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Quantitative Analysis
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Numerical Analysis
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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.
5. Currency Exchange.
6. Credit risk.
A. Delta hedging in situation of predictable jump I.
B. Delta hedging in situation of predictable jump II.
C. Backward Kolmogorov's equation for jump diffusion.
D. Risk neutral valuation in predictable jump size situation.
E. Examples of credit derivative pricing.
F. Credit correlation.
G. Valuation of CDO tranches.
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.

Risk neutral valuation in predictable jump size situation.


omparing the results of ( Delta hedging with jumps ) and ( Backward equation with jumps ) we conclude that the risk neutral pricing (see ( Risk_neutral_pricing )) applies with the following risk-neutral SDEs: MATH To summarize, under the change to the risk neutral measure, drift changes to $r$ , volatility and the size of the jump do not change, intensity of the jump changes to some function implied by the market. Hence, the historical data (real world probability) on intensity of the jumps disappears completely from the pricing equations.





Notation. Index. Contents.


















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