Financial Derivatives: Pricing, Applications, and Mathematics

Author: Bazza Chacko
Publisher:
Publish Date: 2005-09-01
Features: This book provides a concise exposition of the fundamental principles of pricing financial derivatives. Chapter 1 introduces basic stochastic calculus and discusses theorems related to concepts such as uncertainty and time, random walks, and geometric Brownian motion. Chapter 2 covers general pricing methods for assets and derivatives, clarifies the concepts of stochastic discount factors and price kernels, and applies these concepts to price traditional and exotic derivatives. Chapter 3 applies pricing theory to special cases in the interest rate market, such as bonds and swaps, and discusses factor models and term structure consistent models. Chapter 4 explores various mathematical topics related to derivative pricing and portfolio decision-making, such as mean-reversion processes and jump processes, and discusses stochastic calculus tools like the Kolmogorov equation, martingale techniques, stochastic control, and partial differential equations.