Andrew Lyasoff – Stochastic Methods in Asset Pricing

Andrew Lyasoff – Stochastic Methods in Asset Pricing

This book provides a comprehensive overview of stochastic processes and their connections to asset pricing. It also includes some practical applications.-It is a concise, complete, yet condensed overview of the theory, methods, and connections between probability, integration, stochastic process, optimal control, as well as the principles of asset price. The book is also available in a larger version. in Scope is greater than other introductory-The book is designed for graduate students and includes fewer prerequisites. It covers the relevant material in greater detail, almost without any technical proofs. The book presents certain topics and concepts at an introductory level. in Advanced Research Monographs on Stochastic Processes and Asset Pricing. It attempts to clarify the relationships between these two fields. The book starts with the measure-theoretic probability and integration, and then develops the classical tools of stochastic calculus, including stochastic calculus with jumps and Lévy processes. The book starts with an overview of risk preferences and general equilibrium. in Followed by the classic asset pricing setup and incomplete finite endowment economy in continuous time. It is the goal of this document to provide a single, coherent overview. This is why the text presents discrete examples.-Time martingales can be seen as a result market equilibrium considerations. The connection is made to the stochastic discounts factors, before giving a general definition. It covers concrete option pricing models (including stochastic volatility, exchange options, and the exercise of American options), Merton’s investment–consumption problem, and several other applications. More than 450 exercises are included in the book, with detailed hints. Appendices provide information on topology, analysis, and computer code for the practical applications. in The text.

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