Pricing Derivatives Under Lévy Models

Modern Finite-Difference and Pseudo-Differential Operators Approach

Andrey Itkin (Autor)

Buch | Softcover

308 Seiten

2017 | 1st ed. 2017
Springer-Verlag New York Inc.
978-1-4939-6790-2 (ISBN)

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This monograph presents a novel numerical approach to solving partial integro-differential equations arising in asset pricing models with jumps, which greatly exceeds the efficiency of existing approaches. The method, based on pseudo-differential operators and several original contributions to the theory of finite-difference schemes, is new as applied to the Lévy processes in finance, and is herein presented for the first time in a single volume. The results within, developed in a series of research papers, are collected and arranged together with the necessary background material from Lévy processes, the modern theory of finite-difference schemes, the theory of M-matrices and EM-matrices, etc., thus forming a self-contained work that gives the reader a smooth introduction to the subject. For readers with no knowledge of finance, a short explanation of the main financial terms and notions used in the book is given in the glossary.

The latter part of the book demonstrates the efficacy of the method by solving some typical problems encountered in computational finance, including structural default models with jumps, and local stochastic volatility models with stochastic interest rates and jumps. The author also adds extra complexity to the traditional statements of these problems by taking into account jumps in each stochastic component while all jumps are fully correlated, and shows how this setting can be efficiently addressed within the framework of the new method.

Written for non-mathematicians, this book will appeal to financial engineers and analysts, econophysicists, and researchers in applied numerical analysis. It can also be used as an advance course on modern finite-difference methods or computational finance.

Andrey Itkin is an Adjunct Professor of computational and algorithmic finance at the Tandon School of Enginering at New York University and Director, Senior Quant Research Associate at Bank of America.

Basics of a finite-difference method.- Modern finite-difference approach.- An M-matrix theory and FD.- Brief Introduction into Lévy processes.- Pseudo-parabolic and fractional equations of option pricing.- Pseudo-parabolic equations for various Lévy models.- High-order splitting methods for forward PDEs and PIDEs.- Multi-dimensional structural default models and correlated jumps.- LSV models with stochastic interest rates and correlated jumps.- Stochastic skew model.- Glossary.- References.- Index.

Erscheinungsdatum	16.03.2017
Reihe/Serie	Pseudo-Differential Operators ; 12
Reihe/Serie	Pseudo-Differential Operators ; 12
Zusatzinfo	62 Illustrations, color; 2 Illustrations, black and white; XX, 308 p. 64 illus., 62 illus. in color.
Verlagsort	New York
Sprache	englisch
Maße	168 x 240 mm
Themenwelt	Mathematik / Informatik ► Informatik ► Theorie / Studium
	Mathematik / Informatik ► Mathematik ► Analysis
	Mathematik / Informatik ► Mathematik ► Angewandte Mathematik
	Wirtschaft ► Allgemeines / Lexika
	Wirtschaft ► Betriebswirtschaft / Management ► Finanzierung
Schlagworte	Calibration • Computational Finance • finite-difference method • Finite-Difference Schemes • integral transforms • Levy processes • Option pricing • stochastic skew model
ISBN-10	1-4939-6790-8 / 1493967908
ISBN-13	978-1-4939-6790-2 / 9781493967902
Zustand	Neuware