Asset Pricing in Discrete Time

A Complete Markets Approach

Author: Ser-Huang Poon,Richard Stapleton

Publisher: Oxford University Press on Demand

ISBN: 0199271445

Category: Business & Economics

Page: 140

View: 8581


Relying on the existence, in a complete market, of a pricing kernel, this book covers the pricing of assets, derivatives, and bonds in a discrete time, complete markets framework. It is primarily aimed at advanced Masters and PhD students in finance.-- Covers asset pricing in a single period model, deriving a simple complete market pricing model and using Stein's lemma to derive a version of the Capital Asset Pricing Model.-- Looks more deeply into some of the utility determinants of the pricing kernel, investigating in particular the effect of non-marketable background risks on the shape of the pricing kernel.-- Derives the prices of European-style contingent claims, in particular call options, in a one-period model; derives the Black-Scholes model assuming a lognormal distribution for the asset and a pricing kernel with constant elasticity, and emphasizes the idea of a risk-neutral valuation relationship between the price of a contingent claim on an asset and the underlying asset price.-- Extends the analysis to contingent claims on assets with non-lognormal distributions and considers the pricing of claims when risk-neutral valuation relationships do not exist.-- Expands the treatment of asset pricing to a multi-period economy, deriving prices in a rational expectations equilibrium.-- Uses the rational expectations framework to analyse the pricing of forward and futures contracts on assets and derivatives.-- Analyses the pricing of bonds given stochastic interest rates, and then uses this methodology to model the drift of forward rates, and as a special case the drift of the forward London Interbank Offer Rate in the LIBOR Market Model.

Handbook of Financial Econometrics

Tools and Techniques

Author: Yacine Ait-Sahalia,Lars Peter Hansen

Publisher: Elsevier

ISBN: 9780080929842

Category: Business & Economics

Page: 808

View: 1867


This collection of original articles—8 years in the making—shines a bright light on recent advances in financial econometrics. From a survey of mathematical and statistical tools for understanding nonlinear Markov processes to an exploration of the time-series evolution of the risk-return tradeoff for stock market investment, noted scholars Yacine Aït-Sahalia and Lars Peter Hansen benchmark the current state of knowledge while contributors build a framework for its growth. Whether in the presence of statistical uncertainty or the proven advantages and limitations of value at risk models, readers will discover that they can set few constraints on the value of this long-awaited volume. Presents a broad survey of current research—from local characterizations of the Markov process dynamics to financial market trading activity Contributors include Nobel Laureate Robert Engle and leading econometricians Offers a clarity of method and explanation unavailable in other financial econometrics collections


Author: Mukul Majumdar,Ian Wills,Pasquale M. Sgro,John M. Gowdy

Publisher: EOLSS Publications

ISBN: 1848263155


Page: 514

View: 6805


Fundamental Economics in two volumes is a component of Encyclopedia of Social Sciences and Humanities in the global Encyclopedia of Life Support Systems (EOLSS), which is an integrated compendium of twenty one Encyclopedias. The Theme discusses on Fundamental Economics, Walrasian and Non-Walrasian Microeconomics, Strategic Behavior, The Economics of Bargaining, Economic Exernalities, Public Goods, Macroeconomics, Decision Making Under Uncertainty, Development Economics and many other related topics. These two volumes are aimed at the following five major target audiences: University and College Students Educators, Professional Practitioners, Research Personnel and Policy Analysts, Managers, and Decision Makers, NGOs and GOs.

The New Palgrave Dictionary of Economics

Author: NA NA

Publisher: Springer

ISBN: 1349588024

Category: Law

Page: 7300

View: 3418


The award-winning The New Palgrave Dictionary of Economics, 2nd edition is now available as a dynamic online resource. Consisting of over 1,900 articles written by leading figures in the field including Nobel prize winners, this is the definitive scholarly reference work for a new generation of economists. Regularly updated! This product is a subscription based product.

Financial Economics, Risk and Information

An Introduction to Methods and Models

Author: Marcelo Bianconi

Publisher: World Scientific

ISBN: 9814485357

Category: Mathematics

Page: 540

View: 8649


Latest Edition: Financial Economics, Risk and Information (2nd Edition) This book presents a balanced blend of pure finance and contract theory in the presence of risk, alternative forms of information structures, and static and dynamic frameworks. In particular, it provides an introduction to the use of stochastic methods in financial economics and finance. The following topics are covered: financial risk and asset pricing and asset returns under alternative contractual arrangements, portfolio choice, individual behavior towards risk, general equilibrium under uncertainty in discrete and continuous time settings, indivisibilities and nonconvexities in a general equilibrium context, contract theory, mechanism design and principal-agent relationships in partial and general equilibrium contexts, credit markets, and option pricing. Contents: Basic Mathematical ToolsMean-Variance Approach to Financial Decision-MakingExpected Utility Approach to Financial Decision-MakingIntroduction to Systems of Financial Markets, Contracts, Contract Design, and Static Agency RelationshipsNon-convexities and Lotteries in General EquilibriumDynamics I: Discrete TimeDynamics II: Continuous Time Readership: Upper level undergraduates, graduate students (master's & PhD) and lecturers in financial economics; researchers; financial market professionals. Keywords:Risk and Information;Systems of Financial Markets;Contracts and Asymmetric Information;General Equilibrium Under Uncertainty;Non-Convexities;Portfolio Choice and Asset Pricing

Computational Intelligence Applications to Option Pricing, Volatility Forecasting and Value at Risk

Author: Fahed Mostafa,Tharam Dillon,Elizabeth Chang

Publisher: Springer

ISBN: 331951668X

Category: Computers

Page: 171

View: 8001


This book demonstrates the power of neural networks in learning complex behavior from the underlying financial time series data. The results presented also show how neural networks can successfully be applied to volatility modeling, option pricing, and value-at-risk modeling. These features mean that they can be applied to market-risk problems to overcome classic problems associated with statistical models.

Arbitrage Theory in Continuous Time

Author: Tomas Björk

Publisher: Oxford University Press, USA

ISBN: 0198851618


Page: 592

View: 2193


The fourth edition of this widely used textbook on pricing and hedging of financial derivatives now also includes dynamic equilibrium theory and continues to combine sound mathematical principles with economic applications. Concentrating on the probabilistic theory of continuous time arbitrage pricing of financial derivatives, including stochastic optimal control theory and optimal stopping theory, Arbitrage Theory in Continuous Time is designed for graduate students in economics and mathematics, and combines the necessary mathematical background with a solid economic focus. It includes a solved example for every new technique presented, contains numerous exercises, and suggests further reading in each chapter. All concepts and ideas are discussed, not only from a mathematics point of view, but with lots of intuitive economic arguments. In the substantially extended fourth edition Tomas Bjork has added completely new chapters on incomplete markets, treating such topics as the Esscher transform, the minimal martingale measure, f-divergences, optimal investment theory for incomplete markets, and good deal bounds. This edition includes an entirely new section presenting dynamic equilibrium theory, covering unit net supply endowments models and the Cox-Ingersoll-Ross equilibrium factor model. Providing two full treatments of arbitrage theory-the classical delta hedging approach and the modern martingale approach-this book is written so that these approaches can be studied independently of each other, thus providing the less mathematically-oriented reader with a self-contained introduction to arbitrage theory and equilibrium theory, while at the same time allowing the more advanced student to see the full theory in action. This textbook is a natural choice for graduate students and advanced undergraduates studying finance and an invaluable introduction to mathematical finance for mathematicians and professionals in the market.