Financial modeling. A backward stochastic differential equations perspective (Q1945553)
From MaRDI portal
scientific article
Language | Label | Description | Also known as |
---|---|---|---|
English | Financial modeling. A backward stochastic differential equations perspective |
scientific article |
Statements
Financial modeling. A backward stochastic differential equations perspective (English)
0 references
8 April 2013
0 references
This book deals with financial modeling, with a particular emphasis on computational methods. Throughout, the pricing and hedging of financial derivatives is dealt with in a unified setup by exploiting the link to backward stochastic differential equations. The first four chapters contain background material from stochastic analysis and financial theory, respectively, and a number of benchmark models are introduced in Chapter 5. Subsequently, the author turns to a variety of numerical methods: Chapter 6 focuses on Monte Carlo simulation, Chapter 7 deals with tree-based methods, and Chapter 8 is concerned with finite difference schemes. Subsequently, model calibration is discussed in Chapter 9. To illustrate the practical applicability of these methods, the author then presents two classes of examples: Chapter 10 deals with the pricing of convertible bonds by simulation, whereas Chapter 11 turns to a simulation/regression scheme and its application to portfolio credit risk. Many of the numerical methods used in the book are based on the connection between partial (integro-) differential equations and backward stochastic differential equations. The corresponding theory is developed rigorously in Chapters 12--14; the most demanding proofs are deferred to Chapter 15. Finally, Chapters 16 and 17 contain exercises for the material presented in the main body of the book. Some accompanying \texttt{Matlab} scripts are available at \url{http://extras.springer.com}.
0 references
financial modeling
0 references
computational aspects
0 references
numerical methods
0 references
BSDEs
0 references
pricing and hedging
0 references