552 Pages
53 B/W Illustrations
by
Chapman & Hall
552 Pages
by
Chapman & Hall
Also available as eBook on:
WINNER of a Riskbook.com Best of 2004 Book Award! During the last decade, financial models based on jump processes have acquired increasing popularity in risk management and option pricing. Much has been published on the subject, but the technical nature of most papers makes them difficult for nonspecialists to understand, and the mathematical tools required for applications can be intimidating.... Read more
FINANCIAL MODELLING BEYOND BROWNIAN MOTION 1
Models in the light of empirical facts
Evidence from option markets
Implied volatility smiles and skews
Short term options
Hedging and risk management
Objectives
MATHEMATICAL TOOLS
Basic Tools
Lévy Processes: Definitions and Properties
Building Lévy processes
Multidimensional Models with Jumps
SIMULATION AND ESTIMATION
Simulating Lévy Processes
Modelling Financial Time Series with Lévy Processes
OPTION PRICING IN MODELS WITH JUMPS
Stochastic Calculus for Jump Processes
Measure Transformations for Lévy Processes
Pricing and Hedging in Incomplete Markets
Risk-Neutral Modelling with Exponential Lévy Processes
Integro-Differential Equations and Numerical Methods
Inverse Problems and Model Calibration
BEYOND LÉVY PROCESSES
Time-Inhomogeneous Models
Stochastic Volatility Models with Jumps
APPENDIX: Modfied Bessel Functions
REFERENCES
SUBJECT INDEX
Models in the light of empirical facts
Evidence from option markets
Implied volatility smiles and skews
Short term options
Hedging and risk management
Objectives
MATHEMATICAL TOOLS
Basic Tools
Lévy Processes: Definitions and Properties
Building Lévy processes
Multidimensional Models with Jumps
SIMULATION AND ESTIMATION
Simulating Lévy Processes
Modelling Financial Time Series with Lévy Processes
OPTION PRICING IN MODELS WITH JUMPS
Stochastic Calculus for Jump Processes
Measure Transformations for Lévy Processes
Pricing and Hedging in Incomplete Markets
Risk-Neutral Modelling with Exponential Lévy Processes
Integro-Differential Equations and Numerical Methods
Inverse Problems and Model Calibration
BEYOND LÉVY PROCESSES
Time-Inhomogeneous Models
Stochastic Volatility Models with Jumps
APPENDIX: Modfied Bessel Functions
REFERENCES
SUBJECT INDEX
Biography
Rama Cont, Peter Tankov
"Pardon the pun, but I jumped at the opportunity to endorse this book. This book is the first complete treatment of markets rendered incomplete by the reality of jumps in prices and volatilities. If I were you, I would pounce."
-Dr. Peter Carr, Head of Quantitative Research, Bloomberg LP and Director of Masters Program in Mathematical Finance, NYU
"This book is an extremely rich source of information…the content speaks for itself…"
-ISI Short Book Reviews
"This book is an extremely rich source of information for recent developments in the use of jump processes in financial modelling, in particular the use of Levy processes. The authors work at a comfortable mathematical pace choosing carefully which proofs to include and exclude and never losing sight of financial interpretation and application.
"The authors conclude the main body of their text by saying: 'We hope that the present volume will encourage more researchers and practitioners to contribute to this topic and improve on our understanding of theoretical, numerical and practical issues related to financial modelling with jump processes'. I am quite convinced that this goal will be achieved."
-Dr. Andreas E. Kyprianou, International Statistics Institute book reviews
"What makes this book attractive is its comprehensiveness. … this is an excellent book. Read it. You will learn much."
-Glyn A. Holton, Contingency Analysis
"One of the first texts which is entirely devoted to option pricing with non-continuous jump-type stochastic processes … an easygoing presentation where the basic problems of jump models are not additionally obscured by technicalities."
-Journal of the Royal Statistics
"I love this book. It will be required reading for students entering Levy finance. My judgment is that it will be useful both within academia, particularly to people in stochastics, econometrics, and other fields wanting to develop an interest in finance, and to practitioners."
-N.H. Bingham, Journal of the American Statistical Association
