Book description
Incorporates the many tools needed for modeling and pricing in finance and insurance
Introductory Stochastic Analysis for Finance and Insurance introduces readers to the topics needed to master and use basic stochastic analysis techniques for mathematical finance. The author presents the theories of stochastic processes and stochastic calculus and provides the necessary tools for modeling and pricing in finance and insurance. Practical in focus, the book's emphasis is on application, intuition, and computation, rather than theory.
Consequently, the text is of interest to graduate students, researchers, and practitioners interested in these areas. While the text is selfcontained, an introductory course in probability theory is beneficial to prospective readers.
This book evolved from the author's experience as an instructor and has been thoroughly classroomtested. Following an introduction, the author sets forth the fundamental information and tools needed by researchers and practitioners working in the financial and insurance industries:
Overview of Probability Theory
DiscreteTime stochastic processes
Continuoustime stochastic processes
Stochastic calculus: basic topics
The final two chapters, Stochastic Calculus: Advanced Topics and Applications in Insurance, are devoted to more advanced topics. Readers learn the FeynmanKac formula, the Girsanov's theorem, and complex barrier hitting times distributions. Finally, readers discover how stochastic analysis and principles are applied in practice through two insurance examples: valuation of equitylinked annuities under a stochastic interest rate environment and calculation of reserves for universal life insurance.
Throughout the text, figures and tables are used to help simplify complex theory and processes. An extensive bibliography opens up additional avenues of research to specialized topics.
Ideal for upperlevel undergraduate and graduate students, this text is recommended for onesemester courses in stochastic finance and calculus. It is also recommended as a study guide for professionals taking Causality Actuarial Society (CAS) and Society of Actuaries (SOA) actuarial examinations.
Table of contents
 Coverpage
 Titlepage
 Copyright
 Contents
 List of Figures
 List of Tables
 Preface
 1 Introduction
 2 Overview of Probability Theory
 3 DiscreteTime Stochastic Processes
 4 ContinuousTime Stochastic Processes

5 Stochastic Calculus: Basic Topics
 5.1 Stochastic (Ito) Integration
 5.2 Stochastic Differential Equations
 5.3 OneDimensional Ito’s Lemma
 5.4 ContinuousTime Interest Rate Models
 5.5 The BlackScholes Model and Option Pricing Formula
 5.6 The Stochastic Version of Integration by Parts
 5.7 Exponential Martingales
 5.8 The Martingale Representation Theorem
 6 Stochastic Calculus: Advanced Topics
 7 Applications in Insurance
 References
 Index
Product information
 Title: Introductory Stochastic Analysis for Finance and Insurance
 Author(s):
 Release date: March 2006
 Publisher(s): WileyInterscience
 ISBN: 9780471716426
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