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- Product code: 14335
- ISBN: 0521791634,
ISBN13: 9780521791632,
216 pages, hardback
Published by Cambridge University Press on 2000
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Description of Derivatives in Financial Markets with Stochastic Volatility |
This book addresses problems in financial mathematics of pricing and hedging derivative securities in an environment of uncertain and changing market volatility. These problems are important to investors from large trading institutions to pension funds. It presents mathematical and statistical tools that exploit the bursty nature of market volatility. The mathematics is introduced through examples and illustrated with simulations and the modeling approach that is described is validated and tested on market data. The material is suitable for a one semester course for graduate students who have had exposure to methods of stochastic modeling and arbitrage pricing theory in finance. It is easily accessible to derivatives practitioners in the financial engineering industry.
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Reviews'É provides a good overview to the theoretical and practical problems when dealing with stochastic volatility'.Ralf Korn, Mathematical Methods of Operations Research
'É something genuinely new É explained with admirable clarity in this extremely well-written book É [which] is short and to the point, and the production quality is high. Buy it.'Mark Davis, Risk Magazine
'É well written and makes ideal reading for a graduate course on mathematical finance. The authors took great care in making their ideas clear. I support this text strongly and recommend it for the intended audience.'P. A. L. Embrechts, Publication of the International Statistical Institute
'Thanks to a well-written first chapter on the Black-Scholes theory of derivative pricing, the book is essentially self-contained if one has some basic knowledge in stochastic methods and arbitrage pricing. Its style is largely informal which makes it also accessible to practitioners in the finance industry.'M. Schweizer, Zentralblatt fŸr Mathematik
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Contents of Derivatives in Financial Markets with Stochastic Volatility |
1. The Black-Scholes theory of derivative pricing
2. Introduction to stochastic volatility models
3. Scales in mean-reverting stochastic volatility
4. Tools for estimating the rate of mean-reversion
5. Symptotics for pricing European derivatives
6. Implementation and stability
7. Hedging strategies
8. Application to exotic derivatives
9. Application to American derivatives
10. Generalizations
11. Applications to interest rates models
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