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Financial Calculus
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  • 41 b/w illus. 9 tables 23 exercises
  • Page extent: 244 pages
  • Size: 228 x 152 mm
  • Weight: 0.58 kg

Library of Congress

  • Dewey number: 332.63/221
  • Dewey version: 20
  • LC Classification: HG6024.A3 B39 1996
  • LC Subject headings:
    • Derivative securities--Prices--Mathematics

Library of Congress Record


 (ISBN-13: 9780521552899 | ISBN-10: 0521552893)

The rewards and dangers of speculating in the modern financial markets have come to the fore in recent times with the collapse of banks and bankruptcies of public corporations as a direct result of ill-judged investment. At the same time, individuals are paid huge sums to use their mathematical skills to make well-judged investment decisions. Here now is the first rigorous and accessible account of the mathematics behind the pricing, construction and hedging of derivative securities. Key concepts such as martingales, change of measure, and the Heath-Jarrow-Morton model are described with mathematical precision in a style tailored for market practitioners. Starting from discrete-time hedging on binary trees, continuous-time stock models (including Black-Scholes) are developed. Practicalities are stressed, including examples from stock, currency and interest rate markets, all accompanied by graphical illustrations with realistic data. A full glossary of probabilistic and financial terms is provided. This unique book will be an essential purchase for market practitioners, quantitative analysts, and derivatives traders.

• First treatment combining both market knowledge and mathematical rigour; numerous graphs, charts and examples • First clear rigorous discussion of interest rate models • Written with market practitioners in mind, in clear intelligent style


The parable of the bookmaker; 1. Introduction; 2. Discrete processes; 3. Continuous processes; 4. Pricing market securities; 5. Interest rates; 6. Bigger models; Appendix 1. Further reading; Appendix 2. Notation; Appendix 3. Answers to exercises; Appendix 4. Glossary of technical terms; Index.


'… a very readable and useful introduction to the pricing of derivatives … A recommendable book.' Wil Schilders, ITW Nieuws

'… the first rigorous and accessible account of the mathematics behind the pricing, construction and hedging of derivative securities.' L'Enseignement Mathématique

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