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Yielding new insights into important market phenomena like asset price bubbles and trading constraints, this is the first textbook to present asset pricing theory using the martingale approach (and all of its extensions). Since the 1970s asset pricing theory has been studied, refined, and extended, and many different approaches can be used to present this material. Existing PhD–level books on this topic are aimed at either economics and business school students or mathematics students. While the first mostly ignore much of the research done in mathematical finance, the second emphasizes mathematical finance but does not focus on the topics of most relevance to economics and business school students. These topics are derivatives pricing and hedging (the Black–Scholes–Merton, the Heath–Jarrow–Morton, and the reduced-form credit risk models), multiple-factor models, characterizing systematic risk, portfolio optimization, market efficiency, and equilibrium (capital asset and consumption) pricing models. This book fills this gap, presenting the relevant topics from mathematical finance, but aimed at Economics and Business School students with strong mathematical backgrounds. .

Mathematics. --- Economics, Mathematical. --- Mathematical optimization. --- Probabilities. --- Quantitative Finance. --- Probability Theory and Stochastic Processes. --- Optimization. --- Financial Mathematics. --- Finance. --- Distribution (Probability theory. --- Finance—Mathematics. --- Distribution functions --- Frequency distribution --- Characteristic functions --- Probabilities --- Funding --- Funds --- Economics --- Currency question --- Optimization (Mathematics) --- Optimization techniques --- Optimization theory --- Systems optimization --- Mathematical analysis --- Maxima and minima --- Operations research --- Simulation methods --- System analysis --- Martingales (Mathematics) --- Pricing. --- Economics, Mathematical . --- Probability --- Statistical inference --- Combinations --- Mathematics --- Chance --- Least squares --- Mathematical statistics --- Risk --- Mathematical economics --- Econometrics --- Methodology

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This book provides an overview of the risk components of CoCo bonds. CoCos are hybrid financial instruments that convert into equity or suffer a write-down of the face value upon the appearance of a trigger event. The loss-absorption mechanism is automatically enforced either via the breaching of a particular accounting ratio, typically in terms of the Common Equity Tier 1 (CET1) ratio, or via a regulatory trigger. CoCos are non-standardised instruments with different loss-absorption and trigger mechanisms. They might also contain additional features such as the cancellation of coupon payments. Different pricing models are discussed in detail. These models use market data such as share prices, CDS levels and implied volatility in order to calculate the theoretical price of a CoCo bond and its sensitivities, providing the investor with insides to hedge from adverse changes in the market conditions. The audience are professionals as well as academics who want to learn how to risk manage CoCo bonds using cutting edge techniques as well as all the risk involved in CoCo bonds.

Convertible bonds. --- Bonds, Convertible --- Convertibles (Bonds) --- Liquid yield option notes --- Bonds --- Convertible securities --- Finance. --- Financial engineering. --- Statistics. --- Finance—Mathematics. --- Distribution (Probability theory. --- Risk management. --- Quantitative Finance. --- Financial Engineering. --- Statistics for Business, Management, Economics, Finance, Insurance. --- Financial Mathematics. --- Probability Theory and Stochastic Processes. --- Risk Management. --- Insurance --- Management --- Distribution functions --- Frequency distribution --- Characteristic functions --- Probabilities --- Statistical analysis --- Statistical data --- Statistical methods --- Statistical science --- Mathematics --- Econometrics --- Computational finance --- Engineering, Financial --- Finance --- Funding --- Funds --- Economics --- Currency question --- Economics, Mathematical . --- Statistics . --- Probabilities. --- Probability --- Statistical inference --- Combinations --- Chance --- Least squares --- Mathematical statistics --- Risk --- Mathematical economics --- Methodology