The Mathematics of Financial Derivatives: A Student Introduction
Cambridge University Press, 11/9/1995
EAN 9780521497893, ISBN10: 0521497892
Paperback, 334 pages, 22.9 x 15.2 x 1.8 cm
Language: English
Finance is one of the fastest growing areas in the modern banking and corporate world. This, together with the sophistication of modern financial products, provides a rapidly growing impetus for new mathematical models and modern mathematical methods; the area is an expanding source for novel and relevant 'real-world' mathematics. In this book the authors describe the modelling of financial derivative products from an applied mathematician's viewpoint, from modelling through analysis to elementary computation. A unified approach to modelling derivative products as partial differential equations is presented, using numerical solutions where appropriate. Some mathematics is assumed, but clear explanations are provided for material beyond elementary calculus, probability, and algebra. Over 140 exercises are included. This volume will become the standard introduction to this exciting new field for advanced undergraduate students.
Part I. Basic Option Theory
1. An introduction to options and markets
2. Asset price random walks
3. The Black-Scholes model
4. Partial differential equations
5. The Black–Scholes formulae
6. Variations on the Black-Scholes model
7. American options
Part II. Numerical Methods
8. Finite-difference methods
9. Methods for American options
10. Binomial methods
Part III. Further Option Theory
11. Exotic and path-dependent options
12. Barrier options
13. A unifying framework for path-dependent options
14. Asian options
15. Lookback options
16. Options with transaction costs
Part IV. Interest Rate Derivative Products
17. Interest rate derivatives
18. Convertible bonds
Hints to selected exercises
Bibliography
Index.
'The layout is good and clear, so is the style of notation ... overall this is an excellent tool for both mathematicians interested in the world of finance as well as finance practitioners keen to rebuild the foundations of their knowledge.' Rudi Bogni, Times Higher Education Supplement