Arbitrage Theory In Discrete And Continuous Time
Author(s): Anna Battauz, Fulvio Ortu, Francesco Rotondi
Format: Paperback
Publisher: World Scientific Publishing Co Pte Ltd, Singapore
Imprint: World Scientific Publishing Co Pte Ltd
ISBN-13: 9789819817658, 978-9819817658
Synopsis
In the ever-evolving world of finance, no-arbitrage theory remains a cornerstone for understanding asset pricing, risk management, and investment strategies. This book presents the key results of modern no-arbitrage theory in both discrete and continuous time [url] book is structured in three [url] first part focuses on one-period financial market models. Although highly stylized, this framework provides a clear and explicit introduction to the fundamental features of a financial market, such as the absence of arbitrage and market completeness, as well as the tools used to effectively test these properties. Additionally, we explore how the absence of arbitrage imposes constraints on the pricing of new financial [url] second part transitions to multi-period financial market models, offering a more realistic depiction of financial markets. It introduces the fundamentals of discrete-time stochastic processes, extends the tools developed in the first part, and demonstrates how to price contingent claims with cash flows occurring at multiple [url] the third part, we refine the time structure further by moving into a continuous-time setting. After a primer on continuous-time stochastic processes and stochastic integration, we extend the no-arbitrage framework and rigorously examine pricing in the celebrated Black-Scholes model and in a few of its [url] numerical examples throughout the book support the reader's understanding and help visualize key concepts. Each part concludes with a comprehensive set of exercises and solutions, offering opportunities for practice and self-assessment.
