Product Description

Financial mathematics has recently enjoyed considerable interest on account of its impact on the finance industry. In parallel, the theory of Lévy processes has also seen many exciting developments. These powerful modelling tools allow the user to model more complex phenomena, and are commonly applied to problems in finance. Lévy Processes in Finance: Pricing Financial Derivatives takes a practical approach to describing the theory of Lévy-based models, and features many examples of how they may be used to solve problems in finance.

• Provides an introduction to the use of Lévy processes in finance.
• Features many examples using real market data, with emphasis on the pricing of financial derivatives.
• Covers a number of key topics, including option pricing, Monte Carlo simulations, stochastic volatility, exotic options and interest rate modelling.
• Includes many figures to illustrate the theory and examples discussed.
• Avoids unnecessary mathematical formalities.

The book is primarily aimed at researchers and postgraduate students of mathematical finance, economics and finance. The range of examples ensures the book will make a valuable reference source for practitioners from the finance industry including risk managers and financial product developers.

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Product Details

• Amazon Sales Rank: #1071729 in Books
• Published on: 2003-05-23
• Original language: English
• Number of items: 1
• Binding: Hardcover
• 196 pages

From the Back Cover
Financial mathematics has recently enjoyed considerable interest on account of its impact on the finance industry. In parallel, the theory of Lévy processes has also seen many exciting developments. These powerful modelling tools allow the user to model more complex phenomena, and are commonly applied to problems in finance. Lévy Processes in Finance: Pricing Financial Derivatives takes a practical approach to describing the theory of Lévy-based models, and features many examples of how they may be used to solve problems in finance.

• Provides an introduction to the use of Lévy processes in finance.

• Features many examples using real market data, with emphasis on the pricing of financial derivatives.

• Covers a number of key topics, including option pricing, Monte Carlo simulations, stochastic volatility, exotic options and interest rate modelling.

• Includes many figures to illustrate the theory and examples discussed.

• Avoids unnecessary mathematical formalities.

The book is primarily aimed at researchers and postgraduate students of mathematical finance, economics and finance. The range of examples ensures the book will make a valuable reference source for practitioners from the finance industry including risk managers and financial product developers.

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Customer Reviews

A list of formulas but no mathematical or financial insight.
I ordered this book even before publication since I am very interested in the topic and use have been involved in using and implementing option pricing models based on Levy processes.
I am quite disappointed since the book gives details neither on the financial side (incomplete markets, approximate hedging, exotic options...) which is not really the expertise of the author nor on the mathematical side (Wiener Hopf factorization, integrodifferential equations) which is superficially treated, the reader being constantly referred to other books.
The statistics/ econometrics aspect is totally absent and given
only a slight treatment.
For practitioners it is even more disappointing because a crucial aspect, namely NUMERICAL METHODS, is completely absent
and references to recent work on this topic is omitted.
For example, the author does not explain how the models were calibrated to the option prices in the examples he gives and his results are not easy to reproduce.
The only positive point of the book is to give a unified list of different models based on Levy processes which are spread out in the literature.

A Superficial Survey
This book is definitely disappointing. The subject in itself is most interesting and deserved better than this. The reasons are the author superficially surveys in 150 pages well-known results : definitions of the various kinds of Lévy processes... definition of a stock (!) ... and only refers to research papers when matters become too involved : exotic options are studied in the Black and Scholes context (!), are said to be difficult to price with a Lévy model, and are only computed by Monte-Carlo methods (see the article of N'Guyen and Yor for a real study). Interest rate theory is not developed enough, as could have been expected. The reader interested in the topic had better buy the books of Sato, Bertoin, and Boyarchenko and Levendorskii, get the PhD thesis of Raible and the articles of Yor and his coauthors.

excellent book
This book is a valuable reference source for not only academics but certainly for people from the banking industry. It is the best introduction to the application in finance of Levy processes. Modellers from a wide range of financial products will benifit greatly from the numerous real world examples. The chapter on simulation of Levy processes is covering just what one needs in a very comprehensive style.

Moreover, I found it very strange that people recommended the Cont-Tankov book before it was out instead of this book. Looking at the Cont-Tankov contents, I do not see anything useful that is not in the Schoutens book.