Written in a highly accessible style, A Factor Model Approach to
Derivative Pricing lays a clear and structured foundation for the
pricing of derivative securities based upon simple factor model
related absence of arbitrage ideas. This unique and unifying
approach provides for a broad treatment of topics and models,
including equity, interest-rate, and credit derivatives, as well as
hedging and tree-based computational methods, but without reliance
on the heavy prerequisites that often accompany such topics. Key
features A single fundamental absence of arbitrage relationship
based on factor models is used to motivate all the results in the
book A structured three-step procedure is used to guide the
derivation of absence of arbitrage equations and illuminate core
underlying concepts Brownian motion and Poisson process driven
models are treated together, allowing for a broad and cohesive
presentation of topics The final chapter provides a new approach to
risk neutral pricing that introduces the topic as a seamless and
natural extension of the factor model approach Whether being used
as text for an intermediate level course in derivatives, or by
researchers and practitioners who are seeking a better
understanding of the fundamental ideas that underlie derivative
pricing, readers will appreciate the book's ability to unify many
disparate topics and models under a single conceptual theme. James
A Primbs is an Associate Professor of Finance at the Mihaylo
College of Business and Economics at California State University,
Fullerton.
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