Parimutuel applications in finance / Ken Baron and Jeffrey Lange.

Format:

Book

Author/Creator:

Baron, Ken, 1966-

Contributor:

Lange, Jeffrey.

Series:

Finance and capital markets

[Finance and capital markets]

Language:

English

Subjects (All):

Derivative securities--Mathematical models.

Derivative securities.

Risk management--Mathematical models.

Risk management.

Physical Description:

xxvii, 278 pages : illustrations ; 24 cm.

Place of Publication:

Basingstoke [England] ; New York : Palgrave, 2007.

Summary:

Financial intermediaries supply derivatives to their customers when they can hedge the exposures from these transactions. A static hedge is typically employed by arranging an offsetting transaction with a different customer or a dynamic hedge by trading in the underlying derivatives. There is however a broad range of uncertain exposures where intermediaries tend not to offer derivatives or risk management products, as they are unable to hedge the resulting exposures. Baron and Lange suggest a parimutuel auction system adapted from the betting industry as a solution to this problem. They introduce the parimutuel mechanism and the modifications required to apply the mechanism to the capital markets. The PDCA auction and its mechanics are analyzed and finally the mathematics behind the system are described and illustrated. Includes a forward by Robert J. Shiller, the Stanley B. Resor Professor of Economics, Yale University

Notes:

Includes bibliographical references (pages 258-270) and indexes.

ISBN:

1403939500

OCLC:

70175045

Online:

Contributor biographical information

Publisher description