Arabiyyat al-Naas (Part One)

Written in a highly accessible style, A Factor Model Approach to Derivative Pricing lays a clear and structured foundation for the pricing of derivative securities based upon simple factor model related absence of arbitrage ideas. This unique and unifying approach provides for a broad treatment of topics and models, including equity, interest-rate, and credit derivatives, as well as hedging and tree-based computational methods, but without reliance on the heavy prerequisites that often accompany such topics. _x005F_x000D_Key features_x005F_x000D__x005F_x000D__x005F_x000D_A single fundamental absence of arbitrage relationship based on factor models is used to motivate all the results in the book_x005F_x000D__x005F_x000D__x005F_x000D_A structured three-step procedure is used to guide the derivation of absence of arbitrage equations and illuminate core underlying concepts _x005F_x000D__x005F_x000D__x005F_x000D_Brownian motion and Poisson process driven models are treated together, allowing for a broad and cohesive presentation of topics_x005F_x000D__x005F_x000D__x005F_x000D_The final chapter provides a new approach to risk neutral pricing that introduces the topic as a seamless and natural extension of the factor model approach _x005F_x000D__x005F_x000D_Whether being used as text for an intermediate level course in derivatives, or by researchers and practitioners who are seeking a better understanding of the fundamental ideas that underlie derivative pricing, readers will appreciate the book‘s ability to unify many disparate topics and models under a single conceptual theme. _x005F_x000D_James A Primbs is an Associate Professor of Finance at the Mihaylo College of Business and Economics at California State University, Fullerton.