Financial Derivative and Energy Market Valuation: Theory and Implementation in MATLAB

Financial Derivative and Energy Market Valuation brings the application of financial models to a higher level by helping readers capture the true behavior of energy markets and related financial derivatives. The book provides readers with a range of statistical and quantitative techniques and demonstrates how to implement the presented concepts and methods in Matlab.

Featuring an unparalleled level of detail, this unique work provides the underlying theory and various advanced topics without requiring a prior high-level understanding of mathematics or finance.

Thorough, practical, and easy to use, Financial Derivative and Energy Market Valuation is a first-rate guide for readers who want to learn how to use advanced numerical methods to implement and apply state-of-the-art financial models. The book is also ideal for graduate-level courses in quantitative finance, mathematical finance, and financial engineering.

Preface vii

1 Financial Models 1

2 Jump Models 35

3 Options 65

4 Binomial Trees 105

5 Trinomial Trees 131

6 Finite Difference Methods 167

7 Kalman Filter 231

8 Futures and Forwards 245

9 Nonlinear and Non-Gaussian Kalman Filter 295

10 Short-Term Deviation/Long-Term Equilibrium Model 349

11 Futures and Forwards Options 359

12 Fourier Transform 397

13 Fundamentals of Characteristic Functions 459

14 Application of Characteristic Functions 467

15 Levy Processes 505

16 Fourier-Based Option Analysis 547

17 Fundamentals of Stochastic Finance 585

18 Affine Jump-Diffusion Processes 605

Index 645