Martingale Methods in Financial Modelling (Stochastic Modelling and Applied Probability)

Book Description

In the 2nd edition some sections of Part I are omitted for better readability, and a brand new chapter is devoted to volatility risk. As a consequence, hedging of plain-vanilla options and valuation of exotic options are no longer limited to the Black-Scholes framework with constant volatility.

The theme of stochastic volatility also reappears systematically in the second part of the book, which has been revised fundamentally, presenting much more detailed analyses of the various interest-rate models available: the authors' perspective throughout is that the choice of a model should be based on the reality of how a particular sector of the financial market functions, never neglecting to examine liquid primary and derivative assets and identifying the sources of trading risk associated. This long-awaited new edition of an outstandingly successful, well-established book, concentrating on the most pertinent and widely accepted modelling approaches, provides the reader with a text focused on practical rather than theoretical aspects of financial modelling.

Customer Reviews:

Excellent introductory book to financial math.......2006-11-03

This book takes you through the math of finance step-by-step, passing through very simple examples first and then slowly adding complexity to the models studied. It is written very clearly and the prerequisites to reading this book are only some basic notions of probabilities (sigma-fields, probability measures).

Sometimes, the problem with math books is that they are "dry" and contain only a succession of theorems and proofs. In this one, the authors make a point of explaining in detail how different theorems and models relate to each other, and make extensive comparisons between them so that you get a better feel for how they work in practice.

The book is primarily a math book and can be light on market specifics. Do not buy this book as a practical "howto" in derivatives trading.

At the Forefront of Modern Mathematical Finance.......2005-05-23

This advanced text provides an excellent account of the current state-of-the art of options pricing/hedging models and interest rate term structure models. The book is accessible to both advanced practitioners of mathematical finance as well as to pure researchers in the field.

The book is in written in a mathematical style and contains rigorous proofs of many results. However, the main focus of the text is to describe the frontier of knowledge in the subject. Each section contains copious references to the literature and is so current that several references are to working papers. Many sections detail open problems and other areas suitable for scholarly research.

In their second edition, the authors provide an extremely useful critique of each modeling paradigm that they investigate. They also provide evidence for their position in the form of literature references which instruct the reader as to the shortcomings/limitations of a particular model. This information should prove quite valuable to model practitioners and implementers.

The authors assume an advanced background from the field of stochastic analysis, although they do provide an appendix which summarizes key results needed from the field. For the stochastic calculus prerequisites, I recommend Rogers & Williams "Diffusions, Markov Processes and Martingales" volumes I and II. Suitable prerequisites are also covered by Karatzas and Shreve in "Brownian Motion and Stochastic Calculus" 2nd edition. A good foundation in arbitrage pricing theory is also needed. I recommend the nice treatment by Bjork in "Arbitrage Theory in Continuous Time" 2nd edition.

The book is divided into two parts. The first part deals with options pricing in equity markets. Chapter 1 sets premlinaries required for the arbitrage theoretic framework, while Chapter 2 has a very nice treatment of discrete time models and finite financial markets.

In Chapter 3, the authors develop the Black-Scholes model along with the Bachelier model using arbitrage techniques. The models are compared and used as benchmark continuous time models and form the basis for all subsequent analysis.

Chapter 4 provides a nice survey of techniques used to price/hedge options in foreign equity and currency markets. The authors assume familarity of the basic workings of foriegn markets.

Chapter 5 is a terrific chapter on valuing American-style options. The American call option is thoroughly studied and approximation techniques for the American put option are introduced. The explicit derivations of the formulas are referenced to the literature.

Chapter 6 provides an introduction to exotic options, although the authors vary their use of the term 'exotic' to meaning 'not a standard European-style or American-style' in this chapter to meaning 'no readily available liquid market' in Chapter 7. The descriptions are quite accessible and the basic properties of the options are described along with pricing formulas (assuming the Black-Scholes framework).

Chapter 7 provides as complete an accounting as I have ever seen of the generalizations of the Black-Scholes model and motivates this from the point of view of volatility surfaces. Many of the well-known models are studied in detail, such as CEV, local volatility, and mixture models. The strengths and weaknesses of each model are analyzed. The stochastic volatility models of Wiggins (via Orenstien-Uhlenbeck processes), Hull-White, and Heston are studied, as is the SABR model. The chapter wraps up with a study of the SIV models, describes how the stochastic volatility models can be obtained via limits of GARCH models and surveys Jump-diffusion processes and Levy processes.

The second part of the book is concerned with term structure models and interest rate derivatives. The authors are quite well-know for their many contributions to this study and their treatment is authoritative.

Martingales & Finance.......2003-04-12

I have used this book for two courses in my MSc degree in Financial Maths...well this book is hard to understand at first glance, but, once you are introduced with a good course on stochastic analysis and applied probability, this is an illuminating book...I particularly enjoyed the part on foreing equity derivatives and exotic derivatives.....Harmed with patience this is definitely the book by which you can effectively gain a sound a knowledge on modern mathematical finance theory....reading in conjunction with Bingham-Kiesel book, could help understanding the foundation of the subject.

yes, but ..........2000-03-17

I've been using this book on and off over the last year. At first I was very impressed with the level of detail in the mathematics, especially as it was the only book at the time focussing on risk-neutral methods and covering BGM. But I've become increasing disillusioned with it of late. It's difficult to explain, but although the whole book is written in traditional theorem-proof style, there are no real proofs! (I have a PhD in math and have done research for 10 years so I should know a little about proofs.) The only "proofs" provided are basically symbol shifting, but the heart of the math is strangely absent. This is especially strange given the Springer series in which it appears.

In short, if you want a catalogue of methods this book does the job, but if you want a deeper understanding try Lars Nielsens book.

excellent book for post-John-Hull readers.......1999-08-17

This book covers essentially everything needed for a serious financial math study. It captures the spirit of modern financial math. For people with math, physics or engineering background, when you feel comfortable woth John Hull's books, then this book is right one, and a must one.

Modelling Fixed Income Securities and Interest Rate Options (2nd Edition)

Average customer rating:

Incomplete
Excellent!
required reading in fixed income
At last a real well written Book on Interest Rate Modeling!
Modelling Fixed Income Securities and Interest Rate Options

Modelling Fixed Income Securities and Interest Rate Options (2nd Edition)
Robert Jarrow
Manufacturer: Stanford Economics and Finance
ProductGroup: Book
Binding: Hardcover

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ASIN: 0804744386
Release Date: 2002-07-01

Book Description

This book teaches the basics of fixed-income securities in a way that, unlike competitive texts, requires a minimum of prerequisites. While other books focus heavily on institutional details of the bond market, all of which could easily be learned “on the job,” Jarrow is more concerned with presenting a coherent theoretical framework for understanding all basic models. His unified approach—the Heath Jarrow Morton model—under which all other models are presented as special cases, enhances understanding while avoiding repetition. The author’s pricing model is widely used in today’s securities industry.

In this revised edition, the author has added new chapters to enrich coverage, and has modified the order of chapters slightly to smooth the progression of material from simple to complex. Online material will be available with the text, replacing the diskette included in the first edition; lecture notes for instructors will be available on PowerPoint slides. MathWorks has provided a free online, limited version of the MATLAB’s financial derivatives toolbox, with which users of the book can apply the theory presented in each chapter.

Customer Reviews:

Incomplete.......2003-12-08

This book is at its best when explaining the theory. Jarrow provides lots of very explicit examples that really help to illuminate the ideas. Unfortunately, the reader is left to fend for himself when it comes to implementing the theory. The author simply breezes over how to estimate and calibrate these models. There is a rich--but abstruse--literature on how to apply HJM models. This book would be greatly improved if it covered this aspect of the topic with the same care and detail as is devoted to the theoretical segment of the book.

Excellent!.......2003-09-27

The book is very good, unquestionably. It provides you with a deep understanding of interest rate models and risk management. Mind you, you need to know the basics of bonds and fixed income contongent claims, before you try this book. The examples are apt, and explanations are succint, and easily understood. The mathematics involved can be mastered easily, and no arcane stuff (like measure-theoretic probability etc.) are used. So, the book will be accessible to MBA students too. This book has helped me understand the subject very well.

required reading in fixed income.......2003-02-11

Excellent job on the detail analysis of fixed income models, accessible to non-mathematician, no stochastic calculus involved. this book is more focused than Tuckman's book. this is absolutely more easy reading than all other fixed income model books out there. read this one, you will be on the way to "martingale methods in financial modelling". also recommend "fixed income analytics".

At last a real well written Book on Interest Rate Modeling!.......2002-08-16

This book will definitely replace all the books on interest rate modeling- Brigo Murcurio etc. The book starts at an elementary level, explains every details of the concept, and then develop the subject matter one needs to know to be a pro in interest rate modeling. Even the simple concepts like duration, convexity are clearly explained that many other books take pages, and even then not very clear. Buy it, Read it! After all you will be learning from a master! The clarity and the writing style are simply great! Good job Prof. Jarrow!

BTW: Neither Prof.Jarrow knows me nor I know him personally

Modelling Fixed Income Securities and Interest Rate Options.......2000-02-29

Bob did an excellant job on Derivative Securities and a horrible job with this book. All the tree pictures packed with discount bond prices, rates and risk neutral prob just confuse people even more. Read Derivative Securities and you would understand how HJM works better.

Book Description

With forty well structured and easy to follow topics to choose from, each workbook has a wide range of case studies, questions and activities to meet both an individual or organization's training needs. Whether studying for an ILM qualification or looking to enhance the skills of your employees, Super Series provides essential solutions, frameworks and techniques to support management and leadership development.

*Developed by the ILM to support their Level 3 Introductory Certificate and Certificate in First Line Management
*Well-structured and easy to follow
*Fully revised and updated

Book Description

The collapse of the ubiquitous honeybee population during the past 20 years has caused a pollination vacuum for many crops. Surveys and grower experience indicate that a crisis exists in our pollinator populations. This book is an accessible, practical and authoritative research-based guide to using bees for crop pollination. It emphasizes conserving feral bee populations as well as more traditional methods of culturing honeybees and other bees. There are three main sections that address the biology of pollination, culturing and managing bees for optimum crop pollination, and individual crop pollination requirements and recommendations. This last section includes 42 short chapters on different crops.

Business Wire : Honey Bee Pollination Crisis: Shortage of Bees May Reduce Crop Production.

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Business Wire : Honey Bee Pollination Crisis: Shortage of Bees May Reduce Crop Production.

Manufacturer: Business Wire
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Binding: Digital

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Word count: 572.

Ten essential reasons to protect the birds and the bees: How an impending pollination crisis threatens plants and the food on your table

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Ten essential reasons to protect the birds and the bees: How an impending pollination crisis threatens plants and the food on your table
Mrill Ingram
Manufacturer: Forgotten Pollinators Campaign
ProductGroup: Book
Binding: Unknown Binding
ASIN: B0006QO7RU

Most bees live alone: no hives, no honey, but maybe help for crops.(Cover story): An article from: Science News

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Most bees live alone: no hives, no honey, but maybe help for crops.(Cover story): An article from: Science News
Susan Milius
Manufacturer: Thomson Gale
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This digital document is an article from Science News, published by Thomson Gale on January 6, 2007. The length of the article is 2424 words. The page length shown above is based on a typical 300-word page. The article is delivered in HTML format and is available in your Amazon.com Digital Locker immediately after purchase. You can view it with any web browser.

Citation Details
Title: Most bees live alone: no hives, no honey, but maybe help for crops.(Cover story)
Author: Susan Milius
Publication: Science News (Magazine/Journal)
Date: January 6, 2007
Publisher: Thomson Gale
Volume: 171 Issue: 1 Page: 11(3)

Article Type: Cover story

Distributed by Thomson Gale

Pollinators provide economic incentive to preserve natural land in [An article from: Agriculture, Ecosystems and Environment]

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Pollinators provide economic incentive to preserve natural land in [An article from: Agriculture, Ecosystems and Environment]
L.A. Morandin , and M.L. Winston
Manufacturer: Elsevier
ProductGroup: Book
Binding: Digital
ASIN: B000P6NY84

Book Description

This digital document is a journal article from Agriculture, Ecosystems and Environment, published by Elsevier in 2006. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.

Description:
Natural habitats are considered inherently indispensable to the global economy by conservationists, but few natural ecosystems afford direct and quantifiable economic benefits. Quantification of natural land value can provide compelling evidence favoring preservation over development. Wild bees are important pollinators of many crop plants, and natural patches in agroecosystems enhance pollinator services and crop yield. Bee abundance was greatest in canola fields that had more uncultivated land within 750m of field edges and seed set was greater in fields with higher bee abundance. A cost-benefit model that estimates profit in canola agroecosystems with different proportions of uncultivated land is presented. Yield and profit could be maximized with 30% of land uncultivated within 750m of field edges.

Wild bee species increase tomato production and respond differently to surrounding land use in Northern California [An article from: Biological Conservation]

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Wild bee species increase tomato production and respond differently to surrounding land use in Northern California [An article from: Biological Conservation]
S.S. Greenleaf , and C. Kremen
Manufacturer: Elsevier
ProductGroup: Book
Binding: Digital
ASIN: B000PAU97E

Book Description

This digital document is a journal article from Biological Conservation, published by Elsevier in 2006. The article is delivered in HTML format and is available in your Amazon.com Media Library immediately after purchase. You can view it with any web browser.

Description:
Pollination provided by bees enhances the production of many crops. However, the contribution of wild bees remains unmeasured for many crops, and the effects of anthropogenic change on many bee species are unstudied. We experimentally investigated how pollination by wild bees affects tomato production in northern California. We found that wild bees substantially increase the production of field-grown tomato, a crop generally considered self-pollinating. Surveys of the bee community on 14 organic fields that varied in proximity to natural habitat showed that the primary bee visitors, Anthophora urbana Cresson and Bombus vosnesenskii Radoszkowski, were affected differently by land management practices. B. vosnesenskii was found primarily on farms proximate to natural habitats, but neither proximity to natural habitat nor tomato floral abundance, temperature, or year explained variation in the visitation rates of A. urbana. Natural habitat appears to increase B. vosnesenskii populations and should be preserved near farms. Additional research is needed to determine how to maintain A. urbana. Species-specific differences in dependency on natural habitats underscore the importance of considering the natural histories of individual bee species when projecting population trends of pollinators and designing management plans for pollination services. Thus, to maintain an entire bee community, multiple approaches, including maintaining natural habitat, should be implemented.

Bees and Crop Pollination: Crisis, Crossroads, Conservation

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Bees and Crop Pollination: Crisis, Crossroads, Conservation

Manufacturer: Entomological Society of Amer
ProductGroup: Book
Binding: Paperback

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ASIN: 0938522965

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Bulletin
Keith S Delaplane
Manufacturer: Cooperative Extension Service, University of Georgia, College of Agricultural & Environmental Sciences
ProductGroup: Book
Binding: Unknown Binding
ASIN: B0006PI1IC

Bumble bees for legume crop pollination (Project)

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Bumble bees for legume crop pollination (Project)
K. W Richards
Manufacturer: Alberta Agricultural Research Institute
ProductGroup: Book
Binding: Unknown Binding

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