An Introduction to the Mathematics of Financial DerivativesThis popular text, publishing Spring 1999 in its Second Edition, introduces the mathematics underlying the pricing of derivatives. The increase of interest in dynamic pricing models stems from their applicability to practical situations: with the freeing of exchange, interest rates, and capital controls, the market for derivative products has matured and pricing models have become more accurate. Professor Neftci's book answers the need for a resource targeting professionals, Ph.D. students, and advanced MBA students who are specifically interested in these financial products. The Second Edition is designed to make the book the main text in first year masters and Ph.D. programs for certain courses, and will continue to be an important manual for market professionals. 
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This is a great text. Take it slow in the beginning while reading and make sure everything is clear to you. Everything builds very logically. A great educational tool.
Review: An Introduction to the Mathematics of Financial Derivatives
User Review  Gaurav Agalcha  GoodreadsVery nice book Read full review
Contents
Financial Derivatives A Brief Introduction  1 
A Primer on the Arbitrage Theorum  13 
Calculus in Deterministic and Stochastic Environments  45 
Pricing Derivatives Models and Notation  77 
Tools in Probability Theory  91 
Martingales and Martingale Representations  119 
Differentation in Stochastic Environments  156 
The Weiner Process and Rare Events in Financial Markets  173 
The BlackScholes PDE  296 
Pricing Derivative Products  312 
Equivalent Martingale Measures  345 
New Results and Tools for InterestSensitive Securities  368 
Arbitrage Theorem in a New Setting Normalization and Random Interest Rates  379 
Modeling Term Structure and Related Concepts  407 
Classical and HJM Approaches to Fixed Income  426 
Classical PDE Analysis for Interest Rate Derivatives  451 
Integration in Stochastic Environments  204 
Itos Lemma  230 
The Dynamics of Derivative Prices  252 
Pricing Derivative Products  275 
Relating Conditional Expectations to PDEs  467 
Stopping Times and AmericanType Securities  489 
509  
513  
Common terms and phrases
approximation arbitrage arbitragefree arbitragefree price asset prices assume assumption binomial Black–Scholes bond prices boundary condition calculate call option chapter coefﬁcients conditional expectation consider constant continuoustime convergence corresponding deﬁned deﬁnition denoted depend derivative asset deterministic diffusion discount bond discussed drift dynamics equal example ﬁnancial markets ﬁnd ﬁnite ﬁrst ﬁxed formula forward rates function Girsanov theorem given Hence increments inﬁnite inﬁnitesimal information set interest rate interest rate derivatives interval Ito integral Ito’s Lemma jumps Markov martingale maturity normally distributed notation obtain parameters payoff portfolio probability measure process Wt random variable represents respect righthand side risk riskfree rate riskneutral measure satisﬁed solution spot rate spotrate stochastic calculus stochastic differential equation stochastic processes Suppose Taylor series term trajectories underlying asset unpredictable variance volatility Wiener process zero