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Quantitative Analysis
Parallel Processing
Numerical Analysis
C++ Multithreading
Python for Excel
Python Utilities
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I. Basic math.
II. Pricing and Hedging.
1. Basics of derivative pricing I.
2. Change of numeraire.
3. Basics of derivative pricing II.
4. Market model.
A. Forward LIBOR.
B. LIBOR market model.
C. Swap rate.
D. Swap measure.
5. Currency Exchange.
6. Credit risk.
7. Incomplete markets.
III. Explicit techniques.
IV. Data Analysis.
V. Implementation tools.
VI. Basic Math II.
VII. Implementation tools II.
VIII. Bibliography
Notation. Index. Contents.

Market model.

t is a market convention to price options on forward prices with Black formula. In other words we assume MATH for every forward price. The $W$ is a standard Brownian motion with respect to some probability measure, selected differently for every $F$ . Thus, we have a correspondence between forward prices and probability measures. The transformation between the measures is given by the change of measure technique, developed in the previous sections. We will define the forward prices and calculate $\sigma$ , then we will derive SDEs for all $F$ for all relevant choices of probability. The reference for this section is [Mercurio] .

A. Forward LIBOR.
B. LIBOR market model.
C. Swap rate.
D. Swap measure.

Notation. Index. Contents.

Copyright 2007