Risk-Neutral Valuation

In this second edition of their popular text, the authors take into account recent developments in the field, and changes in their own thinking and teaching. The chapters on Incomplete Markets and Interest Rate Theory have been updated and extended, there is a new chapter on the important and growing area of Credit Risk and, in recognition of the increasing popularity of Lévy finance, there is considerable new material on: · Infinite divisibility and Lévy processes · Lévy-based models in incomplete markets Further material such as exercises, solutions to exercises and lecture slides are also available via the web to provide additional support for lecturers.

A thoroughly revised and updated edition of a popular text: it brings readers completely up-to-date with recent developments in the field Includes a new chapter on the important topic of Credit Risk, and provides additional resources for lecturers via the web Written with the practitioner in mind, it gets straight to the heart of the subject and shows how to put the theory into practice Includes supplementary material: sn.pub/extras Request lecturer material: sn.pub/lecturer-material

Zusammenfassung
Provides a treatment of the probabilistic theory behind the risk-neutral valuation principle and its application to the pricing and hedging of financial derivatives. Based on firm probabilistic foundations, this title discusses general properties of discrete- and continuous-time financial market models.

Inhalt

1. Derivative Background.- 2. Probability Background.- 3. Stochastic Processes in Discrete Time.- 4. Mathematical Finance in Discrete Time.- 5. Stochastic Processes in Continuous Time.- 6. Mathematical Finance in Continuous Time.- 7. Incomplete Markets.- 8. Interest Rate Theory.- 9. Credit Risk.- A. Hilbert Space.- B. Projections and Conditional Expectations.- C. The Separating Hyperplane Theorem.