Financial Modelling with Jump Processes

Financial Modelling with Jump Processes
Author: Peter Tankov
Publisher: CRC Press
Total Pages: 552
Release: 2003-12-30
Genre: Business & Economics
ISBN: 1135437947

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 mathematic

Simulation Study on Option Pricing Under Jump Diffusion Models

Simulation Study on Option Pricing Under Jump Diffusion Models
Author: Justin Rodrigues
Publisher:
Total Pages: 41
Release: 2013
Genre: Finance
ISBN:

The main objective of this thesis is to simulate, evaluate and discuss several methods for pricing European-style options. The Black-Scholes model has long been considered the standard method for pricing options. One of the downfalls of the Black-Scholes model is that it is strictly continuous and does not incorporate discrete jumps. This thesis will consider two alternate Lévy models that include discretized jumps; The Merton Jump Diffusion and Kou's Double Exponential Jump Diffusion. We will use each of the three models to price real world stock data through software simulations and explore the results.

Handbooks in Operations Research and Management Science: Financial Engineering

Handbooks in Operations Research and Management Science: Financial Engineering
Author: John R. Birge
Publisher: Elsevier
Total Pages: 1026
Release: 2007-11-16
Genre: Business & Economics
ISBN: 9780080553252

The remarkable growth of financial markets over the past decades has been accompanied by an equally remarkable explosion in financial engineering, the interdisciplinary field focusing on applications of mathematical and statistical modeling and computational technology to problems in the financial services industry. The goals of financial engineering research are to develop empirically realistic stochastic models describing dynamics of financial risk variables, such as asset prices, foreign exchange rates, and interest rates, and to develop analytical, computational and statistical methods and tools to implement the models and employ them to design and evaluate financial products and processes to manage risk and to meet financial goals. This handbook describes the latest developments in this rapidly evolving field in the areas of modeling and pricing financial derivatives, building models of interest rates and credit risk, pricing and hedging in incomplete markets, risk management, and portfolio optimization. Leading researchers in each of these areas provide their perspective on the state of the art in terms of analysis, computation, and practical relevance. The authors describe essential results to date, fundamental methods and tools, as well as new views of the existing literature, opportunities, and challenges for future research.

American Option Pricing in a Jump-Diffusion Model

American Option Pricing in a Jump-Diffusion Model
Author: Jeremy Berros
Publisher: LAP Lambert Academic Publishing
Total Pages: 60
Release: 2010-09
Genre:
ISBN: 9783843356930

Many alternative models have been developed lately to generalize the Black-Scholes option pricing model in order to incorporate more empirical features. Brownian motion and normal distribution have been used in this Black-Scholes option-pricing framework to model the return of assets. However, two main points emerge from empirical investigations: (i) the leptokurtic feature that describes the return distribution of assets as having a higher peak and two asymmetric heavier tails than those of the normal distribution, and (ii) an empirical phenomenon called "volatility smile" in option markets. Among the recent models that addressed the aforementioned issues is that of Kou (2002), which allows the price of the underlying asset to move according to both Brownian increments and double-exponential jumps. The aim of this thesis is to develop an analytic pricing expression for American options in this model that enables us to e±ciently determine both the price and related hedging parameters.

Applied Stochastic Control of Jump Diffusions

Applied Stochastic Control of Jump Diffusions
Author: Bernt Øksendal
Publisher: Springer Science & Business Media
Total Pages: 263
Release: 2007-04-26
Genre: Mathematics
ISBN: 3540698264

Here is a rigorous introduction to the most important and useful solution methods of various types of stochastic control problems for jump diffusions and its applications. Discussion includes the dynamic programming method and the maximum principle method, and their relationship. The text emphasises real-world applications, primarily in finance. Results are illustrated by examples, with end-of-chapter exercises including complete solutions. The 2nd edition adds a chapter on optimal control of stochastic partial differential equations driven by Lévy processes, and a new section on optimal stopping with delayed information. Basic knowledge of stochastic analysis, measure theory and partial differential equations is assumed.

The Concepts and Practice of Mathematical Finance

The Concepts and Practice of Mathematical Finance
Author: Mark S. Joshi
Publisher: Cambridge University Press
Total Pages: 0
Release: 2008-10-30
Genre: Business & Economics
ISBN: 0521514088

The second edition of a successful text providing the working knowledge needed to become a good quantitative analyst. An ideal introduction to mathematical finance, readers will gain a clear understanding of the intuition behind derivatives pricing, how models are implemented, and how they are used and adapted in practice.