Option Theory with Stochastic Analysis PDF Download

Author: Fred Espen Benth
Publisher: Springer Science & Business Media
ISBN: 3642187862
Category : Business & Economics
Languages : en
Pages : 172

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Book Description
This is a very basic and accessible introduction to option pricing, invoking a minimum of stochastic analysis and requiring only basic mathematical skills. It covers the theory essential to the statistical modeling of stocks, pricing of derivatives with martingale theory, and computational finance including both finite-difference and Monte Carlo methods.

Author: Adam S. Iqbal
Publisher: John Wiley & Sons
ISBN: 111950161X
Category : Business & Economics
Languages : en
Pages : 208

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Book Description
Gain a deep, intuitive and technical understanding of practical options theory The main challenges in successful options trading are conceptual, not mathematical. Volatility: Practical Options Theory provides financial professionals, academics, students and others with an intuitive as well as technical understanding of both the basic and advanced ideas in options theory to a level that facilitates practical options trading. The approach taken in this book will prove particularly valuable to options traders and other practitioners tasked with making pricing and risk management decisions in an environment where time constraints mean that simplicity and intuition are of greater value than mathematical formalism. The most important areas of options theory, namely implied volatility, delta hedging, time value and the so-called options greeks are explored based on intuitive economic arguments alone before turning to formal models such as the seminal Black-Scholes-Merton model. The reader will understand how the model free approach and mathematical models are related to each other, their underlying theoretical assumptions and their implications to level that facilitates practical implementation. There are several excellent mathematical descriptions of options theory, but few focus on a translational approach to convert the theory into practice. This book emphasizes the translational aspect, while first building an intuitive, technical understanding that allows market makers, portfolio managers, investment managers, risk managers, and other traders to work more effectively within—and beyond—the bounds of everyday practice. Gain a deeper understanding of the assumptions underlying options theory Translate theoretical ideas into practice Develop a more accurate intuition for better time-constrained decision making This book allows its readers to gain more than a superficial understanding of the mechanisms at work in options markets. Volatility gives its readers the edge by providing a true bedrock foundation upon which practical knowledge becomes stronger.

Author: Ser-Huang Poon
Publisher: John Wiley & Sons
ISBN: 0470856157
Category : Business & Economics
Languages : en
Pages : 236

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Book Description
Financial market volatility forecasting is one of today's most important areas of expertise for professionals and academics in investment, option pricing, and financial market regulation. While many books address financial market modelling, no single book is devoted primarily to the exploration of volatility forecasting and the practical use of forecasting models. A Practical Guide to Forecasting Financial Market Volatility provides practical guidance on this vital topic through an in-depth examination of a range of popular forecasting models. Details are provided on proven techniques for building volatility models, with guide-lines for actually using them in forecasting applications.

Author: Timothy Falcon Crack
Publisher: Timothy Crack
ISBN: 9780994103857
Category : Business & Economics
Languages : en
Pages : 264

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Book Description
THE AUTHOR: Dr. Crack studied PhD-level option pricing at MIT and Harvard Business School, taught undergraduate and MBA option pricing at Indiana University (winning many teaching awards), was an independent consultant to the New York Stock Exchange, worked as an asset management practitioner in London, and has traded options for over 15 years. This unique mixture of learning, teaching, consulting, practice, and trading is reflected in every page. SUMMARY OVERVIEW: This revised third edition of Basic Black-Scholes gives extremely clear explanations of Black-Scholes option pricing theory, and discusses direct applications of the theory to option trading. The presentation does not go far beyond basic Black-Scholes for three reasons: First, a novice need not go far beyond Black-Scholes to make money in the options markets; Second, all high-level option pricing theory is simply an extension of Black-Scholes; and Third, there already exist many books that look far beyond Black-Scholes without first laying the firm foundation given here. The trading advice does not go far beyond elementary call and put positions because more complex trades are simply combinations of these. WHAT MAKES THIS BOOK SPECIAL OR UNIQUE?: -It contains the basic intuition you need to trade options for the first time, or interview for an options job. -Honest advice about trading: there is no simple way to beat the markets, but if you have skill this advice can help make you money, and if you have no skill but still choose to trade, this advice can reduce your losses. -Full immersion treatment of transactions costs (T-costs). -Lessons from trading stated in simple terms. -Stylized facts about the markets (e.g., how to profit from reversals, when are T-costs highest/lowest during the trading day, implications of the market for corporate control, etc.). -How to apply (European-style) Black-Scholes pricing to the trading of (American-style) options. -Leverage through margin trading compared to leverage through options. -Black-Scholes option pricing code for the HP17B, HP19B, and HP12C. -Two downloadable spreadsheets. The first allows the user to forecast T-costs for option positions using simple models. The second allows the user to explore option sensitivities including the Greeks. -Practitioner Bloomberg Terminal screenshots to aid learning. -Simple discussion of continuously-compounded returns. -Introduction to "paratrading" (trading stocks side-by-side with options to generate additional profit). -Unique "regrets" treatment of early exercise decisions and trade-offs for American-style calls and puts. -Unique discussion of put-call parity and option pricing. -How to calculate Black-Scholes in your head in 10 seconds (also in Heard on The Street: Quantitative Questions from Wall Street Job Interviews). -Special attention to arithmetic Brownian motion with general pricing formulae and comparisons to Bachelier (1900) and Black-Scholes. -Careful attention to the impact of dividends in analytical American option pricing. -Dimensional analysis and the adequation formula (relating FX call and FX put prices through transformed Black-Scholes formulae). -Intuitive review of risk-neutral pricing/probabilities and how and why these are related to physical pricing/probabilities. -Careful distinction between the early Merton (non-risk-neutral) hedging-type argument and later Cox-Ross/Harrison-Kreps risk-neutral pricing -Simple discussion of Monte-Carlo methods in science and option pricing. -Simple interpretations of the Black-Scholes formula and PDE and implications for trading. -Careful discussion of conditional probabilities as they relate to Black-Scholes. -Intuitive treatment of high-level topics e.g., bond-numeraire interpretation of Black-Scholes (where N(d2) is P*(ITM)) versus the stock-numeraire interpretation (where N(d1) is P**(ITM)).

Author: Matthew Tagliani
Publisher: John Wiley & Sons
ISBN: 0470383720
Category : Business & Economics
Languages : en
Pages : 564

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Book Description
The Practical Guide to Wall Street is an indispensable resource for anyone who aspires to a front-office sales or trading position on Wall Street and an essential desk reference for market practitioners and those who interact with this exciting but widely misunderstood industry. Written by an experienced trader in a clear, conversational style and assuming no previous background in finance, The Practical Guide to Wall Street provides a thorough schooling in the core curriculum of the equity and equity derivatives sales and trading business - exactly what you would learn from sitting beside the traders at a tier-one Wall Street investment bank (except that in practice, traders rarely have time to provide such detailed explanations!) Topics covered include: Clear, detailed and intuitive explanations of all major products, their function, pricing and risks (several of which are unavailable anywhere else despite producing billions of dollars in annual revenue for Wall St.) The layout of the trading floor, the roles and responsibilities of the different sales and trading groups and how they interact to service the client business An overview of the structure of the macro-economy and the trader’s perspective on the significance of economic data releases and their impact on the financial markets A review of those concepts from fundamental valuation and financial statement analysis of greatest relevance on the trading floor (as opposed to abstract valuation models) Practical details of the structure and functioning of the equity and derivative markets including translations of trader jargon, Bloomberg tips, market conventions, liquidity and risk considerations and much more… This book provides the first comprehensive explanation of all aspects of the functioning of the equities division, with information, details and insights previously only available to those who already worked on a trading floor. The availability of this material in a format accessible to non-professionals fundamentally changes the level of industry knowledge employers in the financial services industry can expect of new hires.

Author: Christophe Chorro
Publisher: Springer
ISBN: 3662450372
Category : Business & Economics
Languages : en
Pages : 202

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Book Description
The current world financial scene indicates at an intertwined and interdependent relationship between financial market activity and economic health. This book explains how the economic messages delivered by the dynamic evolution of financial asset returns are strongly related to option prices. The Black Scholes framework is introduced and by underlining its shortcomings, an alternative approach is presented that has emerged over the past ten years of academic research, an approach that is much more grounded on a realistic statistical analysis of data rather than on ad hoc tractable continuous time option pricing models. The reader then learns what it takes to understand and implement these option pricing models based on time series analysis in a self-contained way. The discussion covers modeling choices available to the quantitative analyst, as well as the tools to decide upon a particular model based on the historical datasets of financial returns. The reader is then guided into numerical deduction of option prices from these models and illustrations with real examples are used to reflect the accuracy of the approach using datasets of options on equity indices.

Author: Andrea Pascucci
Publisher: Springer Science & Business Media
ISBN: 8847017815
Category : Mathematics
Languages : en
Pages : 727

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Book Description
This book offers an introduction to the mathematical, probabilistic and numerical methods used in the modern theory of option pricing. The text is designed for readers with a basic mathematical background. The first part contains a presentation of the arbitrage theory in discrete time. In the second part, the theories of stochastic calculus and parabolic PDEs are developed in detail and the classical arbitrage theory is analyzed in a Markovian setting by means of of PDEs techniques. After the martingale representation theorems and the Girsanov theory have been presented, arbitrage pricing is revisited in the martingale theory optics. General tools from PDE and martingale theories are also used in the analysis of volatility modeling. The book also contains an Introduction to Lévy processes and Malliavin calculus. The last part is devoted to the description of the numerical methods used in option pricing: Monte Carlo, binomial trees, finite differences and Fourier transform.

Author: Alexander Puutio
Publisher: Kluwer Law International B.V.
ISBN: 9041194495
Category : Law
Languages : en
Pages : 268

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Book Description
Identifying the optimal price for a transaction involving an intellectual property (IP) asset necessarily involves a thorough, well-reasoned, and well-supported IP valuation analysis. This matchless book draws on decades of experience from the world’s most renowned IP valuation experts, patent office chief economists, finance and accounting professors, and top-tier legal professionals to provide clear guidance and immediately actionable knowledge on how to value IP assets in a multitude of scenarios. The contributors explore all major facets of IP valuation, ranging from the basics of value to technical economic methods in an approachable manner. The book examines the valuation of brands, copyright, trade secrets, patents, and other forms of IP from a multidisciplinary viewpoint with worked examples, draft contract language, case law analysis, and up-to-date theoretical considerations. Issues and topics considered in depth include the following: fair, reasonable, and non-discriminatory terms; determining reasonable royalty rates; standard essential patents; profit apportionment; discount rates; role of the IP asset manager and multi-functional teams; IP management in collaborative research and development; financial methods and economic considerations; and operationalization of IP valuation in practice. The handbook is the result of five years of dedication and hard work by the advisors and a growing network of researchers, supporters, and end-users involved in the Asia-Pacific Research and Training Network on Trade. As IP becomes ever more indispensable in so many activities and industries that cross national borders, the need to overcome the lack of shared understanding of how to approach the valuation of IP becomes more urgent. This book will facilitate consistent approaches to the valuation of IP as an indispensable component of trade, investment, and sustainable economic development. It will provide IP asset managers and transactional attorneys, both seasoned experts and newcomers, with up-to-date methods on how to value IP assets and apply them in practice.

Author: Amy L. Goodman
Publisher: Wolters Kluwer
ISBN: 0735598959
Category : Law
Languages : en
Pages : 1856

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Book Description
A Practical Guide to SEC Proxy and Compensation Rules, Fifth Edition is designed to meet the special needs of corporate officers and other professionals who must understand and master the latest changes in compensation disclosure and related party disclosure rules, including requirements and initial SEC implementing rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act. Current, comprehensive and reliable, the Guide prepares you to handle both common issues and unexpected situations. Contributions from the country's leading compensation and proxy experts analyze: Executive compensation tables Compensation disclosure and analysis Other proxy disclosure requirements E-proxy rules Executive compensation under IRC Section 162(m) And much more! Organized for quick, easy access to all the issues and areas youand’re likely to encounter in your daily work, A Practical Guide to SEC Proxy and Compensation Rules Dissects each compensation table individuallyand—the summary compensation table, the option and SAR tables, the long-term incentive plan tableand—and alerts you to the perils and pitfalls of each one Walks you through preparation of the Compensation Disclosure and Analysis Explains the latest interpretations under the SEC's shareholder proposal rule and institutional investor initiatives and what they mean for the coming proxy season Helps you tackle planning concerns that have arisen in the executive compensation context, including strategies for handling shareholder proposals regarding executive compensation and obtaining shareholder approval of stock option plans The Fifth Edition reflects the latest SEC and IRS regulations, guidance, interpretations and disclosure practices. It adds a new chapter focused on developments and practices relating to required public company and“say-on-payand” advisory votes pursuant to the Dodd-Frank Act. Another new chapter addresses director qualifications and Board leadership, diversity, and risk oversight disclosures. This one-volume guide will help you prepare required disclosures as well as make long-range plans that comply fully with regulations and positions taken by the SEC more quickly and completely than ever before. In addition, weand’ve updated the Appendices to bring you the latest rules and relevant primary source material.

Author: Graeme Guthrie
Publisher: Oxford University Press
ISBN: 019993908X
Category : Business & Economics
Languages : en
Pages : 433

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Book Description
Decision-makers in business and economics face a staggering array of problems. For example, managers of growing firms have to decide when to expand their business, governments have to decide whether to undertake large infrastructure investments, and managers of oil firms must decide how rapidly to deplete their reserves. While these problems seem quite diverse, they all share many important features. In each case, the decision-maker must choose when to take a particular action that will be potentially impossible to reverse, and the consequences of taking (or not taking) that action are uncertain. Also, the timing and nature of these actions directly affect the cash flows generated by the entities they manage. This book explains how techniques originally developed to price financial derivatives can be used to analyze real-world decisions, and provides the tools necessary to put them into practice. The real options analysis approach to decision-making is built on strong theoretical foundations, and is widely discussed in practitioner literature, but often only at a fairly intuitive level. What practitioners need-and what this book delivers-is a structured approach to systematically applying real options analysis to the wide variety of problems they will meet in business and economics. Real Options in Theory and Practice focuses on building up a general approach to solving real options problems from the ground up. Rather than aiming to build a "black box" to solve a small set of standardized real options problems, it describes the building blocks of any successful real options analysis and shows how they can be assembled in a way that is appropriate to the problem being analyzed. For both practitioners and academics, Real Options in Theory and Practice will serve as an authoritative and invaluable resource for those looking for effective and practical solutions to complex, real-life problems.