Details

Stochastic Simulation and Applications in Finance with MATLAB Programs

The Wiley Finance Series, Band 633 1. Aufl.

von: Huu Tue Huynh, Van Son Lai, Issouf Soumare
71,99 €
Verlag:	Wiley
Format:	PDF
Veröffentl.:	21.11.2011
ISBN/EAN:	9780470722138
Sprache:	englisch
Anzahl Seiten:	360

In den Warenkorb

Als Gutschein

DRM-geschütztes eBook, Sie benötigen z.B. Adobe Digital Editions und eine Adobe ID zum Lesen.

Beschreibungen

Titelbeschreibung

Stochastic Simulation and Applications in Finance with MATLAB Programs explains the fundamentals of Monte Carlo simulation techniques, their use in the numerical resolution of stochastic differential equations and their current applications in finance. Building on an integrated approach, it provides a pedagogical treatment of the need-to-know materials in risk management and financial engineering. The book takes readers through the basic concepts, covering the most recent research and problems in the area, including: the quadratic re-sampling technique, the Least Squared Method, the dynamic programming and Stratified State Aggregation technique to price American options, the extreme value simulation technique to price exotic options and the retrieval of volatility method to estimate Greeks. The authors also present modern term structure of interest rate models and pricing swaptions with the BGM market model, and give a full explanation of corporate securities valuation and credit risk based on the structural approach of Merton. Case studies on financial guarantees illustrate how to implement the simulation techniques in pricing and hedging. NOTE TO READER: The CD has been converted to URL. Go to the following website <a href="http://www.wiley.com/go/huyhnstochastic">www.wiley.com/go/huyhnstochastic</a> which provides MATLAB programs for the practical examples and case studies, which will give the reader confidence in using and adapting specific ways to solve problems involving stochastic processes in finance.

Inhaltsverzeichnis

Contents Preface 1 Introduction to Probability 1.1 Intuitive Explanation 1.2 Axiomatic Definition 2 Introduction to Random Variables 2.1 Random Variables 2.2 Random Vectors 2.3 Transformation of Random Variables 2.4 Transformation of Random Vectors 2.5 Approximation of the Standard Normal Cumulative Distribution Function 3 Random Sequences 3.1 Sum of Independent Random Variables 3.2 Law of Large Numbers 3.3 Central Limit Theorem 3.4 Convergence of Sequences of Random Variables 4 Introduction to Computer Simulation of Random Variables 4.1 Uniform Random Variable Generator 4.2 Generating Discrete Random Variables 4.3 Simulation of Continuous Random Variables 4.4 Simulation of Random Vectors 4.5 Acceptance-Rejection Method 4.6 Markov Chain Monte Carlo Method (MCMC) 5 Foundations of Monte Carlo Simulations 5.1 Basic Idea 5.2 Introduction to the Concept of Precision 5.3 Quality of Monte Carlo Simulations Results 5.4 Improvement of the Quality of Monte Carlo Simulations or Variance Reduction Techniques 5.5 Application Cases of Random Variables Simulations 6 Fundamentals of Quasi Monte Carlo (QMC) Simulations 6.1 Van Der Corput Sequence (Basic Sequence) 6.2 Halton Sequence 6.3 Faure Sequence 6.4 Sobol Sequence 6.5 Latin Hypercube Sampling 6.6 Comparison of the Different Sequences 7 Introduction to Random Processes 7.1 Characterization 7.2 Notion of Continuity, Differentiability and Integrability 7.3 Examples of Random Processes 8 Solution of Stochastic Differential Equations 8.1 Introduction to Stochastic Calculus 8.2 Introduction to Stochastic Differential Equations 8.3 Introduction to Stochastic Processes with Jump 8.4 Numerical Solutions of some Stochastic Differential Equations (SDE) 8.5 Application case: Generation of a Stochastic Differential Equation using the Euler and Milstein Schemes 8.6 Application Case: Simulation of a Stochastic Differential Equation with Control and Antithetic Variables 8.7 Application Case: Generation of a Stochastic Differential Equation with Jumps 9 General Approach to the Valuation of Contingent Claims 9.1 The Cox, Ross and Rubinstein (1979) Binomial Model of Option Pricing 9.2 Black and Scholes (1973) and Merton (1973) Option Pricing Model 9.3 Derivation of the Black-Scholes Formula using the Risk-Neutral Valuation Principle 10 Pricing Options using Monte Carlo Simulations 10.1 Plain Vanilla Options: European put and Call 10.2 American options 10.3 Asian options 10.4 Barrier options 10.5 Estimation Methods for the Sensitivity Coefficients or Greeks 11 Term Structure of Interest Rates and Interest Rate Derivatives 11.1 General Approach and the Vasicek (1977) Model 11.2 The General Equilibrium Approach: The Cox, Ingersoll and Ross (CIR, 1985) model 11.3 The Affine Model of the Term Structure 11.4 Market Models 12 Credit Risk and the Valuation of Corporate Securities 12.1 Valuation of Corporate Risky Debts: The Merton (1974) Model 12.2 Insuring Debt Against Default Risk 12.3 Valuation of a Risky Debt: The Reduced-Form Approach 13 Valuation of Portfolios of Financial Guarantees 13.1 Valuation of a Portfolio of Loan Guarantees 13.2 Valuation of Credit Insurance Portfolios using Monte Carlo Simulations 14 Risk Management and Value at Risk (VaR) 14.1 Types of Financial Risks 14.2 Definition of the Value at Risk (VaR) 14.3 The Regulatory Environment of Basle 14.4 Approaches to compute VaR 14.5 Computing VaR by Monte Carlo Simulations 15 VaR and Principal Components Analysis (PCA) 15.1 Introduction to the Principal Components Analysis 15.2 Computing the VaR of a Bond Portfolio Appendix A: Review of Mathematics A.1 Matrices A.1.1 Elementary Operations on Matrices A.1.2 Vectors A.1.3 Properties A.1.4 Determinants of Matrices A.2 Solution of a System of Linear Equations A.3 Matrix Decomposition A.4 Polynomial and Linear Approximation A.5 Eigenvectors and Eigenvalues of a Matrix Appendix B: MATLAB®Functions References and Bibliography Index

Autorenportrait

HUU TUE HUYNH obtained his D.Sc. in communication theory from Laval University, Canada. From 1969 to 2004 he was a faculty member of Laval University. He left Laval University to become Chairman of the Department of data processing at the College of Technology of The Vietnam National University, Hanoi. Since 2007 he has been Rector of the Bac Ha International University, Vietnam. His main recent research interest covers Fast Monte Carlo methods and applications. VAN SON LAI is Professor of Finance at the Business School of Laval University, Canada. He obtained his Ph.D. in Finance from the University of Georgia, USA and a master degree in water resources engineering from the University of British Columbia, Canada. He is also a CFA charterholder from the CFA Institute and a registered P.Eng. in the Province of British Columbia. An established teacher and researcher in banking, financial engineering, and risk management, he has extensively published in mainstream banking, economics, and finance journals. ISSOUF SOUMARÉ is currently associate professor of finance and managing director of the Laboratory for Financial Engineering at Laval University. His research and teaching interests included risk management, financial engineering and numerical methods in finance. He has published his theoretical and applied finance works in economics and finance journals. Dr Soumaré holds a PhD in Finance from the University of British Columbia, Canada, MSc in Financial Engineering from Laval University, Canada, MSc in Statistics and Quantitative Economics and MSc and BSc in Applied Mathematics from Ivory Coast. He is also a certified Professional Risk Manager (PRM) of the Professional Risk Managers’ International Association (PRMIA).

Back cover copy

Stochastic Simulation and Applications in Finance with MATLAB Programs explains the fundamentals of Monte Carlo simulation techniques, their use in the numerical resolution of stochastic differential equations and their current applications in finance. Building on an integrated approach, it provides a pedagogical treatment of the need-to-know materials in risk management and financial engineering. The book takes readers through the basic concepts, covering the most recent research and problems in the area, including: the quadratic re-sampling technique, the Least Squared Method, the dynamic programming and Stratified State Aggregation technique to price American options, the extreme value simulation technique to price exotic options and the retrieval of volatility method to estimate Greeks. The authors also present modern term structure of interest rate models and pricing swaptions with the BGM market model, and give a full explanation of corporate securities valuation and credit risk based on the structural approach of Merton. Case studies on financial guarantees illustrate how to implement the simulation techniques in pricing and hedging. NOTE TO READER: The CD has been converted to URL. Go to the following website <a href="http://www.wiley.com/go/huyhnstochastic">www.wiley.com/go/huyhnstochastic</a> which provides MATLAB programs for the practical examples and case studies, which will give the reader confidence in using and adapting specific ways to solve problems involving stochastic processes in finance.