Probability and Finance Theory

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9789814307932: Probability and Finance Theory

This book provides a basic grounding in the use of probability to model random financial phenomena of uncertainty, and is targeted at an advanced undergraduate and graduate level. It should appeal to finance students looking for a firm theoretical guide to the deep end of derivatives and investments. Bankers and finance professionals in the fields of investments, derivatives, and risk management should also find the book useful in bringing probability and finance together.

The book contains applications of both discrete time theory and continuous time mathematics, and is extensive in scope. Distribution theory, conditional probability, and conditional expectation are covered comprehensively, and applications to modeling state space securities under market equilibrium are made. Martingale is studied, leading to consideration of equivalent martingale measures, fundamental theorems of asset pricing, change of numeraire and discounting, risk-adjusted and forward-neutral measures, minimal and maximal prices of contingent claims, Markovian models, and the existence of martingale measures preserving the Markov property. Discrete stochastic calculus and multiperiod models leading to no-arbitrage pricing of contingent claims are also to be found in this book, as well as the theory of Markov Chains and appropriate applications in credit modeling. Measure-theoretic probability, moments, characteristic functions, inequalities, and central limit theorems are examined. The theory of risk aversion and utility, and ideas of risk premia are considered. Other application topics include optimal consumption and investment problems and interest rate theory.

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About the Author:

Kian Guan Lim received his doctorate from Stanford University in 1986 and works in the field of risk management and financial asset pricing. He is Professor of Quantitative Finance in the Business School at Singapore Management University (SMU) and Adjunct Professor in the Mathematics Department of the National University of Singapore (NUS). Prior to joining SMU, Kian Guan was at NUS and founded the University Center for Financial Engineering. He also started the Master of Science program in Financial Engineering. He has been a consultant for several banks in risk validation and valuation. He was a reservist captain in the Singapore Armed Forces and had served in administrative positions at SMU and NUS over many years.

Review:

"Professor Lim Kian Guan, a respected scholar in the field of finance, has written two extremely valuable texts on Financial Valuation and Econometrics , and Probability and Finance Theory . These texts develop the core ideas of finance in the last 40 years and their applications in an accessible manner without sacrificing rigor. I recommend the texts for scholars teaching financial theory, capital markets, and financial engineering."
-- Suresh M Sundaresan, Chase Manhattan Bank Professor of Economics & Finance, Columbia Business School, University of Columbia

"This book goes beyond many others on similar topics, presenting the connection between probability and topics in the foundations of modern finance, including derivatives, asset pricing, welfare economics and microeconomic marginal analyses. The exercises scattered throughout the book guide the student along the way on the key ideas and methods discussed. This will also be an important companion to any practitioner working in the area of quantitative finance."
-- Chong Chi Tat, University Professor, Department of Mathematics, National University of Singapore

"The book will be very useful for students of finance and financial engineering. The arguments are presented intuitively, then developed with mathematical rigor, and supported with excellent examples and problems -- and they cover a wide range of applications in finance." --Krishna Ramaswamy, Edward Hopkinson, Jr. Professor of Investment Banking, Wharton School, University of Pennsylvania

"Based on a lucid introduction to probability theory, the book presents many interesting and important financial problems and results in the language of probability. The book is worth recommending to students in quantitative finance for it will help them develop a probabilistic mindset as one of the key qualities of a quant." --Dr Liu Xiaoqing, Senior Vice President, Treasury and Market, DBS Bank

"The best book I have read that provides a solid understanding of asset pricing. Lays the foundation for would-be rocket scientists." --Dr Tee Lim, Director Barr Rosenberg Research Center, US

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Book Description World Scientific Publishing Co Pte Ltd, Singapore, 2011. Hardback. Book Condition: New. Language: English . Brand New Book. This book provides a basic grounding in the use of probability to model random financial phenomena of uncertainty, and is targeted at an advanced undergraduate and graduate level. It should appeal to finance students looking for a firm theoretical guide to the deep end of derivatives and investments. Bankers and finance professionals in the fields of investments, derivatives, and risk management should also find the book useful in bringing probability and finance together.The book contains applications of both discrete time theory and continuous time mathematics, and is extensive in scope. Distribution theory, conditional probability, and conditional expectation are covered comprehensively, and applications to modeling state space securities under market equilibrium are made. Martingale is studied, leading to consideration of equivalent martingale measures, fundamental theorems of asset pricing, change of numeraire and discounting, risk-adjusted and forward-neutral measures, minimal and maximal prices of contingent claims, Markovian models, and the existence of martingale measures preserving the Markov property. Discrete stochastic calculus and multiperiod models leading to no-arbitrage pricing of contingent claims are also to be found in this book, as well as the theory of Markov Chains and appropriate applications in credit modeling. Measure-theoretic probability, moments, characteristic functions, inequalities, and central limit theorems are examined. The theory of risk aversion and utility, and ideas of risk premia are considered. Other application topics include optimal consumption and investment problems and interest rate theory. Bookseller Inventory # AAC9789814307932

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Book Description World Scientific Publishing Co Pte Ltd, Singapore, 2011. Hardback. Book Condition: New. Language: English . Brand New Book. This book provides a basic grounding in the use of probability to model random financial phenomena of uncertainty, and is targeted at an advanced undergraduate and graduate level. It should appeal to finance students looking for a firm theoretical guide to the deep end of derivatives and investments. Bankers and finance professionals in the fields of investments, derivatives, and risk management should also find the book useful in bringing probability and finance together.The book contains applications of both discrete time theory and continuous time mathematics, and is extensive in scope. Distribution theory, conditional probability, and conditional expectation are covered comprehensively, and applications to modeling state space securities under market equilibrium are made. Martingale is studied, leading to consideration of equivalent martingale measures, fundamental theorems of asset pricing, change of numeraire and discounting, risk-adjusted and forward-neutral measures, minimal and maximal prices of contingent claims, Markovian models, and the existence of martingale measures preserving the Markov property. Discrete stochastic calculus and multiperiod models leading to no-arbitrage pricing of contingent claims are also to be found in this book, as well as the theory of Markov Chains and appropriate applications in credit modeling. Measure-theoretic probability, moments, characteristic functions, inequalities, and central limit theorems are examined. The theory of risk aversion and utility, and ideas of risk premia are considered. Other application topics include optimal consumption and investment problems and interest rate theory. Bookseller Inventory # AAC9789814307932

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Book Description World Scientific Publishing Co Pte Ltd. Hardback. Book Condition: new. BRAND NEW, Probability and Finance Theory, Kian Guan Lim, This book provides a basic grounding in the use of probability to model random financial phenomena of uncertainty, and is targeted at an advanced undergraduate and graduate level. It should appeal to finance students looking for a firm theoretical guide to the deep end of derivatives and investments. Bankers and finance professionals in the fields of investments, derivatives, and risk management should also find the book useful in bringing probability and finance together. The book contains applications of both discrete time theory and continuous time mathematics, and is extensive in scope. Distribution theory, conditional probability, and conditional expectation are covered comprehensively, and applications to modeling state space securities under market equilibrium are made. Martingale is studied, leading to consideration of equivalent martingale measures, fundamental theorems of asset pricing, change of numeraire and discounting, risk-adjusted and forward-neutral measures, minimal and maximal prices of contingent claims, Markovian models, and the existence of martingale measures preserving the Markov property. Discrete stochastic calculus and multiperiod models leading to no-arbitrage pricing of contingent claims are also to be found in this book, as well as the theory of Markov Chains and appropriate applications in credit modeling. Measure-theoretic probability, moments, characteristic functions, inequalities, and central limit theorems are examined. The theory of risk aversion and utility, and ideas of risk premia are considered. Other application topics include optimal consumption and investment problems and interest rate theory. Bookseller Inventory # B9789814307932

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