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Dynamic Asset Pricing Theory, Third Edition. (Princeton Series in Finance) [Kindle Edition]

Darrell Duffie
3.5 out of 5 stars  See all reviews (8 customer reviews)

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  • Print ISBN-10: 069109022X
  • Print ISBN-13: 978-0691090221
  • Edition: 3

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Book Description

This is a thoroughly updated edition of Dynamic Asset Pricing Theory, the standard text for doctoral students and researchers on the theory of asset pricing and portfolio selection in multiperiod settings under uncertainty. The asset pricing results are based on the three increasingly restrictive assumptions: absence of arbitrage, single-agent optimality, and equilibrium. These results are unified with two key concepts, state prices and martingales. Technicalities are given relatively little emphasis, so as to draw connections between these concepts and to make plain the similarities between discrete and continuous-time models.

Readers will be particularly intrigued by this latest edition's most significant new feature: a chapter on corporate securities that offers alternative approaches to the valuation of corporate debt. Also, while much of the continuous-time portion of the theory is based on Brownian motion, this third edition introduces jumps--for example, those associated with Poisson arrivals--in order to accommodate surprise events such as bond defaults. Applications include term-structure models, derivative valuation, and hedging methods. Numerical methods covered include Monte Carlo simulation and finite-difference solutions for partial differential equations. Each chapter provides extensive problem exercises and notes to the literature. A system of appendixes reviews the necessary mathematical concepts. And references have been updated throughout. With this new edition, Dynamic Asset Pricing Theory remains at the head of the field.



Editorial Reviews

Review

"This is an important addition to the set of text/reference books on asset pricing theory. It will, if it has not already, become the standard text for the second Ph.D. course in security markets. Its treatment of contingent claim valuation, in particular, is unrivaled in its breadth and coherence."--Journal of Economic Literature

About the Author

J. Darrell Duffie is the James Irvin Miller Professor of Finance at the Graduate School of Business. Stanford University. He teaches and does research in the area of asset valuation, risk management, credit risk modeling, and fixed-income and equity markets. His other books include Security Markets, Stochastic Models, and Futures Markets.

Product Details

  • File Size: 5014 KB
  • Print Length: 488 pages
  • Publisher: Princeton University Press; 3 edition (October 1, 2001)
  • Sold by: Amazon Digital Services, Inc.
  • Language: English
  • ASIN: B0042JTB7I
  • Text-to-Speech: Enabled
  • X-Ray:
  • Lending: Not Enabled
  • Amazon Best Sellers Rank: #825,535 Paid in Kindle Store (See Top 100 Paid in Kindle Store)
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Customer Reviews

3.5 out of 5 stars
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Most Helpful Customer Reviews
28 of 32 people found the following review helpful
5.0 out of 5 stars Finance for economists April 27, 2005
Format:Hardcover
This book provides the most elegant and coherent synthesis of finance theory, in a complete markets and frictionless settings.

For the reader interested in the theoretical foundations of modern financial models, this book has three main advantages over many of its competitors:

- It clearly shows the link between modern finance theory and the 40-year old Arrow-Debreu model. As this book will make clear, financial assets can be viewed as "bundles" of Arrow-Debreu contingent goods, and pricing kernels are simply extensions of Arrow-Debreu contingent state prices.

- It bridges the gap between arbitrage models on one hand, and models based on consumption, optimization/dynamic programming and general equilibrium on the other hand. Absence of arbitrage guarantees the existence of a stochastic discount factor, or pricing kernel. Optimality implies that the stochastic discount factor must be equal to the investors' intertemporal marginal rate of substitution.

- It provides a unified treatment of discrete-time and continuous-time models. Many finance textbooks focus on the mathematic tools and emphasize the difference between continuous-time and discrete-time tools--usually at the expense of the economics underlying both types of models. In contrast Duffie's book emphasizes the conceptual unity between continuous-time and discrete-time asset pricing.

This book was written more for students and academics than for pratictioners. It is not a reference or a recipe book for traders and programmers. Several chapters are devoted to general-equilibrium models that pratictioners are not likely to find useful. However, the essentials of derivative asset pricing and the term structure are also covered.
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20 of 24 people found the following review helpful
5.0 out of 5 stars Demanding but rewarding! September 30, 2003
By A Customer
Format:Hardcover
First of all, this book is for people with advanced mathematical preparation. Courses in functional analysis, measure theory, stochastic calculus and vector space optimization are in my opinion required for a deep understanding of the material in the book. Fortunately, the appendices are very good and provide many things that can help someone to follow the book.
In the first four chapters the writer develops the discrete-time theory,in order to provide a better understanding of the underlying ideas which remain the same in the next chapters which deal with the continuous-time setting.
Although the book needs a lot of effort from the reader, it is unique in that can help you see beyond the mathematics. In other words it USES the mathematics and it isn't just a layout of theorems and proofs.
Of course it can't be compared with books like Hull as it isn't accessible to everyone. But someone with the mathematical preparation , who has read Hull , should buy this book and he will never regret it.
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42 of 60 people found the following review helpful
2.0 out of 5 stars painful and obscure December 23, 2005
Format:Hardcover|Verified Purchase
The mathematics of finance is not trivial, but neither is it really all that difficult; nevertheless, Duffie works to make you think that it is.

I maintain a scale of good versus bad mathematics writing in my head, against which I calibrate books I read. This scale stretches from, at one end, the faculty of Moscow University, in particular Israel Gelfand, Vladimir Arnold and Andre Kolmogorov, all of whom manage to explain to me hard things so that they seem easy, to, at the other, Darrell Duffie.
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2 of 2 people found the following review helpful
1.0 out of 5 stars Do Not Purchase the Kindle Version of This Book June 29, 2013
Format:Hardcover
The Kindle version of this book is of extremely poor quality. It looks like trash.

In 2013, paying customers who fork over $60 (USD) for the electronic version of this book deserve more than a crappy HTML-ized version of the printed text where the equations do not scale properly or even line up with the baseline of surrounding text.

By flipping through the free sample provided above and comparing it with a copy of the print edition, one can quickly assess just how badly the publisher has wrecked the typesetting of the formulas by converting the text from native PDF to their own proprietary Kindle format. Only certain formats (PDF being foremost among them) can faithfully preserve all of the elegance and beauty that mathematical typesetting systems like LaTeX provide.

By refusing to purchase the electronic version, customers can send a strong message to the publisher that they will not accept an inferior product in order to accommodate their desire for digital rights management.

The "Kindle Replica" format is a potential solution to this problem as the latter is nothing more than a DRM-wrapped version of PDF.

Question to the publisher: why are you not offering a Kindle Replica version of this text, because if you did, I would purchase it immediately.
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