Download PDF by James A. Primbs: A Factor Model Approach to Derivative Pricing

By James A. Primbs

ISBN-10: 1498763324

ISBN-13: 9781498763325

This booklet offers the quickest and least difficult path to the vast majority of the implications and equations in by-product pricing, and offers the reader the instruments essential to expand those principles to new events that they could stumble upon. It does so by means of concentrating on a unmarried underlying precept that's effortless to know, after which it indicates that this precept is the most important to the vast majority of the consequences in by-product pricing. In that feel, it offers the "big photo" of spinoff pricing through concentrating on the underlying precept and never on mathematical technicalities. After examining this ebook, one is provided with the instruments had to expand the strategies to any new pricing scenario.

Show description

Read or Download A Factor Model Approach to Derivative Pricing PDF

Similar probability & statistics books

Get Exploratory Data Analysis PDF

The process during this introductory ebook is that of casual learn of the information. equipment variety from plotting picture-drawing concepts to particularly tricky numerical summaries. numerous of the equipment are the unique creations of the writer, and all might be conducted both with pencil or aided via hand held calculator.

Get Chance and Luck: The Laws of Luck, Coincidences, Wagers, PDF

Probability and success: The legislation of good fortune, Coincidences, Wagers, Lotteries, and the Fallacies of GamblingThe fake rules time-honored between all periods of the group, cultured in addition to uncultured, respecting likelihood and good fortune, illustrate the fact that universal consent (in concerns outdoor the impact of authority) argues virtually of necessity errors.

New PDF release: Continuous univariate distributions. Vol.2

This quantity provides a close description of the statistical distributions which are in general utilized to such fields as engineering, enterprise, economics and the behavioural, organic and environmental sciences. The authors disguise particular distributions, together with logistic, curb, bath, F, non-central Chi-square, quadratic shape, non-central F, non-central t, and different miscellaneous distributions.

Additional info for A Factor Model Approach to Derivative Pricing

Sample text

1 Jump Diffusion as a Stock Price Model When used as the model for a stock price S(t), the jump diffusion process leads to the stock’s instantaneous return being r= dS = adt + bdz + (Y − 1)dπ, S− which is the sum of three parts. The term adt is a deterministic drift, bdz is a Gaussian term, and finally (Y − 1)dπ allows random jumps to occur which could represent sudden unexpected events such as earnings surprises or the like. 20) where a, b, c, and f are constants. We will obtain the solution to this stochastic differential equation using the concept of an integrating factor that arises in ordinary differential equations [6].

P. p. 1) has a mean and variance that agree with a Poisson random variable with parameter αdt to order dt. 4 Poisson Processes. Consider the time interval [0, 1]. Chop this time interval into n parts of equal length. p. p. 1 − α/n. 2) n Xi . 3) i=1 Answer the following, where P(·) denotes probability. (a) What is P(Y = 0)? (b) In your answer in (a), take the limit as n → ∞. What do you get? (b) What is P(Y = 1)? (c) Again take the limit. What is your answer? (d) Now consider an arbitrary but fixed k with k < n.

Which term has standard deviation of lowest order in dt? 7). 31). CHAPTER 3 Stochastic Differential Equations with Solutions n this chapter, we review some stochastic differential equations that have closed form solutions. These are also some of the stochastic differential equations used for modeling asset prices and other relevant financial variables. In these solutions, note the role that Ito’s lemma plays. Most importantly, not many stochastic differential equations have closed form solutions.

Download PDF sample

A Factor Model Approach to Derivative Pricing by James A. Primbs


by Anthony
4.4

Rated 4.91 of 5 – based on 50 votes