Neutral and Indifference Portfolio Pricing, Hedging and Investing

Here is a general theory of risk premium, pricing and hedging of financial contracts, based on the optimal portfolio-based theory and allowing for a complete solution of problems. Coverage includes the pricing of the remaining risk in incomplete markets.

This book is written for quantitative finance professionals, students, educators, and mathematically inclined individual investors. It is about some of the latest developments in pricing, hedging, and investing in incomplete markets. With regard to pricing, two frameworks are fully elaborated: neutral and indifference pricing. With regard to hedging, the most conservative and relaxed hedging formulas are derived. With regard to investing, the neutral pricing methodology is also considered as a tool for connecting market asset prices with optimal positions in such assets.

Srdjan D. Stojanovic is Professor in the Department of Mathematical Sciences at University of Cincinnati (USA) and Professor in the Center for Financial Engineering at Suzhou University (China).

Presents a general theory of risk premium, pricing, and hedging of financial contracts that allows for a complete solution of problems Uses a practical perspective with examples relevant to the financial industry Offers new qualitative financial insights and predictions that are out of reach for standard pricing theory Written for self-study as well as for professional and academic courses

Inhalt
Preface.- Background Material.- Simple economiescomplete and incomplete markets.- Investment Portfolio Optimization.-Pricing: Neutral and Indifference.- Hedging.- Equity Valuation and Investing.- FX Rates and FX Derivatives.- Appendix.- References.-