In the last months, the world's economies were confronted with the largest economic recession since the Great Depression. The occurrence of a worldwide financial market meltdown as a consequence originally stemming from of the crisis in the US subprime housing sector was only prevented by...

Part I The Fundamentals of Derivative Security Pricing -- 1 The Stock Option Problem -- 2 Stochastic Processes for Asset Price Modelling -- 3 An Initial Attempt at Pricing an Option -- 4 The Stochastic Differential Equation -- 5 Manipulating Stochastic Differential Equations and Stochastic...

This paper presents a continuous-time model of exchange rates relying not only on macroeconomic factors but also having a market microstructure component. The driving macroeconomic factor is the interest rate differential, while the market microstructure element is described by the expectations...

Margrabe provides a pricing formula for an exchange option where the distributions of both stock prices are log-normal with correlated Wiener components. Merton has provided a formula for the price of a European call option on a single stock where the stock price process contains a continuous...

The book presents a disequilibrium approach to employment, inflation and growth in modern macroeconomics. It integrates markets of products and money, and labor markets into a consistent macrodynamic framework which contains a complete set of agents and markets. The framework allows to establish...