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Derivative Security Pricing

Techniques, Methods and Applications

  • Book
  • © 2015

Overview

Authors:
  1. Carl Chiarella

    1. Finance Discipline Group, UTS Business School, University of Technology, Sydney, Australia

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    You can also search for this author in PubMed   Google Scholar

  2. Xue-Zhong He

    1. Finance Discipline Group, UTS Business School, University of Technology, Sydney, Australia

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    You can also search for this author in PubMed   Google Scholar

  3. Christina Sklibosios Nikitopoulos

    1. Finance Discipline Group, UTS Business School, University of Technology, Sydney, Australia

    View author publications

    You can also search for this author in PubMed   Google Scholar

  • Focuses on the financial intuition of key results of derivative security pricing
  • Helps readers from both academia and industry without formal mathematical training to understand the fundamentals of mathematical finance
  • Includes theoretical and computational problems aiming to enhance the theoretical understanding as well as the applicability of the topics
  • Includes supplementary material: sn.pub/extras

Part of the book series: Dynamic Modeling and Econometrics in Economics and Finance (DMEF, volume 21)

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Table of contents (26 chapters)

  1. Front Matter

    Pages i-xvi
    Download chapter PDF

  2. The Fundamentals of Derivative Security Pricing

    1. Front Matter

      Pages 1-1
      Download chapter PDF

    2. The Stock Option Problem

      • Carl Chiarella, Xue-Zhong He, Christina Sklibosios Nikitopoulos
      Pages 3-6

    3. Stochastic Processes for Asset Price Modelling

      • Carl Chiarella, Xue-Zhong He, Christina Sklibosios Nikitopoulos
      Pages 7-36

    4. An Initial Attempt at Pricing an Option

      • Carl Chiarella, Xue-Zhong He, Christina Sklibosios Nikitopoulos
      Pages 37-53

    5. The Stochastic Differential Equation

      • Carl Chiarella, Xue-Zhong He, Christina Sklibosios Nikitopoulos
      Pages 55-91

    6. Manipulating Stochastic Differential Equations and Stochastic Integrals

      • Carl Chiarella, Xue-Zhong He, Christina Sklibosios Nikitopoulos
      Pages 93-110

    7. Ito’s Lemma and Its Applications

      • Carl Chiarella, Xue-Zhong He, Christina Sklibosios Nikitopoulos
      Pages 111-143

    8. The Continuous Hedging Argument

      • Carl Chiarella, Xue-Zhong He, Christina Sklibosios Nikitopoulos
      Pages 145-156

    9. The Martingale Approach

      • Carl Chiarella, Xue-Zhong He, Christina Sklibosios Nikitopoulos
      Pages 157-189

    10. The Partial Differential Equation Approach Under Geometric Brownian Motion

      • Carl Chiarella, Xue-Zhong He, Christina Sklibosios Nikitopoulos
      Pages 191-206

    11. Pricing Derivative Securities: A General Approach

      • Carl Chiarella, Xue-Zhong He, Christina Sklibosios Nikitopoulos
      Pages 207-234

    12. Applying the General Pricing Framework

      • Carl Chiarella, Xue-Zhong He, Christina Sklibosios Nikitopoulos
      Pages 235-249

    13. Jump-Diffusion Processes

      • Carl Chiarella, Xue-Zhong He, Christina Sklibosios Nikitopoulos
      Pages 251-271

    14. Option Pricing Under Jump-Diffusion Processes

      • Carl Chiarella, Xue-Zhong He, Christina Sklibosios Nikitopoulos
      Pages 273-293

    15. Partial Differential Equation Approach Under Geometric Jump-Diffusion Process

      • Carl Chiarella, Xue-Zhong He, Christina Sklibosios Nikitopoulos
      Pages 295-314

    16. Stochastic Volatility

      • Carl Chiarella, Xue-Zhong He, Christina Sklibosios Nikitopoulos
      Pages 315-347

    17. Pricing the American Feature

      • Carl Chiarella, Xue-Zhong He, Christina Sklibosios Nikitopoulos
      Pages 349-369

    18. Pricing Options Using Binomial Trees

      • Carl Chiarella, Xue-Zhong He, Christina Sklibosios Nikitopoulos
      Pages 371-387

    19. Volatility Smiles

      • Carl Chiarella, Xue-Zhong He, Christina Sklibosios Nikitopoulos
      Pages 389-401
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Keywords

About this book

The book presents applications of stochastic calculus to derivative security pricing and interest rate modelling. By focusing more on the financial intuition of the applications rather than the mathematical formalities, the book provides the essential knowledge and understanding of fundamental concepts of stochastic finance, and how to implement them to develop pricing models for derivatives as well as to model spot and forward interest rates. Furthermore an extensive overview of the associated literature is presented and its relevance and applicability are discussed. Most of the key concepts are covered including Ito’s Lemma, martingales, Girsanov’s theorem, Brownian motion, jump processes, stochastic volatility, American feature and binomial trees. The book is beneficial to higher-degree research students, academics and practitioners as it provides the elementary theoretical tools to apply the techniques of stochastic finance in research or industrial problems in the field.

Authors and Affiliations

  • Finance Discipline Group, UTS Business School, University of Technology, Sydney, Australia

    Carl Chiarella, Xue-Zhong He, Christina Sklibosios Nikitopoulos

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