Including a new chapter on credit risk modelling and new developments in econometrics, the new edition of this bestselling resource provides an accessible overview of financials models based on jump processes used in risk management and option pricing. After presenting the necessary mathematics, the text presents theoretical, numerical, and empirical issues. While the emphasis is on demystifying technical difficulties so as to better understand applications, mathematical results are presented in a rigorous, though self-contained, manner, accessible to any reader having basic knowledge of the Black Scholes model. Concepts are illustrated through many numerical and empirical examples.