Stochastic Modeling in Economics and Finance

Preface. Acknowledgments. Part I: Fundamentals. I.1. Money, Capital, and Securities. I.2. Interest Rate. I.3. Measures of Cash Flows. I.4. Return, Expected Return, and Risk. I.5. Valuation of Securities. I.6. Matching of Assets and Liabilities. I.7. Index Numbers and Inflation. I.8. Basics of Utility Theory. I.9. Markowitz Mean-Variance Portfolio. I.10. Capital Asset Pricing Model. I.11. Arbitrage Pricing Theory. I.12. Bibliographical Notes. Part II: Discrete Time Stochastic Decision Models. II.1. Introduction and Preliminaries. II.2. Multistage Stochastic Programs. II.3. Multiple Criteria. II.4. Selected Applications in Finance and Economics. II.5. Approximation Via Scenarios. II.6. Case Study: Bond Portfolio Management Problem. II.7. Incomplete Input Information. II.8. Numerical Techniques and Available Software; P. Popela. II.9. Bibliographical Notes. Part III: Stochastic Analysis and Diffusion Finance. III.1. Martingales. III.2. Stochastic Integration. III.3. Diffusion Financial Mathematics. III.4. Bibliographical Notes. References. Index.