The Story
Filling the void between surveys of the field with relatively light mathematical content and books with a rigorous, formal approach to stochastic integration and probabilistic ideas, Stochastic Financial Models provides a sound introduction to mathematical finance. The author takes a classical applied mathematical approach, focusing on calculations rather than seeking the greatest generality.Developed from the esteemed authors advanced undergraduate and graduate courses at the University of Cambridge, the text begins with the classical topics of utility and the meanvariance approach to portfolio choice. The remainder of the book deals with derivative pricing. The author fully explains the binomial model since it is central to understanding the pricing of derivatives by selffinancing hedging portfolios. He then discusses the general discretetime model, Brownian motion and the BlackScholes model. The book concludes with a look at various interestrate models. Concepts from measuretheoretic probability and solutions to the endofchapter exercises are provided in the appendices.By exploring the important and exciting application area of mathematical finance, this text encourages students to learn more about probability, martingales and stochastic integration. It shows how mathematical concepts, such as the BlackScholes and Gaussian randomfield models, are used in financial situations.
Description
Filling the void between surveys of the field with relatively light mathematical content and books with a rigorous, formal approach to stochastic integration and probabilistic ideas, Stochastic Financial Models provides a sound introduction to mathematical finance. The author takes a classical applied mathematical approach, focusing on calculations rather than seeking the greatest generality.Developed from the esteemed authors advanced undergraduate and graduate courses at the University of Cambridge, the text begins with the classical topics of utility and the meanvariance approach to portfolio choice. The remainder of the book deals with derivative pricing. The author fully explains the binomial model since it is central to understanding the pricing of derivatives by selffinancing hedging portfolios. He then discusses the general discretetime model, Brownian motion and the BlackScholes model. The book concludes with a look at various interestrate models. Concepts from measuretheoretic probability and solutions to the endofchapter exercises are provided in the appendices.By exploring the important and exciting application area of mathematical finance, this text encourages students to learn more about probability, martingales and stochastic integration. It shows how mathematical concepts, such as the BlackScholes and Gaussian randomfield models, are used in financial situations.
