John Wiley & Sons, Inc., 2002. – 304 pages.
This book is designed as a graduate textbook in financial engineering. It was motivated by the need to present the main techniques used in quantitative pricing in a single source adequate for Master level students. Students are expected to have some background in algebra, elementary statistics, calculus, and elementary techniques of financial pricing, such as binomial trees and simple Monte Carlo simulation. The book includes a brief introduction to the fundamentals of stochastic calculus.
The book is divided into seven chapters covering an introduction to stochastic calculus, a summary of asset pricing theory, simulation applied to pricing, and pricing using finite difference solutions. The topic of trees as a tool for pricing is touched on at the end of the finite differences chapter. Although trees are a popular pricing technique, finite differences, of which trees are a particularly simple case, are a far more powerful and flexible approach. Significant effort is dedicated to the fundamentals of early exercise simulation. This methodology is rapidly taking the lead as a preferred way to price highly dimensional early exercise instruments.
This book is designed as a graduate textbook in financial engineering. It was motivated by the need to present the main techniques used in quantitative pricing in a single source adequate for Master level students. Students are expected to have some background in algebra, elementary statistics, calculus, and elementary techniques of financial pricing, such as binomial trees and simple Monte Carlo simulation. The book includes a brief introduction to the fundamentals of stochastic calculus.
The book is divided into seven chapters covering an introduction to stochastic calculus, a summary of asset pricing theory, simulation applied to pricing, and pricing using finite difference solutions. The topic of trees as a tool for pricing is touched on at the end of the finite differences chapter. Although trees are a popular pricing technique, finite differences, of which trees are a particularly simple case, are a far more powerful and flexible approach. Significant effort is dedicated to the fundamentals of early exercise simulation. This methodology is rapidly taking the lead as a preferred way to price highly dimensional early exercise instruments.