Girsanov, Numeraires, and All That
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Product details
| Management number | 201823114 | Release Date | 2025/10/08 | List Price | $10.21 | Model Number | 201823114 | ||
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The authors review the change of numeraire technique in the martingale approach to option pricing, illustrating its applications in quantitative finance. They start with an informal review of Girsanov's theorem, then summarize arbitrage-free pricing and the technique of change of numeraire. They also discuss applications in interest rate models, FX quanto adjustments, credit risk modeling, mortgage-backed securities, and CMS rates.
Format: Paperback / softback
Length: 75 pages
Publication date: 17 November 2022
Publisher: Cambridge University Press
In this Element, the authors delve into the technique of changing the numeraire in the martingale approach to option pricing. Their primary objective is to provide a reader-friendly explanation of the technique itself, while also showcasing its applications in various fields of quantitative finance as the foundation for constructing option valuation models. The authors commence with an informal review of Girsanov's theorem, followed by a concise summary of the fundamental concepts of arbitrage-free pricing and the change of numeraire technique. This is then followed by a series of applications of the change of numeraire technique, encompassing interest rate models, FX quanto adjustments, credit risk modeling, mortgage-backed securities, and CMS rates.
In this Element, the authors delve into the technique of changing the numeraire in the martingale approach to option pricing. Their primary objective is to provide a reader-friendly explanation of the technique itself, while also showcasing its applications in various fields of quantitative finance as the foundation for constructing option valuation models. The authors commence with an informal review of Girsanov's theorem, followed by a concise summary of the fundamental concepts of arbitrage-free pricing and the change of numeraire technique. This is then followed by a series of applications of the change of numeraire technique, encompassing interest rate models, FX quanto adjustments, credit risk modeling, mortgage-backed securities, and CMS rates.
ISBN-13: 9781009339285
Finance
Heating Mats
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