A Factor Model Approach to Derivative Pricing

The approach that the author has taken should provide a new insight for derivative pricing, which is quite useful to learn the topic for students entering graduate studies or starting senior undergraduate projects. In particular, the book is recommended for students with engineering background as well as those in business schools. -Yuji Yamada, Professor and Chair of Master's Program in Systems Management, Faculty of Business Sciences, University of Tsukuba, Japan This book will be of tremendous help to those who either are new to the field and unsure where to start, or have started but are frustrated by not being able to apply what they learn. This is one of a kind book that provides a step by step recipe for developing the broadest possible set of derivating pricing models with the minimum reliance on sophisticated mathematical analysis. The style of the book is truly educational also - not only does it provide intuition behind every use of mathematics, but it also ensures the intuitions are coherent. The factor model approach not only simplifies the steps of derivations, but I believe provides also a great opportunity for students with or without finance background to appreciate the beauty of this fundamental model in finance. Well thought-out exercises are provided in each chapter, which makes the book a great choice for advanced undergraduate or graduate courses. -Jonathan Yu-Meng Li, Assistant Professor of Risk Management, University of Ottawa, Canada