Read more
Zusatztext "The book presents in a balanced way both theory and applications of interest rate modeling. ?The book can serve as a textbook. It is self-contained in mathematics and presents rigorous justifications for almost all results. Many exercises are provided which often require computer implementation. To a large extent! this book can also serve as a research monograph as it contains many new results. The book shows the readers what has to be a competent quantitative analysis in financial markets."-Pavel Stoynov! Zentralblatt MATH 1173 Informationen zum Autor Lixin Wu is an associate professor at the Hong Kong University of Science and Technology. Best known in the financial engineering community for his work on market models! Dr. Wu co-developed the PDE model for soft barrier options and the finite-state Markov model for credit contagion. Klappentext Portrays the theory of interest rate modeling as a three-dimensional object of finance! mathematics! and computation. This title introduces different models with financial-economical justifications! develops options along the martingale approach! and handles option evaluations with precise numerical methods. Zusammenfassung Containing many results that are new or exist only in recent research articles! Interest Rate Modeling: Theory and Practice portrays the theory of interest rate modeling as a three-dimensional object of finance! mathematics! and computation. It introduces all models with financial-economical justifications! develops options along the martingale approach! and handles option evaluations with precise numerical methods.The text begins with the mathematical foundations! including Ito's calculus and the martingale representation theorem. It then introduces bonds and bond yields! followed by the Heath-Jarrow-Morton (HJM) model! which is the framework for no-arbitrage pricing models. The next chapter focuses on when the HJM model implies a Markovian short-rate model and discusses the construction and calibration of short-rate lattice models. In the chapter on the LIBOR market model! the author presents the simplest yet most robust formula for swaption pricing in the literature. He goes on to address model calibration! an important aspect of model applications in the markets; industrial issues; and the class of affine term structure models for interest rates.Taking a top-down approach! Interest Rate Modeling provides readers with a clear picture of this important subject by not overwhelming them with too many specific models. The text captures the interdisciplinary nature of the field and shows readers what it takes to be a competent quant in today's market.This book can be adopted for instructional use. For this purpose! a solutions manual is available for qualifying instructors. Inhaltsverzeichnis The Basics of Stochastic Calculus Brownian Motion Stochastic Integrals Stochastic Differentials and Ito's Lemma Multi-Factor ExtensionsMartingalesThe Martingale Representation Theorem Changing Measures with Binomial Models Change of Measures under Brownian Filtration The Martingale Representation Theorem A Complete Market with Two Securities Replicating and Pricing of Contingent Claims Multi-Factor Extensions A Complete Market with Multiple Securities The Black-Scholes Formula NotesInterest Rates and Bonds Interest Rates and Fixed-Income Instruments Yields Zero-Coupon Bonds and Zero-Coupon Yields Forward Rates and Forward-Rate Agreements Yield-Based Bond Risk Management The Heath-Jarrow-Morton ModelLognormal Model: The Starting PointThe HJM ModelSpecial Cases of the HJM ModelEstimating the HJM Model from Yield Data A Case Study with a Two-Factor ModelMonte Carlo ImplementationsForward PricesForward MeasureBlack's Formula for Call and Put Options Numeraires and Changes of MeasureNotesShort-Rate Models and Lattice ImplementationFrom Short-Rate...
