This book is an elementary introduction to the basic concepts of financial mathematics with a central focus on discrete models and an aim to demonstrate simple, but widely used, financial derivatives for managing market risks. Only a basic knowledge of probability, real analysis, ordinary...

<i>Recent Advances in Financial Engineering 2012</i> is the Proceedings of the International Workshop on Finance 2012, which was held at the University of Tokyo on October 30 and 31, 2012. This workshop was organized by the Center for Advanced Research in Finance (CARF), Graduate School of Economics,...

We apply the results of Malliavin-Thalmaier-Watanabe for strong and weak Taylor expansions of solutions of perturbed stochastic differential equations (SDEs). In particular, we determine weight expressions for the Taylor coefficients of the expansion. The results are applied to LIBOR market...

We propose a non-symmetric copula to model the evolution of electricity and gas prices by a bivariate non-Gaussian autoregressive process. We identify the marginal dynamics as driven by normal inverse Gaussian processes, estimating them from a series of observed UK electricity and gas spot data....

Abstract Behavioural finance has challenged many claims of efficient market hypothesis (EMH). Unfortunately many of these challenges are in the form of anecdotal evidence and lack quantification. This article uses market data together with some simple statistics to show that in practice certain...

The concept of stress levels embedded in S&P500 options is defined and illustrated with explicit constructions. The particular example of a stress function used is MINMAXVAR. Seven joint laws for the top 50 stocks in the index are considered. The first time changes a Gaussian one factor copula....