A Benchmark Approach to Quantitative Finance

  • Authors
  • Eckhard Platen
  • David Heath

Part of the Springer Finance book series (FINANCE)

Table of contents

  1. Front Matter
    Pages I-XX
  2. Eckhard Platen, David Heath
    Pages 1-53
  3. Eckhard Platen, David Heath
    Pages 55-98
  4. Eckhard Platen, David Heath
    Pages 99-132
  5. Eckhard Platen, David Heath
    Pages 133-162
  6. Eckhard Platen, David Heath
    Pages 163-203
  7. Eckhard Platen, David Heath
    Pages 205-235
  8. Eckhard Platen, David Heath
    Pages 237-275
  9. Eckhard Platen, David Heath
    Pages 277-318
  10. Eckhard Platen, David Heath
    Pages 319-365
  11. Eckhard Platen, David Heath
    Pages 367-402
  12. Eckhard Platen, David Heath
    Pages 403-437
  13. Eckhard Platen, David Heath
    Pages 439-481
  14. Eckhard Platen, David Heath
    Pages 483-511
  15. Eckhard Platen, David Heath
    Pages 513-549
  16. Eckhard Platen, David Heath
    Pages 551-613
  17. Eckhard Platen, David Heath
    Pages 615-665
  18. Back Matter
    Pages 667-698

About this book

Introduction

The benchmark approach provides a general framework for financial market modeling, which extends beyond the standard risk neutral pricing theory. It permits a unified treatment of portfolio optimization, derivative pricing, integrated risk management and insurance risk modeling. The existence of an equivalent risk-neutral pricing measure is not required. Instead, it leads to pricing formulae with respect to the real world probability measure. This yields important modeling freedom which turns out to be necessary for the derivation of realistic, parsimonious market models. The first part of the book describes the necessary tools from probability theory, statistics, stochastic calculus and the theory of stochastic differential equations with jumps. The second part is devoted to financial modeling under the benchmark approach. Various quantitative methods for the fair pricing and hedging of derivatives are explained. The general framework is used to provide an understanding of the nature of stochastic volatility. The book is intended for a wide audience that includes quantitative analysts, postgraduate students and practitioners in finance, economics and insurance. It aims to be a self-contained, accessible but mathematically rigorous introduction to quantitative finance for readers that have a reasonable mathematical or quantitative background. Finally, the book should stimulate interest in the benchmark approach by describing some of its power and wide applicability.

Keywords

Finance Financial Modeling Hedging Quantitative Methods Statistical Methods Stochastic Differential Equations Stochastic Processes Stochastic calculus modeling optimization

Bibliographic information

  • DOI https://doi.org/10.1007/978-3-540-47856-0
  • Copyright Information Springer-Verlag Berlin Heidelberg 2006
  • Publisher Name Springer, Berlin, Heidelberg
  • eBook Packages Mathematics and Statistics
  • Print ISBN 978-3-540-26212-1
  • Online ISBN 978-3-540-47856-0
  • About this book