The Mathematics of Financial Modelingand Investment Management

Index Page 762 Wednesday, February 4, 2004 1:13 PM

762 Index

Densities

Fourier transform, 192–193

process, 465. See also Equiva-

lent Martingales

Depository institutions, 43–44

investments, 753

Derivative instruments, 26, 70,

85, 742

contrast. See Cash

value, 423

Derivatives, 21. See also Higher

order derivatives; n par-

tial derivatives

application. See First deriva-

tive; Second derivative

computation, rules, 107–111

market, 26

pricing, 12, 89. See also Inter-

est rates

valuation. See European sim-

ple derivatives

Derivatives (calculus), 91

Derman, Emanuel, 638. See also

Black-Derman-Toy Model

Descriptive metafile, 16

Descriptors, 532

Determinants, 148–149

Determination, coefficient, 518

Deterministic environment, 218, 640

Deterministic equivalents, 676

Deterministic series, 296

Deterministic short-term inter-

est rates, 619

Deterministic trend, 309

Dhrymes, Phoebus J., 436

Diaconis, Persi, 327

Diagonal matrices, creation, 161–

162



Diagonal variance-covariance

matrix, 534

Diagonalization/similarity, 161–162

Diagonals, 145–146. See also

Antidiagonals

matrices, 146–147

Dickey-Fuller (DF) test, 312–

313. See also Augmented
     Dickey-Fuller test
     Diebold, Francis X., 346, 378
     Difference equations, 239. See
     also Recursive difference
     equations
     Difference method. See Finite
     difference method
     Difference quotient, 106, 255
     Difference stationary series, 310
     Differentiable function, 106–107
     Differential equations, 239. See
     also Linear differential
     equation; Ordinary dif-
     ferential equations; Par-
     tial differential equations;
     Stochastic differential
     equations
     definition, 240

degree, 241

first-order system, 243

general solution, 242–243

solution, 92

Differentiation, 92, 106–111

rule. See Termwise differenti-

ation

Diffusion

equation, 259–261

solution, 261–263

invariance principle, 461–462

models. See Spread-based dif-

fusion models

volatility, 447

Dimensional distributions, 228

Dimensionality

curse, 345

reduction, 309

Dimensions, generalization, 276–278

Dimitriu, Anca, 344, 545

Dirac delta, 228

function, 628

Dirac measure, 371

Direct investments, 35–36

Discontinuous function, 104–105

Discount bond. See Pure risk-

free discount bond

Discount factor. See Risk-free

discount factor

Discount function, 606–607, 625

Discrete probabilities, 171

Discrete quantities, 99

Discrete random variables, col -

lection, 407

Discrete random walk, 225

Discrete-state discrete-time envi -

ronment, 623

Discrete-state discrete-time setting,

445



Discrete-time continuous-state

setting, arbitrage pricing,

430–434

Discrete-time models, 283

Discrete-time processes, 671

Discretization scheme, 263

Disjoint additivity. See Probability

Distances, 96–100

Distributed sequences. See Identi -

cally distributed sequences;

Independent distributed

sequences

Distributions, 174–175. See also

Fat-tailed distributions;

Max-stable distributions;

Stable distributions

functions, 174–175

law, 175

Distributive properties, 159

Diversifiable risk, 515, 525

Diversification, 36, 472–474.

See also Cost-effective

diversification

quantification, 472

usage, 81

Dividends

factor, 520

payment, 49

usage, 45

yield, 519

Divisibility/denomination, 22

Dodd, David, 567

Dollar convexity, 119, 122

Dollar duration, 113–114, 122

Domain of attraction. See Attraction

Dorfleitner, D., 353

Dow Jones Industrial Average

(DJIA), 46–47, 545

Dow Jones-Reuters, 17

Down-and-out barrier option, 695

Downside dollar, 502

Downside risk, 66

Drees, H., 377

Duda, Richard O., 562

Duffie, Darrell, 625, 685, 687,

696, 706, 729, 740

Duffie-Singleton Model, 697,

706–710

Duration. See Dollar duration;

Effective duration; Rate

duration

usage, 115–116

Durlaf, S.N., 380

Dynamic cointegration, 540

Dynamic Cointegration Approach, 342

Dynamic market models. See Returns

Dynamic models. See Prices

Dynamic nonlinear self-rein-

forcing cascades, 380

Dynamic trading, 427

Dynkin, Lev, 651, 652, 654,

656, 657, 660, 662, 663

EAFE index, 497–498

EAFE international equity, 504–506

Earnings growth. See Estimated

earnings growth

Earnings yield, 589

Eber, Jean-Marc, 748

Econometrics, 337–338. See also

Financial econometrics

models, 511

Economic activity, 593

Economic behavior, quantitative

laws, 76–78

Economic growth rate, 175

Economic modeling, 11

Economic quantities, 168. See

also Time-variable eco-

nomic quantities

Economic theories. See Term

structure

Economic value, 66–67

Economic variables, prima facie

trends, 287

Econophysics, 78

Edwards, Mark, 551

Effective duration, 118