Darrell Duffie - Dynamic asset pricing theory-Princeton University Press (2001)

• Author: Darrell Duffie
• Publisher: Princeton University Press
• Year of Publication: 2001
• Format: PDF
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Introduction

This book is a standard textbook for doctoral students and researchers on the theory of asset pricing and portfolio selection in an uncertain multi-period environment. Asset pricing results are based on three increasingly stringent assumptions: no arbitrage, single-agent optimality, and equilibrium. These results are unified by two key concepts - state prices and martingales. With relatively little emphasis on technical details, the book aims to reveal the connections between these concepts and to illustrate the similarities between discrete-time and continuous-time models.

The main mathematical techniques covered in this book include continuous-time models based on Brownian motion and the introduction of jump processes (such as those associated with Poisson arrivals) to accommodate contingencies such as bond defaults. Applications include term structure models, derivatives valuation and hedging methods, and dynamic programming algorithms for portfolio selection and optimal exercise of American options. The book also covers numerical methods such as Monte Carlo simulation and finite difference solutions of partial differential equations. In addition, the latest edition of this book includes a new chapter on corporate securities that provides alternative methods for valuing corporate debt.

Main features

• Solid theoretical foundation
• Rich practical cases
• Clear operating instructions
• Suitable for practical applications

Suitable for the crowd

• Quantitative Analyst
• Algorithmic Trader
• Financial Engineer
• Data Scientist