Quantitative Methods in Derivatives Pricing: An Introduction to Computational Finance / Edition 1

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Quantitative Methods in Derivatives Pricing

Quantitative Methods in Derivatives Pricing, researched and writtenby Domingo Tavella, one of the pioneers in the emergence ofcomputational finance as a discipline in its own right, developsthe main techniques and strategies of computational finance in aunified framework. From the plethora of methods that characterize anew discipline in a state of fluid evolution, this bookconcentrates on those that have proven to be sufficiently solid androbust to become a permanent part of the arsenal of strategies forpricing complex financial instruments. Either as a textbook or areference source, this book's emphasis is on practicality andapplications.

As a textbook, this work fills a palpable need for adequatematerial in the ever-increasing number of programs with an emphasison sophisticated financial engineering. As a reference source, itprovides a valuable overview of the most relevant methods andapproaches of computational finance for those with adequatequantitative background entering the field of financial pricing.Topics discussed include:
* A brief introduction to single-period pricing
* A self-contained, practical introduction to stochastic calculus,with an emphasis on practical applications
* Introduction to continuous-time pricing
* Generation of scenarios for simulation, discussing methods andaccuracy in detail
* Simulation applied to computing expectations for Europeanpricing
* Simulation applied to early exercise pricing, presenting adetailed description of the least squares Monte Carlo method
* The use of finite differences in option pricing

Filled with numerous case studies and expert advice, QuantitativeMethods in Derivatives Pricing offers the most complete look atproven computational techniques for derivatives pricing to date.You'll quickly learn about the pricing of derivatives in continuoustime, how asset-pricing theory is used to set up the pricingproblem, and how to implement simulation methods for pricing bothEuropean and early exercise derivatives.

This invaluable resource prepares you for the rigors of the modernfinancial world and puts you on the road to successful derivativespricing.

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Product Details

  • ISBN-13: 9780471394471
  • Publisher: Wiley
  • Publication date: 5/2/2002
  • Series: Wiley Finance Series , #124
  • Edition number: 1
  • Pages: 304
  • Product dimensions: 6.34 (w) x 9.37 (h) x 1.04 (d)

Meet the Author

DOMINGO A. TAVELLA is President of Octanti Associates, a consulting firm in risk management and financial systems design. He is the founder and Chief Editor of the Journal of Computational Finance and has pioneered the application of advanced numerical techniques in pricing and risk analysis in the financial and insurance industries. Tavella coauthored Pricing Financial Instruments: The Finite Difference Method. He holds a PhD in aeronautical engineering from Stanford University and an MBA in finance from the University of California at Berkeley.

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Table of Contents

Arbitrage and Pricing.

Fundamentals of Stochastic Calculus.

Pricing in Continuous Time.

Scenario Generation.

European Pricing with Simulation.

Simulation for Early Exercise.

Finite Differences.

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