Option Pricing and Estimation of Financial Models with R (ePub)

Preface. 1. A Synthetic View. 1.1 The World of Derivatives. 1.2 Bibliographic Notes. References. 2. Probability, Random Variables and Statistics. 2.1 Probability. 2.2 Bayes' Rule. 2.3 Random Variables. 2.4 Asymptotics. 2.5 Conditional Expectation. 2.6 Statistics. 2.7 Solution to Exercises. 2.8 Bibliographic Notes. References. 3. Stochastic Processes. 3.1 Definition and First Properties. 3.2 Martingales. 3.3 Stopping Times. 3.4 Markov Property. 3.5 Mixing Property. 3.6 Stable Convergence. 3.7 Brownian Motion. 3.8 Counting and Marked Processes. 3.9 Poisson Process. 3.10 Compound Poisson process. 3.11 Compensated Poisson processes. 3.12 Telegraph Process. 3.13 Stochastic Integrals. 3.14 More Properties and Inequalities for the Itô Integral. 3.15 Stochastic Differential Equations. 3.16 Girsanov's theorem for diffusion processes. 3.17 Local Martingales and Semimartingales. 3.18 Lévy Processes. 3.19 Stochastic Differential Equations in Rn. 3.20 Markov Switching Diffusions. 3.21 Solution to Exercises. 3.22 Bibliographic Notes. References. 4. Numerical Methods. 4.1 Monte Carlo Method. 4.2 Numerical Differentiation. 4.3 Root Finding. 4.4 Numerical Optimization. 4.5 Simulation of Stochastic Processes. 4.6 Solution to Exercises. 4.7 Bibliographic Notes. References. 5. Estimation of Stochastic Models for Finance. 5.1 Geometric Brownian Motion. 5.2 Quasi-Maximum Likelihood Estimation. 5.3 Short-Term Interest Rates Models. 5.4 Exponential Lévy Model. 5.5 Telegraph and Geometric Telegraph Process. 5.6 Solution to Exercises. 5.7 Bibliographic Notes. References. 6. European Option Pricing. 6.1 Contingent Claims. 6.2 Solution of the Black & Scholes Equation. 6.3 The Hedging and the Greeks. 6.4 Pricing Under the Equivalent Martingale Measure. 6.5 More on Numerical Option Pricing. 6.6 Implied Volatility and Volatility Smiles. 6.7 Pricing of Basket Options. 6.8 Solution to Exercises. 6.9 Bibliographic Notes. References. 7. American Options. 7.1 Finite Difference Methods. 7.2 Explicit

Stefano Maria Iacus, Professor (Professore Associato) of Probability and Mathematical Statistics at University of Milan, Department of Economics, Business and Statistics. Stefano is a member of the R development Core Team.

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