Product Description

This book provides a comprehensive and self-contained treat- ment of the theory and practice of option pricing. The role of martingale methods in financial modeling is exposed. The emphasis is on using arbitrage-free models already accepted by the market as well as on building the new ones but in a way that makes them consistent with the finance industry derivatives pricing practice. Standard calls and puts together with numerous examples of exotic options such as barriers and quantos, for example on stocks, indices, currencies and interest rates are analysed. The importance of choosing a convenient numeraire in price calculations is explained. Mathematical and financial language is used so as to bring mathematicians closer to practical problems of finance and presenting to the industry useful math. tools.

Product Details

• Amazon Sales Rank: #1205610 in Books
• Published on: 1998-10-31
• Original language: English
• Number of items: 1
• Binding: Hardcover
• 530 pages

Customer Reviews

Hardcore Financial Engineering for the Sultan
This is a classic book. However, it is not for the faint hearted and can at times feel like reading War & Peace in Russian when you only have a tourist phrasebook! Its tone is by nature academic and theoretical but if you want to have the most rigorous treatment of this exciting new area of derivative valuation then you must suffer this dryness. Anyone wanting Wilmott style antidotes and cartoons will be disappointed.

The use of martingale valuation in real world derivatives is still niche, however the authors show that the techniques are very important and can be applied to a wide variety of financial instruments - in many respects the martingale methods are simpler than the traditional partial differential techniques favoured by the mainstream. The book's audience is PhD level quants seeking to apply martingale techniques and anyone without a good grounding in calculus should not attempt this book. However, for the enlightened ones it is worth the effort and will provide many happy hours of reflection.