The book has been tested and refined through years of classroom teaching experience. With an abundance of examples, problems, and fully worked out solutions, the text introduces the financial theory and relevant mathematical methods in a mathematically rigorous yet engaging way.
This textbook provides complete coverage of continuous-time financial models that form the cornerstones of financial derivative pricing theory. Unlike similar texts in the field, this one presents multiple problem-solving approaches, linking related comprehensive techniques for pricing different types of financial derivatives.
- In-depth coverage of continuous-time theory and methodology
- Numerous, fully worked out examples and exercises in every chapter
- Mathematically rigorous and consistent, yet bridging various basic and more advanced concepts
- Judicious balance of financial theory and mathematical methods
- Guide to Material
This revision contains:
- Almost 150 pages worth of new material in all chapters
- A appendix on probability theory
- An expanded set of solved problems and additional exercises
- Answers to all exercises
This book is a comprehensive, self-contained, and unified treatment of the main theory and application of mathematical methods behind modern-day financial mathematics.
The text complements Financial Mathematics: A Comprehensive Treatment in Discrete Time, by the same authors, also published by CRC Press.
Part I: Stochastic Calculus with Brownian Motion
1. One-Dimensional Brownian Motion and Related Processes
2. Introduction to Continuous-Time Stochastic Calculus
Part II Continuous-Time Modelling
3. Risk-Neutral Pricing in the (B; S) Economy: One Underlying Stock
4. Risk-Neutral Pricing in a Multi-Asset Economy
5. American Options
6. Interest-Rate Modelling and Derivative Pricing
7. Alternative Models of Asset Price Dynamics
A. Essentials of General Probability Theory
B. Some Useful Integral (Expectation) Identities and Symmetry Properties
of Normal Random Variables
C. Answers and Hints to Exercises
D. Glossary of Symbols and Abbreviations