An Introduction to the Mathematics of Financial Derivatives

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Academic Press, Jun 22, 2000 - Business & Economics - 527 pages
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An Introduction to the Mathematics of Financial Derivatives, Second Edition, introduces the mathematics underlying the pricing of derivatives.

The increased 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. This updated edition has six new chapters and chapter-concluding exercises, plus one thoroughly expanded chapter. The text answers the need for a resource targeting professionals, Ph.D. students, and advanced MBA students who are specifically interested in financial derivatives.

This edition is also designed to become 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 and professionals with mathematical, technical, or physics backgrounds.

 

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Excellent book

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
Bibliography
509
Subject Index
513

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About the author (2000)

Professor Neftci completed his Ph.D. at the University of Minnesota and was head of the FAME Certificate program in Switzerland. He taught at the Graduate School, City University of New York; ICMA Centre, University of Reading; and at the University of Lausanne. He was also a Visiting Professor in the Finance Department at Hong Kong University of Science and Technology. Known his books and articles, he was a regular columnist for CBN daily, the most influential financial newspaper in China.