Risk Neutral Pricing and Financial Mathematics

Peter M. Knopf and John L. Teall
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Peter M. Knopf: Dyson College of Arts and Sciences, Pace University, Pleasantville, NY, USA
John L. Teall: Rensselaer Polytechnic Institute, Troy, NY, USA

in Elsevier Monographs from Elsevier, currently edited by Candice Janco

Abstract: Risk Neutral Pricing and Financial Mathematics: A Primer provides a foundation to financial mathematics for those whose undergraduate quantitative preparation does not extend beyond calculus, statistics, and linear math. It covers a broad range of foundation topics related to financial modeling, including probability, discrete and continuous time and space valuation, stochastic processes, equivalent martingales, option pricing, and term structure models, along with related valuation and hedging techniques. The joint effort of two authors with a combined 70 years of academic and practitioner experience, Risk Neutral Pricing and Financial Mathematics takes a reader from learning the basics of beginning probability, with a refresher on differential calculus, all the way to Doob-Meyer, Ito, Girsanov, and SDEs. It can also serve as a useful resource for actuaries preparing for Exams FM and MFE (Society of Actuaries) and Exams 2 and 3F (Casualty Actuarial Society). Includes more subjects than other books, including probability, discrete and continuous time and space valuation, stochastic processes, equivalent martingales, option pricing, term structure models, valuation, and hedging techniques Emphasizes introductory financial engineering, financial modeling, and financial mathematics Suited for corporate training programs and professional association certification programs

Keywords: American call; And currency options; Annuities; Antiderivative; Arbitrage; Arbitrage-free pricing; Arrow-Debreu security; Binomial process; Binomial random variable; Black-Scholes differential equation; Black-Scholes option pricing model; Black-Scholes options pricing model; Black's pseudo-American call model; Bond pricing; Brownian motion; Cameron-Martin-Girsanov theorem; Cash flow; Central limit theorem; Change of binomial probability measure; Change of normal density measure; Compound options; Conditional probability; Convexity; Cox-Ingersoll-Ross (CIR) model; Definite integral; Delta hedge; Derivative and differential; Derivative securities; Differential equation; Discount functions; Doob decomposition; Drift; Duration; Equivalent martingale measure; Equivalent probability; European call; European known dividend model; Exchange options; Expected value; Financial models; Forward contract; Forward contracts; Forward rate; Gauss-Jordan method; Geometric Brownian motion; Greeks; Hitting time; Implied volatility; Independent random variables; Itô isometry; Itô process; Itô's lemma; Lagrange multipliers; Linear independence; Market efficiency; Markov process; Martingale; Martingale representation theorem; Matrix; Mean-reverting process; Merton model; Merton's continuous leakage formula; Method of bisection; Newton-Raphson method; No arbitrage; Normal random variable; Numeraire; Optional stopping theorem; Ornstein-Uhlenbeck process; Pairs trading; Physical probability; Plain vanilla option; Portfolio optimization; Portfolio return; Present value; Pricing bonds; Pricing kernel; Probability spaces; Product rule; Pure security; Put-call parity; Radon-Nikodym derivative; Random variable; Riemann sum; Risk premium; Risk-neutral probability measure; Roll-Geske-Whaley model; Self-financing replicating portfolio; Separable differential equation; Smiles and smirks; Spanning set of vectors; Stochastic calculus; Stochastic differential equations; Stochastic integral; Stochastic process; Stochastic volatility; Stopping time; Submartingale; Supermartingale; Synthetic probability (search for similar items in EconPapers)
Date: 2015 Originally published 2015-08-18.
Edition: 1
ISBN: 978-0-12-801534-6
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