Stochastic finance : a numeraire approach / Jan Vecer.

Includes bibliographical references and index.

Elements of finance -- Binomial models -- Diffusion models -- Interest rate contracts -- Barrier options -- Lookback options -- American options -- Contracts on three or more assets : quantos, rainbows and "friends" -- Asian options -- Jump models.

This book can be regarded as a wonderful application of stochastic analysis, as it includes not only detailed theoretical proofs but also practical illustrative examples. With the systematic and feasible numeraire techniques, the book can serve as an everyday reference book for practitioners, but also as a powerful tool to deal with pricing and hedging for complicated financial assets. Most importantly, the representation of prices as a pairwise relationship of two assets is the most novel characteristic of this book, which could lead to deeper understanding of derivative contracts. Although the importance of the choice of numeraire has been recognized for quite some time, this is the first book to stress the fundamental role that numeraires play in modern asset pricing theory.

oif 17/06/14

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