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This text is designed for first courses in financial calculus aimed at students with a good background in mathematics. Key concepts such as martingales and change of measure are introduced in the discrete time framework, allowing an accessible account of Brownian motion and stochastic calculus. The Black-Scholes pricing formula is first derived in the simplest financial context. Subsequent chapters are devoted to increasing the financial sophistication of the models and instruments. The final chapter introduces more advanced topics including stock price models with jumps, and stochastic volatility. A large number of exercises and examples illustrate how the methods and concepts can be applied to realistic financial questions.Read more
- Self-contained textbook inspired by Financial Calculus by Baxter and Rennie
- Extensive exercises, with solutions available to lecturers from firstname.lastname@example.org
- Minimal prerequisites in terms of mathematical sophistication
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Etheridge offers an interesting, self-contained, and readable book highlighting advanced mathematical techniques used to solve complex financial market problems. Recommended." Choice
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- Date Published: September 2002
- format: Hardback
- isbn: 9780521813853
- length: 206 pages
- dimensions: 254 x 178 x 13 mm
- weight: 0.58kg
- contains: 138 exercises
- availability: Available
Table of Contents
1. Single period models
2. Binomial trees and discrete parameter martingales
3. Brownian motion
4. Stochastic calculus
5. The Black-Scholes model
6. Different payoffs
7. Bigger models
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