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Author: Nicholas H. Bingham Publisher: Springer Science & Business Media ISBN: 1447138562 Category : Mathematics Languages : en Pages : 447
Book Description
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.
Author: Nicholas H. Bingham Publisher: Springer Science & Business Media ISBN: 1447138562 Category : Mathematics Languages : en Pages : 447
Book Description
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.
Author: Nicholas H. Bingham Publisher: Springer Science & Business Media ISBN: 1447136195 Category : Mathematics Languages : en Pages : 306
Book Description
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.
Author: Joseph Tham Publisher: ISBN: Category : Languages : en Pages : 55
Book Description
Risk-neutral valuation is simple, elegant and central in option pricing theory. However, in teaching risk-neutral valuation, it is not easy to explain the concept of 'risk-neutral' probabilities. Beginners who are new to risk-neutral valuation always have lingering doubts about the validity of the probabilities. What do the probabilities really mean? Are they real or fictional? Where do they come from? What is the relationship between the risk-neutral probabilities and the actual probabilities? Does it mean that all investors are risk-neutral? When is it appropriate to use the risk-free rate as the discount rate?From a pedagogical point of view, in the beginning it is best to avoid the use of probabilities because probabilities can be a barrier to understanding. Instead, it is far preferable to introduce the idea of state prices and then show that the approach with risk-neutral probabilities is equivalent to the use of state prices.In this teaching note, we use simple one-period examples to explain the intuitive ideas behind risk-neutral valuation. It is a gentle introduction to risk-neutral valuation, with a minimum requirement of mathematics and prior knowledge. We will provide the motivation and the rationale for calculating state prices and we will show that the risk-neutral approach is simply another way of looking at the issue of state prices.
Author: N. H. Bingham Publisher: Springer Verlag ISBN: 9781852330019 Category : Mathematics Languages : en Pages : 296
Book Description
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.
Author: Patrick Boyle Publisher: Walter de Gruyter GmbH & Co KG ISBN: 1547401214 Category : Business & Economics Languages : en Pages : 298
Book Description
Trading and Pricing Financial Derivatives is an introduction to the world of futures, options, and swaps. Investors who are interested in deepening their knowledge of derivatives of all kinds will find this book to be an invaluable resource. The book is also useful in a very applied course on derivative trading. The authors delve into the history of options pricing; simple strategies of options trading; binomial tree valuation; Black-Scholes option valuation; option sensitivities; risk management and interest rate swaps in this immensely informative yet easy to comprehend work. Using their vast working experience in the financial markets at international investment banks and hedge funds since the late 1990s and teaching derivatives and investment courses at the Master's level, Patrick Boyle and Jesse McDougall put forth their knowledge and expertise in clearly explained concepts. This book does not presuppose advanced mathematical knowledge, though it is presented for completeness for those that may benefit from it, and is designed for a general audience, suitable for beginners through to those with intermediate knowledge of the subject.
Author: Joseph Tham Publisher: ISBN: Category : Languages : en Pages : 60
Book Description
Risk-neutral valuation is simple, elegant and central in option pricing theory. However, in teaching risk-neutral valuation, it is not easy to explain the concept of quot;risk-neutralquot; probabilities. Beginners who are new to risk-neutral valuation always have lingering doubts about the validity of the probabilities. What do the probabilities really mean? Are they real or fictional? Where do they come from? What is the relationship between the risk-neutral probabilities and the actual probabilities? Does it mean that all investors are risk-neutral? When is it appropriate to use the risk-neutral rate as the discount rate?From a pedagogical point of view, in the beginning it is best to avoid the use of probabilities because probabilities can be a barrier to understanding. Instead, it is far preferable to introduce the idea of state prices and then show that the approach with risk-neutral probabilities is equivalent to the use of state prices.In this teaching note, we use simple one-period examples to explain the intuitive ideas behind risk-neutral valuation. It is a gentle introduction to risk-neutral valuation, with a minimum requirement of mathematics and prior knowledge. We will provide the motivation and the rationale for calculating state prices and we will show that the risk-neutral approach is simply another way of looking at the issue of state prices.
Author: Nicholas H. Bingham
Author: Nicholas H. Bingham
Author: Nicholas H. Bingham
Author: Nicholas H. Bingham
Author: Joseph Tham
Author: N. H. Bingham
Author: Patrick Boyle
Author: Joseph Tham
Author: Jens Carsten Jackwerth
Author: Dominik Grimmer
Author: Antonio Guimaraes de Sousa da Camara