Pricing and Hedging of Derivative Securities

Hardcover | June 15, 1999

byLars Tyge Nielsen

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The theory of pricing and hedging of derivative securities is mathematically sophisticated. This book is an introduction to the use of advanced probability theory in financial economics, presenting the necessary mathematics in a precise and rigorous manner. Professor Nielsen concentrates onthree main areas: the theory of continuous-time stochastic processes, a notorious barrier to the understanding of probability theory in finance; the general theory of trading, pricing, and hedging in continuous time, using the martingale approach; and a detailed look at the BlackScholes and theGaussian one-factor models of the term structure of interest rates. His book enables the reader to read the journal literature with confidence, apply the methods to new problems, or to do original research in the field.

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From the Publisher

The theory of pricing and hedging of derivative securities is mathematically sophisticated. This book is an introduction to the use of advanced probability theory in financial economics, presenting the necessary mathematics in a precise and rigorous manner. Professor Nielsen concentrates onthree main areas: the theory of continuous-ti...

Nielsen |f Lars Tyge |i L. |s au |t Professor of Finance, INSEAD
Format:HardcoverPublished:June 15, 1999Publisher:Oxford University PressLanguage:English

The following ISBNs are associated with this title:

ISBN - 10:0198776195

ISBN - 13:9780198776192

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Table of Contents

1. Stochastic Processes2. Ito Calculus3. Gaussian Processes4. Securities and Trading Strategies5. The Martingale Valuation Principle6. The Black-Scholes Model7. Gaussian Term Structure ModelsAppendix A Measure and ProbabilityAppendix B Lebesgue Integrals and ExpectationsAppendix C The Heat EquationAppendix D Suggested Solutions to Exercises for Chapters 1-7Appendix E Suggested Solutions to Exercises for Appendix A and B

Editorial Reviews

"this book will prove valuable for those teaching graduate courses in continuous time finance and for researchers and practitioners who require access to a good reference book." Economic Journal