Fast valuation of financial derivatives

The fourth edition of this textbook on pricing and hedging of financial derivatives, now also including dynamic equilibrium theory, continues to combine sound mathematical principles with economic applications. Concentrating on the probabilistic theory of continuous time arbitrage pricing of financial derivatives, including stochastic optimal control theory and optimal stopping theory, the book is designed for graduate students in economics and mathematics, and combines the necessary mathematical background with a solid economic focus. It includes a solved example for every new technique presented, contains numerous exercises, and suggests further reading in each chapter. All concepts and ideas are discussed, not only from a mathematics point of view, but the mathematical theory is also always supplemented with lots of intuitive economic arguments. In the substantially extended fourth edition Tomas Björk has added completely new chapters on incomplete markets, treating such topics as the Esscher transform, the minimal martingale measure, f-divergences, optimal investment theory for incomplete markets, and good deal bounds. There is also an entirely new part of the book presenting dynamic equilibrium theory. This includes several chapters on unit net supply endowments models, and the Cox–Ingersoll–Ross equilibrium factor model (including the CIR equilibrium interest rate model). Providing two full treatments of arbitrage theory—the classical delta hedging approach and the modern martingale approach—the book is written in such a way that these approaches can be studied independently of each other, thus providing the less mathematically oriented reader with a self-contained introduction to arbitrage theory and equilibrium theory, while at the same time allowing the more advanced student to see the full theory in action.

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Investment in Financial Derivatives Contracts from an Islamic Perspective

International Finance and Banking ◽

10.5296/ifb.v1i1.5442 ◽

2014 ◽

Vol 1 (1) ◽

pp. 51 ◽

Cited By ~ 2

Author(s):

Yesser Abdelkarim Karim Mohammed Hourani ◽

Mohammed Ali ZARAI

Keyword(s):

Financial Derivatives ◽

Financial Contracts ◽

Research Results ◽

Islamic Perspective ◽

Descriptive Approach ◽

Financial Transactions

This research aims at exploring the nature of financial derivatives (FD) and their associated activities, and thus highlight their legitimate rule from an Islamic Perspective. Although there are many kinds of financial derivatives, this research focuses on the discussion of only three basic contracts; namely options, futures and swaps contracts, because they represent financial contracts derived from financially stable instruments such as stocks and bonds. There is no doubt that the great importance of this research lies mainly in determining the nature of these contracts and knowing their legitimate rules. In dealing with this issue, the research employs a descriptive approach which relies on first clarifying the image of each contract and its contemporary concept, second explaining the contract's performance and applications in the field of financial transactions, with reference to illustrative examples, and finally discussing its legitimate rule.The research results in uncovering the legitimate ruling on financial derivatives contracts, summed up mainly in the presence of betrayal and ignorance; leading, therefore, to the prohibition of such contracts.

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