An Introduction to Financial Option Valuation or Understanding Organizations

An Introduction to Financial Option Valuation: Mathematics, Stochastics and Computation

Author: Desmond J Higham

This book is intended for use in a rigorous introductory PhD level course in econometrics, or in a field course in econometric theory. It covers the measure-theoretical foundation of probability theory, the multivariate normal distribution with its application to classical linear regression analysis, various laws of large numbers, central limit theorems and related results for independent random variables as well as for stationary time series, with applications to asymptotic inference of M-estimators, and maximum likelihood theory. Some chapters have their own appendices containing the more advanced topics and/or difficult proofs. Moreover, there are three appendices with material that is supposed to be known. Appendix I contains a comprehensive review of linear algebra, including all the proofs. Appendix II reviews a variety of mathematical topics and concepts that are used throughout the main text, and Appendix III reviews complex analysis. Therefore, this book is uniquely self-contained.

Table of Contents:

	List of illustrations
	Preface
1	Options	1
2	Option valuation preliminaries	11
3	Random variables	21
4	Computer simulation	33
5	Asset price movement	45
6	Asset price model : part I	53
7	Asset price model : part II	63
8	Black-Scholes PDE and formulas	73
9	More on hedging	87
10	The Greeks	99
11	More on the Black-Scholes formulas	105
12	Risk neutrality	115
13	Solving a nonlinear equation	123
14	Implied volatility	131
15	Monte Carlo method	141
16	Binomial method	151
17	Cash-or-nothing options	163
18	American options	173
19	Exotic options	187
20	Historical volatility	203
21	Monte Carlo part II : variance reduction by antithetic variaties	215
22	Monte Carlo part III : variance reduction by control variates	229
23	Finite difference methods	237
24	Finite difference methods for the Black-Scholes PDE	257
	References	267
	Index	271

Book review: At Canaans Edge or The Labyrinth of Solitude

Understanding Organizations

Author: Charles Handy

Charles Handy's revolutionary 1989 bestseller The Age of Unreason catapulted him into the ranks of the top management consultants. Now, in this new edition of his acclaimed study Understanding Organizations, he solidifies his reputation as a seminal business thinker, offering a brilliantly insightful, wide-ranging look at business organizations.
Long a bestseller in the United Kingdom, this classic text offers an illuminating discussion of key concepts of concern to all managers: culture, motivation, leadership, power, role-playing and working in groups. Ever mindful of actual business practice, Handy directly addresses how managers can translate the six main concepts into invaluable tools for effective management. He discusses how all organizations need to select, develop and reward their people; to structure and design their work; to resolve political conflicts; to lay down guidelines for their managers; and to plan for the future. In each case, the approaches and techniques described here are invaluable.
Equally important, Handy excels at presenting his ideas in colorful, immediately accessible ways, filling the book with illuminating examples and inventive metaphors that range from Tolstoy's ideas on the concept of self, to the many meanings of "good morning," to the conversations that occur in a stopped elevator, to the proper size for a vineyard or an elephant. He shows, for instance, how an optical illusion experiment sheds light on interdepartmental relations, and how the way schoolchildren are typecast by their peers helps explain corporate hierarchies. And along with case studies, graphs, charts, and questionnaires, Understanding Organizations is peppered withboxed sections that offer advice and stimulate thought, brimming with provocative quotations from business wizards such as Peter Drucker, Tom Peters, Warren Bennis, Alvin Toffler, and Rosabeth Moss Kanter, as well as from Aristotle, Shakespeare, Gilbert and Sullivan, Gail Sheehy, and Joseph Heller.
What the successful manager knows intuitively, Charles Handy puts into words. His powerful interpretive schemes will help managers grasp the underlying dynamics of their company, make sense of its past, and assess--and shape--its future.