Monte Carlo Methods and Models in Finance and Insurance

Ralf Korn, Elke Korn, Gerald Kroisandt

February 26, 2010 by CRC Press
Reference - 484 Pages - 44 B/W Illustrations
ISBN 9781420076189 - CAT# C7618
Series: Chapman and Hall/CRC Financial Mathematics Series

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Features

  • Provides detailed descriptions of financial and actuarial models and Monte Carlo simulation algorithms
  • Enables readers to find the right algorithm for a desired application
  • Illustrates complicated methods and algorithms with simple applications to provide an easy understanding of key properties
  • Describes recent financial models and Monte Carlo simulation methods

Summary

Offering a unique balance between applications and calculations, Monte Carlo Methods and Models in Finance and Insurance incorporates the application background of finance and insurance with the theory and applications of Monte Carlo methods. It presents recent methods and algorithms, including the multilevel Monte Carlo method, the statistical Romberg method, and the Heath–Platen estimator, as well as recent financial and actuarial models, such as the Cheyette and dynamic mortality models.

The authors separately discuss Monte Carlo techniques, stochastic process basics, and the theoretical background and intuition behind financial and actuarial mathematics, before bringing the topics together to apply the Monte Carlo methods to areas of finance and insurance. This allows for the easy identification of standard Monte Carlo tools and for a detailed focus on the main principles of financial and insurance mathematics. The book describes high-level Monte Carlo methods for standard simulation and the simulation of stochastic processes with continuous and discontinuous paths. It also covers a wide selection of popular models in finance and insurance, from Black–Scholes to stochastic volatility to interest rate to dynamic mortality.

Through its many numerical and graphical illustrations and simple, insightful examples, this book provides a deep understanding of the scope of Monte Carlo methods and their use in various financial situations. The intuitive presentation encourages readers to implement and further develop the simulation methods.