Stochastic modeling in economics and finance. (Q1396167)

The monograph presents a complete overview on stochastic modeling in finance and economics. It consists of three parts, which require different prerequisites for a reader's understanding, starting from an elementary mathematical tratment in the first part, until to a substantial mathematical background in the remaining parts. Anyway the mathematical approach is accessible to a wide audience. In Part I the authors treat the basic lines of financial mathematics, such as valuation of cash flows, yield curves, securities, the Capital Asset Pricing Model, and the Arbitrage Pricing Theory. This section provides a clear support also to the beginners. In Part II stochastic decision models are deeply treated via multistage stochastic programming, and suitable alghoritms and software are presented. The fundamental topic consists of scenario-based problems, with particular attention to scenario generation and output analysis. Interesting cases are discussed, showing the concrete validity of several theoretic models. Part III deals with stochastic calculus applied to diffusion finance. The models and techniques presented in this section give rigorous tools to treat problems involving complete markets, optimal control, option pricing and so on. A comprehensive bibliograpry and index complete the book. The volume can be used in introductory graduate courses, and as a reference text for researchers in probability, statistics and operation research, who can appreciate the applications to economics and finance. Analogously researchers in economics and finance can deepen a rigorous mathematical approach to the problems in their fields.