The Mathematics of Financial Derivatives: A Student Introduction

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Cambridge University Press, Sep 29, 1995 - Business & Economics - 317 pages
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Finance is one of the fastest growing areas in the modern banking and corporate world. This, together with the sophistication of modern financial products, provides a rapidly growing impetus for new mathematical models and modern mathematical methods. Indeed, the area is an expanding source for novel and relevant "real-world" mathematics. In this book, the authors describe the modeling of financial derivative products from an applied mathematician's viewpoint, from modeling to analysis to elementary computation. The authors present a unified approach to modeling derivative products as partial differential equations, using numerical solutions where appropriate. The authors assume some mathematical background, but provide clear explanations for material beyond elementary calculus, probability, and algebra. This volume will become the standard introduction for advanced undergraduate students to this exciting new field.
  

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Contents

An Introduction to Options and Markets
3
Asset Price Random Walks
18
The BlackScholes Model
33
Partial Differential Equations
58
The BlackScholes Formulae
71
Variations on the BlackScholes Model
90
American Options
106
Finitedifference Methods
135
Barrier Options
206
A Unifying Framework for Pathdependent Options
213
Asian Options
222
Lookback Options
236
Options with Transaction Costs
252
Interest Rate Derivatives
265
Convertible Bonds
286
Hints to Selected Exercises
295

Methods for American Options
165
Binomial Methods
180
Exotic and Pathdependent Options
197

Common terms and phrases

References to this book

MATLAB Guide
Nicholas J. Higham
No preview available - 2005
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About the author (1995)

Paul Wilmott is a researcher, consultant and lecturer in quantitative finance in London, UK. He is founder of Wilmott Associates, a financial consultancy and training firm, from which he publishes "Wilmott" magazine. The Financial Times called him a "cult derivatives lecturer." He is one of the world's leading experts on quantitative finance and derivatives and is renowned for his criticism of popular models and concepts and for his unique, informal writing style.

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