This book contains a comprehensive account of pricing models of financial derivatives. It covers risk neutral valuation theory, martingale measure, and tools in stochastic calculus required for the understanding of option pricing theory. This second edition, now featuring new material, focuses on the valuation principles that are common to most derivative securities.
A wide range of financial derivatives commonly traded in the equity and fixed income markets are analysed, emphasising aspects of pricing, hedging and practical usage. This second edition features additional emphasis on the discussion of Ito calculus and Girsanovs Theorem, and the risk-neutral measure and equivalent martingale pricing approach.
A new chapter on credit risk models and pricing of credit derivatives has been added. Up-to-date research results are provided by many useful exercises. Review: From the reviews of the second edition: Mathematical Models of Financial Derivatives is a ... comprehensive collection of known facts and techniques, as well as a methodologically thought-through textbook on derivative pricing in financial markets.
The book is written both for a novice who will profit from its numerous and well-conceived exercises, and a practitioner who wants to brush up on finer points of the classical pricing theory behind a specific financial product. ... it will certainly attract many a non-mathematician with an interest in quantitative methods in finance ... . (Gordan Zitkovic, The Mathematical Association of America, March, 2009) This book is written mainly as a textbook of modeling on derivative pricing theory for the students in financial engineering, computational finance etc.
It provides basic knowledge of mathematical theory and applications of the financial derivatives. ... This book can also be used as an Instructor's Manual of reference of those in financial institutions. (Gong Guanglu, Zentralblatt MATH, Vol. 1146, 2008)
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