Asset Pricing provides a concise guide to financial asset pricing theory for economists. Assuming a basic knowledge of graduate microeconomic theory, it explores the fundamental ideas that underlie competitive financial asset pricing models with symmetric information. Using finite dimensional techniques, this book avoids sophisticated mathematics and exploits economic theory to clarify the essential structure of recent research in asset pricing. In particular, it explores arbitrage pricing models with and without diversification, Martingale pricing methods and representative agent pricing models; discusses these ideas in two-date and multi-date models; and provides a range of examples from the literature. This second edition includes a new section dealing with more advanced multi-period models. In particular it considers discrete factor structure models that mimic recent continuous time models of interest rates, money, and nominal rates and exchange rates. Additional sections sketch extensions to real options and transaction costs.