Download or read book Hedging Derivatives written by Thorsten Rheinlander and published by World Scientific. This book was released on 2011 with total page 244 pages. Available in PDF, EPUB and Kindle. Book excerpt: Valuation and hedging of financial derivatives are intrinsically linked concepts. Choosing appropriate hedging techniques depends on both the type of derivative and assumptions placed on the underlying stochastic process. This volume provides a systematic treatment of hedging in incomplete markets. Mean-variance hedging under the risk-neutral measure is applied in the framework of exponential L(r)vy processes and for derivatives written on defaultable assets. It is discussed how to complete markets based upon stochastic volatility models via trading in both stocks and vanilla options. Exponential utility indifference pricing is explored via a duality with entropy minimization. Backward stochastic differential equations offer an alternative approach and are moreover applied to study markets with trading constraints including basis risk. A range of optimal martingale measures are discussed including the entropy, Esscher and minimal martingale measures. Quasi-symmetry properties of stochastic processes are deployed in the semi-static hedging of barrier options. This book is directed towards both graduate students and researchers in mathematical finance, and will also provide an orientation to applied mathematicians, financial economists and practitioners wishing to explore recent progress in this field."
Download or read book Mathematics of Derivative Securities written by Michael A. H. Dempster and published by Cambridge University Press. This book was released on 1997-10-13 with total page 614 pages. Available in PDF, EPUB and Kindle. Book excerpt: During 1995 the Isaac Newton Institute for the Mathematical Sciences at Cambridge University hosted a six month research program on financial mathematics. During this period more than 300 scholars and financial practitioners attended to conduct research and to attend more than 150 research seminars. Many of the presented papers were on the subject of financial derivatives. The very best were selected to appear in this volume. They range from abstract financial theory to practical issues pertaining to the pricing and hedging of interest rate derivatives and exotic options in the market place. Hence this book will be of interest to both academic scholars and financial engineers.
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 447 pages. Available in PDF, EPUB and Kindle. Book excerpt: This second edition - completely up to date with new exercises - provides a comprehensive and self-contained treatment of the probabilistic theory behind the risk-neutral valuation principle and its application to the pricing and hedging of financial derivatives. On the probabilistic side, both discrete- and continuous-time stochastic processes are treated, with special emphasis on martingale theory, stochastic integration and change-of-measure techniques. Based on firm probabilistic foundations, general properties of discrete- and continuous-time financial market models are discussed.
Download or read book Economic Foundations Of Risk Management The Theory Practice And Applications written by Robert A Jarrow and published by World Scientific. This book was released on 2016-11-02 with total page 206 pages. Available in PDF, EPUB and Kindle. Book excerpt: 'The book is an ideal complement to existing monographs on financial risk management. The reader will benefit from a standard background in no-arbitrage pricing. A tour of risk types and risk management principles is presented in a terse, no-fuss manner. Plenty of pointers to additional literature are given, allowing the interested reader to go deeper into any of the topics presented.'Newsletter of the Bachelier Finance Society The Economic Foundations of Risk Management presents the theory, the practice, and applies this knowledge to provide a forensic analysis of some well-known risk management failures. By doing so, this book introduces a unified framework for understanding how to manage the risk of an individual's or corporation's or financial institution's assets and liabilities. The book is divided into five parts. The first part studies the markets and the assets and liabilities that trade therein. Markets are differentiated based on whether they are competitive or not, frictionless or not (and the type of friction), and actively traded or not. Assets are divided into two types: primary assets and financial derivatives. The second part studies models for determining the risks of the traded assets. Models provided include the Black-Scholes-Merton, the Heath-Jarrow-Morton, and the reduced form model for credit risk. Liquidity risk, operational risk, and trading constraint models are also contained therein. The third part studies the conceptual solution to an individual's, firm's, and bank's risk management problem. This formulation involves solving a complex dynamic programming problem that cannot be applied in practice. Consequently, Part IV investigates how risk management is actually done in practice via the use of diversification, static hedging, and dynamic hedging. Finally, Part V applies these collective insights to six case studies, which are famous risk management failures. These are Penn Square Bank, Metallgesellschaft, Orange County, Barings Bank, Long Term Capital Management, and Washington Mutual. The credit crisis is also discussed to understand how risk management failed for many institutions and why.
Download or read book Hedging Derivatives written by Thorsten Rheinlander and published by World Scientific. This book was released on 2011-05-18 with total page 244 pages. Available in PDF, EPUB and Kindle. Book excerpt: Valuation and hedging of financial derivatives are intrinsically linked concepts. Choosing appropriate hedging techniques depends on both the type of derivative and assumptions placed on the underlying stochastic process. This volume provides a systematic treatment of hedging in incomplete markets. Mean-variance hedging under the risk-neutral measure is applied in the framework of exponential Lévy processes and for derivatives written on defaultable assets. It is discussed how to complete markets based upon stochastic volatility models via trading in both stocks and vanilla options. Exponential utility indifference pricing is explored via a duality with entropy minimization. Backward stochastic differential equations offer an alternative approach and are moreover applied to study markets with trading constraints including basis risk. A range of optimal martingale measures are discussed including the entropy, Esscher and minimal martingale measures. Quasi-symmetry properties of stochastic processes are deployed in the semi-static hedging of barrier options.This book is directed towards both graduate students and researchers in mathematical finance, and will also provide an orientation to applied mathematicians, financial economists and practitioners wishing to explore recent progress in this field.
Download or read book Pricing Derivative Securities written by T. W. Epps and published by World Scientific. This book was released on 2007 with total page 644 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book presents techniques for valuing derivative securities at a level suitable for practitioners, students in doctoral programs in economics and finance, and those in masters-level programs in financial mathematics and computational finance. It provides the necessary mathematical tools from analysis, probability theory, the theory of stochastic processes, and stochastic calculus, making extensive use of examples. It also covers pricing theory, with emphasis on martingale methods. The chapters are organized around the assumptions made about the dynamics of underlying price processes. Readers begin with simple, discrete-time models that require little mathematical sophistication, proceed to the basic Black-Scholes theory, and then advance to continuous-time models with multiple risk sources. The second edition takes account of the major developments in the field since 2000. New topics include the use of simulation to price American-style derivatives, a new one-step approach to pricing options by inverting characteristic functions, and models that allow jumps in volatility and Markov-driven changes in regime. The new chapter on interest-rate derivatives includes extensive coverage of the LIBOR market model and an introduction to the modeling of credit risk. As a supplement to the text, the book contains an accompanying CD-ROM with user-friendly FORTRAN, C++, and VBA program components.
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 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 Mathematical Techniques In Finance written by Aleš Černý and published by . This book was released on 2006 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Modern Finance Overlaps With Many Fields Of Mathematics, And For Students This Can Represent Considerable Strain. Mathematical Techniques In Finance Is An Ideal Textbook For Masters Finance Courses With A Significant Quantitative Element While Also Being Suitable For Finance Ph.D. Students. Developed For The Highly Acclaimed Master Of Science In Finance Program At Imperial College London, It Offers A Carefully Crafted Blend Of Numerical Applications And Theoretical Grounding In Economics, Finance, And Mathematics.In The Best Engineering Tradition, Ale Cerný Mixes Tools From Calculus, Linear Algebra, Probability Theory, Numerical Mathematics, And Programming To Analyze In An Accessible Way Some Of The Most Intriguing Problems In Financial Economics. Eighty Figures, Over 70 Worked Examples, 25 Simple Ready-To-Run Computer Programs, And Several Spreadsheets Further Enhance The Learning Experience. Each Chapter Is Followed By A Number Of Classroom-Tested Exercises With Solutions Available On The Book'S Web Site.Applied Mathematics Is A Craft That Requires Practice This Textbook Provides Plenty Of Opportunities To Practice It And Teaches Cutting-Edge Finance Into The Bargain. Asset Pricing Is A Common Theme Throughout The Book; And Readers Can Follow The Development From Discrete One-Period Models To Continuous Time Stochastic Processes. This Textbook Sets Itself Apart By The Comprehensive Treatment Of Pricing And Risk Measurement In Incomplete Markets, An Area Of Current Research That Represents The Future In Risk Management And Investment Performance Evaluation.This Special Low-Priced Edition Is For Sale In India, Bangladesh, Bhutan, Maldives, Nepal, Myanmar, Pakistan And Sri Lanka Only.
Download or read book The Derivatives Sourcebook written by Terence Lim and published by Now Publishers Inc. This book was released on 2006 with total page 225 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Derivatives Sourcebook is a citation study and classification system that organizes the many strands of the derivatives literature and assigns each citation to a category. Over 1800 research articles are collected and organized into a simple web-based searchable database. We have also included the 1997 Nobel lectures of Robert Merton and Myron Scholes as a backdrop to this literature.
Download or read book Pricing and Hedging Derivative Securities in Incomplete Markets written by Dimitris Bertsimas and published by . This book was released on 1997 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Given a European derivative security with an arbitrary payoff function and a corresponding set of" underlying securities on which the derivative security is based, we solve the dynamic replication problem: find a" self-financing dynamic portfolio strategy involving only the underlying securities that most closely" approximates the payoff function at maturity. By applying stochastic dynamic programming to the minimization of a" mean-squared-error loss function under Markov state-dynamics, we derive recursive expressions for the optimal-replication strategy that are readily implemented in practice. The approximation error or " " of the optimal-replication strategy is also given recursively and may be used to quantify the "degree" of market incompleteness. " To investigate the practical significance of these -arbitrage strategies examples including path-dependent options and options on assets with stochastic volatility and jumps. "
Download or read book Introduction To Derivative Securities Financial Markets And Risk Management An Second Edition written by Robert A Jarrow and published by World Scientific. This book was released on 2019-05-16 with total page 772 pages. Available in PDF, EPUB and Kindle. Book excerpt: Written by two of the most distinguished finance scholars in the industry, this introductory textbook on derivatives and risk management is highly accessible in terms of the concepts as well as the mathematics.With its economics perspective, this rewritten and streamlined second edition textbook, is closely connected to real markets, and:Beginning at a level that is comfortable to lower division college students, the book gradually develops the content so that its lessons can be profitably used by business majors, arts, science, and engineering graduates as well as MBAs who would work in the finance industry. Supplementary materials are available to instructors who adopt this textbook for their courses. These include:Solutions Manual with detailed solutions to nearly 500 end-of-chapter questions and problemsPowerPoint slides and a Test Bank for adoptersPRICED! In line with current teaching trends, we have woven spreadsheet applications throughout the text. Our aim is for students to achieve self-sufficiency so that they can generate all the models and graphs in this book via a spreadsheet software, Priced!
Download or read book A Course in Derivative Securities written by Kerry Back and published by Springer Science & Business Media. This book was released on 2005-10-11 with total page 358 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Deals with pricing and hedging financial derivatives.... Computational methods are introduced and the text contains the Excel VBA routines corresponding to the formulas and procedures described in the book. This is valuable since computer simulation can help readers understand the theory....The book...succeeds in presenting intuitively advanced derivative modelling... it provides a useful bridge between introductory books and the more advanced literature." --MATHEMATICAL REVIEWS
Download or read book Probability and Finance Theory written by Kian Guan Lim and published by World Scientific. This book was released on 2011 with total page 405 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book provides a basic grounding in the use of probability to model random financial phenomena of uncertainty, and is targeted at an advanced undergraduate and graduate level. It should appeal to finance students looking for a firm theoretical guide to the deep end of derivatives and investments. Bankers and finance professionals in the fields of investments, derivatives, and risk management should also find the book useful in bringing probability and finance together. The book contains applications of both discrete time theory and continuous time mathematics, and is extensive in scope. Distribution theory, conditional probability, and conditional expectation are covered comprehensively, and applications to modeling state space securities under market equilibrium are made. Martingale is studied, leading to consideration of equivalent martingale measures, fundamental theorems of asset pricing, change of numeraire and discounting, risk-adjusted and forward-neutral measures, minimal and maximal prices of contingent claims, Markovian models, and the existence of martingale measures preserving the Markov property. Discrete stochastic calculus and multiperiod models leading to no-arbitrage pricing of contingent claims are also to be found in this book, as well as the theory of Markov Chains and appropriate applications in credit modeling. Measure-theoretic probability, moments, characteristic functions, inequalities, and central limit theorems are examined. The theory of risk aversion and utility, and ideas of risk premia are considered. Other application topics include optimal consumption and investment problems and interest rate theory.
Download or read book Introduction To Derivative Securities Financial Markets And Risk Management An Third Edition written by Robert A Jarrow and published by World Scientific. This book was released on 2024-05-03 with total page 763 pages. Available in PDF, EPUB and Kindle. Book excerpt: The third edition updates the text in two significant ways. First, it updates the presentation to reflect changes that have occurred in financial markets since the publication of the 2nd edition. One such change is with respect to the over-the-counter interest rate derivatives markets and the abolishment of LIBOR as a reference rate. Second, it updates the theory to reflect new research related to asset price bubbles and the valuation of options. Asset price bubbles are a reality in financial markets and their impact on derivative pricing is essential to understand. This is the only introductory textbook that contains these insights on asset price bubbles and options.
Download or read book Dynamic Hedging written by Nassim Nicholas Taleb and published by John Wiley & Sons. This book was released on 1997-01-14 with total page 536 pages. Available in PDF, EPUB and Kindle. Book excerpt: Destined to become a market classic, Dynamic Hedging is the only practical reference in exotic options hedgingand arbitrage for professional traders and money managers Watch the professionals. From central banks to brokerages to multinationals, institutional investors are flocking to a new generation of exotic and complex options contracts and derivatives. But the promise of ever larger profits also creates the potential for catastrophic trading losses. Now more than ever, the key to trading derivatives lies in implementing preventive risk management techniques that plan for and avoid these appalling downturns. Unlike other books that offer risk management for corporate treasurers, Dynamic Hedging targets the real-world needs of professional traders and money managers. Written by a leading options trader and derivatives risk advisor to global banks and exchanges, this book provides a practical, real-world methodology for monitoring and managing all the risks associated with portfolio management. Nassim Nicholas Taleb is the founder of Empirica Capital LLC, a hedge fund operator, and a fellow at the Courant Institute of Mathematical Sciences of New York University. He has held a variety of senior derivative trading positions in New York and London and worked as an independent floor trader in Chicago. Dr. Taleb was inducted in February 2001 in the Derivatives Strategy Hall of Fame. He received an MBA from the Wharton School and a Ph.D. from University Paris-Dauphine.
Download or read book Stochastic Processes Theory and Methods written by D N Shanbhag and published by Gulf Professional Publishing. This book was released on 2001 with total page 990 pages. Available in PDF, EPUB and Kindle. Book excerpt: This volume in the series contains chapters on areas such as pareto processes, branching processes, inference in stochastic processes, Poisson approximation, Levy processes, and iterated random maps and some classes of Markov processes. Other chapters cover random walk and fluctuation theory, a semigroup representation and asymptomatic behavior of certain statistics of the Fisher-Wright-Moran coalescent, continuous-time ARMA processes, record sequence and their applications, stochastic networks with product form equilibrium, and stochastic processes in insurance and finance. Other subjects include renewal theory, stochastic processes in reliability, supports of stochastic processes of multiplicity one, Markov chains, diffusion processes, and Ito's stochastic calculus and its applications. c. Book News Inc.
