Stochastic Interest Rate Modeling with Fixed Income Derivative Pricing Nicolas Privault Author
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This book introduces the mathematics of stochastic interest rate modeling and the pricing of related derivatives, based on a step-by-step presentation of concepts with a focus on explicit calculations. The types of interest rates considered range from short rates to forward rates such as LIBOR and swap rates, which are presented in the HJM and BGM frameworks. The pricing and hedging of interest rate and fixed income derivatives such as bond options, caps, and swaptions, are treated using forward measure techniques. An introduction to default bond pricing and an outlook on model calibration are also included as additional topics.This third edition represents a significant update on the second edition published by World Scientific in 2012. Most chapters have been reorganized and largely rewritten with additional details and supplementary solved exercises. New graphs and simulations based on market data have been included, together with the corresponding R codes.This new edition also contains 75 exercises and 4 problems with detailed solutions, making it suitable for advanced undergraduate and graduate level students.Contents: A Review of Stochastic CalculusA Review of Black-Scholes Pricing and HedgingShort Term Interest Rate ModelsPricing of Zero-Coupon and Coupon BondsForward Rates and Swap RatesCurve Fitting and a Two-Factor ModelForward Rate ModelingForward Measures and Derivative PricingPricing of Caps and SwaptionsDefault Bond PricingAppendix: Mathematical ToolsSolutions to the ExercisesReadership: Advanced undergraduate and graduate students in finance and actuarial science; researchers and practitioners involved in quantitative analysis of interest rate models.Stochastic Interest Rate;Short Rate;Forward Rate;Fixed Income;HJM Model;BGM Model;Bond Pricing;Derivatives;Bond Options;Caps;Swaps And Swaptions;Default Bonds;Model Calibration0Key Features:A fairly complete introduction accessible to advanced undergraduates Also covers more advanced aspects of interest rate modelingIncludes many graphs and code illustrating the modeling of interest ratesEach chapter is accompanied with exercises and their complete solutions


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