Through Brach's own three-step real option valuation method readers will learn how the theory of real options is now being applied to drive better, more profitable corporate decision-making. Touching on the real options most firms care about, Real Options in Practice identifies the classic types of real options-deferral, abandonment, switching, expansion, and compound-and explores the main concepts critical to understanding real option theory. Expert Marion Brach describes the challenges of implementing a real option framework in practice within a corporate setting. Real Options in Practice allows readers to view the world of real options from the vantage point of a corporate practitioner applying real option valuation techniques on a regular basis. Chapman Jr.Explores real option theory applied in practice Real options are quickly becoming the valuation and decision-making method of choice for many companies, including oil and gas companies, utilities and natural resource companies, pharmaceutical and biotech companies, Internet companies, and many others. This book is highly recommended for undergraduates and those preparing for actuarial credentialing and exams. There is an electronic version of this text, which can be obtained as a Mathematica notebook. Though the problems in this book can be solved with an advanced calculator, the author suggests using a computational platform, such as Mathematica. Topics covered include the mathematics of interest, valuation of bonds, discrete probability for finance, portfolio selection, and derivatives. Another unique aspect is the application of discrete probability to finance the author provides an overview and illustrates problems in which the rates of interest are random variables, instead of traditional problems that consider only known constants. In addition to its clear explanations, this volume emphasizes real problem solving with examples and exercises that challenge students to apply knowledge of basic concepts to new situations. This clearly written work serves as a bridge to more advanced texts, such as the second edition of Capiński and Zastawniak's Mathematics for Finance: An Introduction to Financial Engineering (CH, Jun'11, 48-5740). Hastings (mathematics, Knox College) perceived a need for an introductory text to financial mathematics, and the result is an excellent book that superbly fits that niche. For maximum flexibility, the author has produced the text without adhering to any particular computational platform.Ī digital version of this text is also available in the form of Mathematica notebooks that contain additional content. Many of the examples in the book involve numerical solution of complicated non-linear equations others ask students to produce algorithms which beg to be implemented as programs. The one-step and multi-step cases are covered, and exotic options such as barrier options are also introduced, to which simulation methods are applied. The text closes with a detailed discussion of how to value financial derivatives using anti-arbitrage assumptions. The text also discusses the estimation of parameters of asset models from real data. He also explains how to derive the rate of return on a portfolio and how to use the idea of risk aversion to model the investor tradeoff between risk and return. The author introduces the basic terminology of stocks and stock trading. Next, it supplies a rapid-fire overview of the main ideas and techniques of discrete probability, including sample spaces and probability measures, random variables and distributions, expectation, conditional probability, and independence. The text explains how to value bonds at their issue dates, at coupon times, between coupon times, and in cases where the bonds are terminated early. It begins by covering standard material on the mathematics of interest, including compound interest, present value, annuities, loans, several versions of the rate of return on an investment, and interest in continuous time. The text covers nearly all of the syllabus topics of the Financial Mathematics Actuarial examination, providing students with the foundation they require for future studies and throughout their careers. The author then goes on to cover valuation of financial derivatives in discrete time, using all of closed form, recursive, and simulation methods. Unlike most textbooks aimed at more advanced courses, the text motivates students through a discussion of personal finances and portfolio management. Introduction to Financial Mathematics is ideal for an introductory undergraduate course.
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