This book aims at a middle ground between the introductory books on derivative securities and those that provide advanced mathematical treatments. It is written for mathematically capable students who have not necessarily had prior exposure to probability theory, stochastic calculus, or computer programming. It provides derivations of pricing and hedging formulas (using the probabilistic change of numeraire technique) for standard options, exchange options, options on forwards and futures, quanto options, exotic options, caps, floors and swaptions, as well as VBA code implementing the formulas. It also contains an introduction to Monte Carlo, binomial models, and finite-difference methods.

The book is unusual in combining derivations of the pricing and hedging formulas, computer code implementing the formulas, and an introduction to computational methods The computational tools supplement the theory, allowing the inclusion of exercises of a practical nature Has a broad coverage of derivatives and can be used either for courses emphasizing computation or for courses emphasizing theory Uses almost exclusively the probabilistic (change of numeraire) approach, which is developed in the first chapter The VBA code is available in an Excel workbook, which includes examples of all of the functions (available on the internet) Includes supplementary material: sn.pub/extras Request lecturer material: sn.pub/lecturer-material

Autorentext

Kerry Back holds the Jerry and Kay Cox Professorship of Business and the Thomas W. Leland Memorial Professorship of Finance at Texas A&M University. Before joining Texas A&M in 2005, he was a chaired professor at Washington University in St. Louis. His awards and honors include a Batterymarch Fellowship (1991-92), a best paper award at the Review of Financial Studies (1993) the Reid Teaching Award at Washington University in St. Louis (1997, 1998, 1999, 2001), and the Washington University Distinguished Faculty Award (1999). He is a past editor of the Review of Financial Studies and is currently co-editor of Finance and Stochastics and an associate editor of the Journal of Finance.

Inhalt
to Option Pricing.- Asset Pricing Basics.- Continuous-Time Models.- Black-Scholes.- Estimating and Modelling Volatility.- to Monte Carlo and Binomial Models.- Advanced Option Pricing.- Foreign Exchange.- Forward, Futures, and Exchange Options.- Exotic Options.- More on Monte Carlo and Binomial Valuation.- Finite Difference Methods.- Fixed Income.- Fixed Income Concepts.- to Fixed Income Derivatives.- Valuing Derivatives in the Extended Vasicek Model.- A Brief Survey of Term Structure Models.