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The Concepts and Practice of Mathematical Finance
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  • 78 b/w illus. 150 exercises
  • Page extent: 492 pages
  • Size: 247 x 174 mm
  • Weight: 1.24 kg

Library of Congress

  • Dewey number: 332/.01/51
  • Dewey version: 22
  • LC Classification: HG6024.A3 J67 2003
  • LC Subject headings:
    • Derivative securities--Prices--Mathematical models
    • Options (Finance)--Prices--Mathematical models
    • Interest rates--Mathematical models
    • Finance--Mathematical models
    • Investments--Mathematics

Library of Congress Record


 (ISBN-13: 9780521823555 | ISBN-10: 0521823552)

DOI: 10.2277/0521823552

  • Published December 2003

Replaced by 9780521514088

 (Stock level updated: 02:09 GMT, 28 November 2015)


For those starting out as practitioners of mathematical finance, this is an ideal introduction. It provides the reader with a clear understanding of the intuition behind derivatives pricing, how models are implemented, and how they are used and adapted in practice. Strengths and weaknesses of different models, e.g. Black-Scholes, stochastic volatility, jump-diffusion and variance gamma, are examined. Both the theory and the implementation of the industry-standard LIBOR market model are considered in detail. Uniquely, the book includes extensive discussion of the ideas behind the models, and is even-handed in examining various approaches to the subject. Thus each pricing problem is solved using several methods. Worked examples and exercises, with answers, are provided in plenty, and computer projects are given for many problems. The author brings to this book a blend of practical experience and rigorous mathematical background, and supplies here the working knowledge needed to become a good quantitative analyst.

• Covers both martingale and PDE approach to the subject and discusses multiple approaches to each problem • Spends a lot of time on the underlying ideas and intuition behind the models; includes computer projects • Covers alternative models such as stochastic volatility, jump diffusion and variance gamma as well as the conventional Black–Scholes


Preface; 1. Risk; 2. Pricing methodologies and arbitrage; 3. Trees and option pricing; 4. Practicalities; 5. The Ito calculus; 6. Risk neutrality and martingale measures; 7. The practical pricing of a European option; 8. Continuous barrier options; 9. Multi-look exotic options; 10. Static replication; 11. Multiple sources of risk; 12. Options with early exercise features; 13. Interest rate derivatives; 14. The pricing of exotic interest rate derivatives; 15. Incomplete markets and jump-diffusion processes; 16. Stochastic volatility; 17. Variance gamma models; 18. Smile dynamics and the pricing of exotic options; Appendix A. Financial and mathematical jargon; Appendix B. Computer projects; Appendix C. Elements of probability theory; Appendix D. Hints and answers to questions; Bibliography; Index.


'The book is intended as an introduction for a numerate person to the discipline of mathematical finance. In this, Mark Joshi succeeds admirably … an excellent starting point for a numerate person in the field of mathematical finance.' Risk Magazine

'The author allows the reader as often as possible to get an intuition for the models and concepts. Helpful information is given on how to use and implement these models and concepts in practical terms. This practice-orientation makes this book different from others belonging to this category … the text is also well suited as a textbook for a quantitative-oriented introductory course on finance at universities or other academic institutions … one can say that this introductory book in offering a well balanced and up-to-date introduction to the theory and practice of mathematical finance overshadows many other books available on the same subject.' Zentralblatt MATH

'The book has been very nicely produced by Cambridge University Press. I would certainly recommend that anyone teaching an introductory or intermediate course on this topic seriously consider this book as a potential course text.' International Statistical Institute

'The set-up of this book certainly meets the needs of the audience for whom this book is written. Moreover, the author brings the material in a very comprehensive way leading to new or better insights in several aspects of the material. An innovation is that besides worked out examples and exercises, a list of computer projects are included which encourage the reader to implement the models. This certainly adds to the learning process.' Kwantitatieve Methoden

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