PETER JAMES – OPTION THEORY

The theory of options in each of the different forms is presented in a unified development of the subject. Some of the more complex topics have been demystified. Practical, tangible results can be derived using the theory. The results of the analysis and pricing of options in the equity, currency, commodity and interest rate markets are applied. The reader is given the analytical tools and technical jargon to understand the current technical literature. A user-friendly reference on option theory is provided. The back cover.

The reader is taken from the first principles to the frontiers of modern finance theory. The book is aimed at busy financial engineers at all levels, providing formulas and techniques that can be readily applied to real life problems, yet the theoretical basis of the subject is explored in detail so that the book will appeal to students and researchers.

In a clear and accessible manner, the author covers the various approaches to option pricing: risk neutral expectations by integration, trees, analytical and numerical solutions of partial differential equations and Monte Carlo methods, demonstrating the close relationship between them.

There are four mathematical tools used in the first three parts of the book. The techniques are applied to all the standard exotic options encountered in the equity, foreign exchange and commodity markets. The exotics are not a large random collection of unrelated instruments, but a few families which can be analysed using the techniques developed in Parts One and Two.

Part Four contains a course that is tailored to finance theory and designed for readers with previous knowledge of options. It gives an active working knowledge of the subject. There is a person named Martingales.

There are differential equations.

The integration is Stochastic.

The Kac theorem is related to the Feyman Kac.

The control is Stochastic.

The time is local.

There is a theorem by Girsanov. It’s not like it’s like it’s like it’s like it’s like it’s like it’s like it’s like it’s like it’s like it’s like it’s like it’s like it’s like it The simpler and more intuitive approach to option theory using classical statistics was used in the first three parts of the book. The analysis shows where there are valuable insights and advances and where it is just window dressing.

The book demystifies the subject and will appeal to both practitioners and students.

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