Financial Derivatives in Theory and Practice

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John Wiley and Sons, Jul 2, 2004 - Business & Economics - 437 pages
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The term Financial Derivative is a very broad term which has come to mean any financial transaction whose value depends on the underlying value of the asset concerned. Sophisticated statistical modelling of derivatives enables practitioners in the banking industry to reduce financial risk and ultimately increase profits made from these transactions.

The book originally published in March 2000 to widespread acclaim. This revised edition has been updated with minor corrections and new references, and now includes a chapter of exercises and solutions, enabling use as a course text.

  • Comprehensive introduction to the theory and practice of financial derivatives.
  • Discusses and elaborates on the theory of interest rate derivatives, an area of increasing interest.
  • Divided into two self-contained parts ? the first concentrating on the theory of stochastic calculus, and the second describes in detail the pricing of a number of different derivatives in practice.
  • Written by well respected academics with experience in the banking industry.

A valuable text for practitioners in research departments of all banking and finance sectors. Academic researchers and graduate students working in mathematical finance.

 

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Contents

Brownian Motion
19
Stochastic Integration
63
Girsanov and Martingale Representation
91
Stochastic Differential Equations
115
Option Pricing in Continuous Time
141
Dynamic Term Structure Models
183
Modelling in Practice
215
Basic Instruments and Terminology
227
Pricing Exotic European Derivatives
259
Convexity Corrections
277
Implied Interest Rate Pricing Models
287
MultiCurrency Terminal SwapRate Models
303
ShortRate Models
319
Market Models
337
MarkovFunctional Modelling
351
Exercises and Solutions
373

Pricing Standard Market Derivatives
237
Futures Contracts
247
The Usual Conditions
417
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