Discrete Models of Financial Markets (Mastering Mathematical Finance)
Cambridge University Press
Edition: Illustrated, 2/23/2012
EAN 9781107002630, ISBN10: 110700263X
Hardcover, 192 pages, 23.6 x 15.5 x 1.5 cm
Language: English
This book explains in simple settings the fundamental ideas of financial market modelling and derivative pricing, using the no-arbitrage principle. Relatively elementary mathematics leads to powerful notions and techniques - such as viability, completeness, self-financing and replicating strategies, arbitrage and equivalent martingale measures - which are directly applicable in practice. The general methods are applied in detail to pricing and hedging European and American options within the Cox–Ross–Rubinstein (CRR) binomial tree model. A simple approach to discrete interest rate models is included, which, though elementary, has some novel features. All proofs are written in a user-friendly manner, with each step carefully explained and following a natural flow of thought. In this way the student learns how to tackle new problems.
Preface
1. Introduction
2. Single-step asset pricing models
3. Multi-step binomial model
4. Multi-step general models
5. American options
6. Modelling bonds and interest rates
Index.