Pricing derivative securities / T.W. Epps.

Format:

Book

Author/Creator:

Epps, T. W.

Language:

English

Subjects (All):

Derivative securities--Prices--Mathematical models.

Derivative securities.

Securities--Prices--Mathematical models.

Securities.

Physical Description:

1 online resource (712 p.)

Place of Publication:

River Edge, NJ : World Scientific, 2000.

Language Note:

English

Summary:

The development of successful techniques for valuing derivative assets is among the most influential achievements of economic science. Pricing Derivative Securities presents the theory of financial derivatives in a way that emphasizes both its mathematical foundations and its practical implementation. The book's organization reveals its three distinctive features. Part I surveys the necessary tools of analysis, probability theory, and stochastic calculus, thus making the book self-contained. The chapters in Part II, Pricing Theory, are organized around the dynamics of the price processes of un

Contents:

Contents; Preface; Part I PRELIMINARIES; Chapter 1 INTRODUCTION AND OVERVIEW; 1.1 A Tour of Derivatives and Markets; 1.1.1 Forward Contracts; 1.1.2 Futures; 1.1.3 'Vanilla' Options; 1.1.4 Other Derivative Products; 1.2 An Overview of Derivatives Pricing; 1.2.1 Replication: Static and Dynamic; 1.2.2 Approaches to Valuation when Replication Is Possible; 1.2.3 Markets: Complete and Otherwise; 1.2.4 Derivatives Pricing in Incomplete Markets; Chapter 2 MATHEMATICAL PREPARATION; 2.1 Analytical Tools; 2.1.1 Order Notation; 2.1.2 Series Expansions; 2.1.3 Measures; 2.1.4 Measurable Functions

2.1.5 Variation and Absolute Continuity of Functions2.1.6 Integration; 2.1.7 Change of Measure: Radon-Nikodym Theorem; 2.1.8 Special Functions and Integral Transforms; 2.2 Probability; 2.2.1 Probability Spaces; 2.2.2 Random Variables and Their Distributions; 2.2.3 Mathematical Expectation; 2.2.4 Radon-Nikodym for Probability Measures; 2.2.5 Conditional Probability and Expectation; 2.2.6 Stochastic Convergence; 2.2.7 Models for Distributions; 2.2.8 Introduction to Stochastic Processes; Chapter 3 TOOLS FOR CONTINUOUS-TIME MODELS; 3.1 Wiener Processes; 3.1.1 Definition and Background

3.1.2 Essential Properties3.2 Itô Integrals and Processes; 3.2.1 A Motivating Example; 3.2.2 Integrals with Respect to Brownian Motions; 3.2.3 ltô Processes; 3.3 Itô's Formula; 3.4 Tools for Martingale Pricing; 3.4.1 Girsanov's Theorem and Changes of Measure; 3.4.2 Representation of Martingales; 3.5 Tools for Discontinuous Processes; 3.5.1 ""J"" Processes; 3.5.2 More General Processes; Part II PRICING THEORY; Chapter 4 DYNAMICS-FREE PRICING; 4.1 Bond Prices and Interest Rates; 4.1.1 'Spot' Bond Prices and Rates; 4.1.2 Forward Bond Prices and Rates

4.1.3 Uncertainty in Future Bond Prices and Rates4.2 Forwards and Futures; 4.2.1 Forward Prices and Values of Forward Contracts; 4.2.2 Determining Futures Prices; 4.2.3 Illustrations and Caveats; 4.2.4 A Preview of Martingale Pricing; 4.3 Options; 4.3.1 Payoff Distributions for European Options; 4.3.2 Put-Call Parity; 4.3.3 Bounds on Option Prices; 4.3.4 How Prices Vary with T, X, and St; Chapter 5 PRICING UNDER BERNOULLI DYNAMICS; 5.1 The Structure of Bernoulli Dynamics; 5.2 Self-Financing Portfolios in Discrete Time; 5.3 Replication and Binomial Pricing

5.4 Interpreting the Binomial Solution5.4.1 The P.D.E. Interpretation; 5.4.2 The Risk-Neutral or Martingale Interpretation; 5.5 Specific Applications; 5.5.1 European Stock Options; 5.5.2 Binomial Pricing of Futures and Futures Options; 5.5.3 American-Style Derivatives; 5.5.4 Derivatives on Assets That Pay Dividends; 5.6 Implementing the Binomial Method; 5.6.1 Modelling the Dynamics; 5.6.2 Efficient Calculation; 5.7 Inferring Trees from Option Prices; 5.7.1 Assessing the Implicit Risk-Neutral Distribution of ST; 5.7.2 Building the Tree; 5.7.3 Appraisal; Chapter 6 BLACK-SCHOLES DYNAMICS

6.1 The Structure of Black-Scholes Dynamics

Notes:

Description based upon print version of record.

Includes bibliographical references (p. 661-675) and index.

ISBN:

981-279-291-0