Quantitative Methods in Derivatives Pricing: An Introduction to Computational Finance

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John Wiley & Sons, Apr 7, 2003 - Business & Economics - 304 pages
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This book presents a cogent description of the main methodologies used in derivatives pricing. Starting with a summary of the elements of Stochastic Calculus, Quantitative Methods in Derivatives Pricing develops the fundamental tools of financial engineering, such as scenario generation, simulation for European instruments, simulation for American instruments, and finite differences in an intuitive and practical manner, with an abundance of practical examples and case studies. Intended primarily as an introductory graduate textbook in computational finance, this book will also serve as a reference for practitioners seeking basic information on alternative pricing methodologies.

Domingo 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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Contents

CHAPTER 1 Arbitrage and Pricing
1
CHAPTER 2 Fundamentals of Stochastic Calculus
9
CHAPTER 3 Pricing in Continuous Time
41
CHAPTER 4 Scenario Generation
77
CHAPTER 5 European Pricing with Simulation
121
CHAPTER 6 Simulation for Early Exercise
177
CHAPTER 7 Pricing with Finite Differences
207
BIBLIOGRAPHY
273
INDEX
277
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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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