Book description
An in-depth guide to understanding probability distributions and
financial modeling for the purposes of investment management
In Financial Models with Lévy Processes and Volatility
Clustering, the expert author team provides a framework to model
the behavior of stock returns in both a univariate and a multivariate
setting, providing you with practical applications to option pricing
and portfolio management. They also explain the reasons for working
with non-normal distribution in financial modeling and the best
methodologies for employing it.
The book's framework includes the basics of probability distributions
and explains the alpha-stable distribution and the tempered stable
distribution. The authors also explore discrete time option pricing
models, beginning with the classical normal model with volatility
clustering to more recent models that consider both volatility
clustering and heavy tails.
- Reviews the basics of probability distributions
- Analyzes a continuous time option pricing model (the so-called
exponential Lévy model)
- Defines a discrete time model with volatility clustering and how
to price options using Monte Carlo methods
- Studies two multivariate settings that are suitable to explain
joint extreme events
Financial Models with Lévy Processes and Volatility Clustering
is a thorough guide to classical probability distribution methods and
brand new methodologies for financial modeling.
SVETLOZAR T. RACHEV is Chair-Professor in
Statistics, Econometrics, and Mathematical Finance at the Karlsruhe
Institute of Technology (KIT) in the School of Economics and Business
Engineering; Professor Emeritus at the University of California, Santa
Barbara; and Chief Scientist at FinAnalytica Inc.
YOUNG SHIN KIM is a scientific assistant in the Department of
Statistics, Econometrics, and Mathematical Finance at the Karlsruhe
Institute of Technology (KIT).
MICHELE Leonardo BIANCHI is an analyst in the Division of Risk
and Financial Innovation Analysis at the Specialized Intermediaries
Supervision Department of the Bank of Italy.
FRANK J. FABOZZI is Professor in the Practice of Finance and
Becton Fellow at the Yale School of Management and Editor of the
Journal of PortfolioManagement. He is an Affiliated Professor at the
University of Karlsruhe's Institute of Statistics, Econometrics, and
Mathematical Finance and serves on the Advisory Council for the
Department of Operations Research and Financial Engineering at
Princeton University.
