Girsanov, Numeraires, and All That

In this Element the authors review the technique of the change of numeraire in the martingale approach to option pricing. Their intention is to present a reader friendly explanation of the technique itself, and illustrate how it is applied in various fields of quantitative finance as the basis for building option valuation models.

List of contents

1. Introduction; 2. Girsanov's theorem; 3. Arbitrage asset pricing in a nutshell; 4. Riskless bond numeraires and associated EMMs; 5. Change of numeraire in interest rate and FX models; 6. Incomplete markets.

Summary

In this Element the authors review the technique of the change of numeraire in the martingale approach to option pricing. Their intention is to present a reader friendly explanation of the technique itself, and illustrate how it is applied in various fields of quantitative finance as the basis for building option valuation models.

Foreword

In this Element the authors review the technique of the change of numeraire in the martingale approach to option pricing.

Product details

• Authors: Patrick S. Hagan, Patrick S. Lesniewski Hagan, Hagan Patrick S., Andew Lesniewski, Andrew Lesniewski
• Publisher: Cambridge University Press ELT
• Languages: English
• Product format: Paperback / Softback
• Released: 31.12.2022
• EAN: 9781009339285
• ISBN: 978-1-0-0933928-5
• No. of pages: 75
• Series: Elements in Quantitative Finance
• Subjects: Social sciences, law, business > Business > Business administration; Finance, BUSINESS & ECONOMICS / Finance / General, Finance and the finance industry