Option Pricing and Estimation of Financial Models with R

Presents inference and simulation of stochastic process in thefield of model calibration for financial times series modelled bycontinuous time processes and numerical option pricing. Introducesthe bases of probability theory and goes on to explain how to modelfinancial times series with continuous models, how to calibratethem from discrete data and further covers option pricing with oneor more underlying assets based on these models. Analysis and implementation of models goes beyond the standardBlack and Scholes framework and includes Markov switching models, Lévy models and other models with jumps (e. g. the telegraphprocess); Topics other than option pricing include: volatility andcovariation estimation, change point analysis, asymptotic expansionand classification of financial time series from a statisticalviewpoint.
The book features problems with solutions and examples. All theexamples and R code are available as an additional R package, therefore all the examples can be reproduced.