This book was such a relief after going through tens of books/lectures notes on stochastic calculus. Most math books give the theory behind Ito calculus (martingales, measure theory etc.), but fail to give the motivation and reasoning behind abstract definitions. This book does an excellent job in deriving many seemingly-complicated math formulas (or, theorems) using intuitive terms. It is an excellent read for people who have a reasonable background in probability theory, and are wishing to learn stochastic calculus (plus finance). I strongly recommend it to anyone who wants to learn the rudiments of Ito integral and see its applications in finance.
Author(s): Professor Dr. Jürgen Franke, Professor Dr. Wolfgang K. Härdle, Professor Dr. Christian M. Hafner (auth.)
Series: Universitext
Edition: 2nd
Publisher: Springer Berlin Heidelberg
Year: 2008
Language: English
Pages: 525
Tags: Statistics for Business/Economics/Mathematical Finance/Insurance; Quantitative Finance; Finance /Banking
Front Matter....Pages i-xxii
Front Matter....Pages 1-1
Derivatives....Pages 3-10
Introduction to Option Management....Pages 11-36
Basic Concepts of Probability Theory....Pages 37-45
Stochastic Processes in Discrete Time....Pages 47-56
Stochastic Integrals and Differential Equations....Pages 57-72
Black-Scholes Option Pricing Model....Pages 73-115
Binomial Model for European Options....Pages 117-127
American Options....Pages 129-141
Exotic Options....Pages 143-153
Models for the Interest Rate and Interest Rate Derivatives....Pages 155-161
Front Matter....Pages 163-163
Introduction: Definitions and Concepts....Pages 165-201
ARIMA Time Series Models....Pages 203-225
Time Series with Stochastic Volatility....Pages 227-278
Non-parametric Concepts for Financial Time Series....Pages 279-302
Front Matter....Pages 303-303
Pricing Options with Flexible Volatility Estimators....Pages 305-320
Value at Risk and Backtesting....Pages 321-332
Copulae and Value at Risk....Pages 333-369
Statistics of Extreme Risks....Pages 371-397
Neural Networks....Pages 399-427
Volatility Risk of Option Portfolios....Pages 429-441
Front Matter....Pages 303-303
Nonparametric Estimators for the Probability of Default....Pages 443-450
Credit Risk Management....Pages 451-466
Back Matter....Pages 467-505
