Martingale Methods in Financial Modelling / Edition 2

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A new edition of a successful, well-established book that provides the reader with a text focused on practical rather than theoretical aspects of financial modelling

Includes a new chapter devoted to volatility risk

The theme of stochastic volatility reappears systematically and has been revised fundamentally, presenting a much more detailed analyses of interest-rate models

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Editorial Reviews

From the Publisher
From the reviews:

" …This book is an impressive work of scholarship in mathematical finance in the area of option pricing. …contains the latest results and references. …The presence of many explicit formulae, for various types of derivatives, will make this book attractive to practitioners; and its breadth of content will make it useful for anyone who considers research in mathematical finance." (The Australian and New Zealand Journal of Statistics)

" …On the whole, this book presents a very wide range of topics and will appeal to both practitioners and mathematicians. …the second part gives an excellent overview of the state of the art in term structure research and will set a clear standard for some time to come." (MathSciNet)

" ...The book contains a wealth of material expressed in a clear mathematical way. A definite bonus is the very extensive list of references which gives the reader a most welcome basis from which to explore further the realm of mathematical finance. …The book can be used ideally both as an introductory and as an advanced text on mathematical finance." (Short Book Reviews)

" …This book is a comprehensive and up-to-date presentation of the martingale approach for pricing and hedging derivative securities. …provides a wide range of topics and will appeal to both practitioners and mathematicians. When only special cases or models are provided, the authors give useful references that will help researchers to obtain even more insight in the topics." (ZentralblattMATH)

From the reviews of the second edition:

"The book starts at an elementary level of mathematics as well as of market and product knowledge. … In summary, the book gives a very broad insight into advanced modern financial mathematics, in particular fixed income models. … It will serve as a basic source of knowledge of the described topics in financial mathematics." (Ludger Overbeck, Mathematical Reviews, Issue 2005 m)

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Product Details

  • ISBN-13: 9783540209669
  • Publisher: Springer Berlin Heidelberg
  • Publication date: 10/28/2008
  • Series: Stochastic Modelling and Applied Probability Series, #36
  • Edition description: 2nd Corrected ed. 2005. Corr. 4th printing 2008
  • Edition number: 2
  • Pages: 638
  • Product dimensions: 6.40 (w) x 9.50 (h) x 1.70 (d)

Meet the Author

Table of Contents

1 An Introduction to Financial Derivatives 3
2 The Cox-Ross-Rubinstein Model 33
3 Finite Security Markets 69
4 Market Imperfections 87
5 The Black-Scholes Model 109
6 Modifications of the Black-Scholes Model 135
7 Foreign Market Derivatives 159
8 American Options 183
9 Exotic Options 205
10 Continuous-time Security Markets 229
11 Interest Rates and Related Contracts 265
12 Models of the Short-term Rate 281
13 Models of Instantaneous Forward Rates 303
14 Models of Bond Prices and LIBOR Rates 325
15 Option Valuation in Gaussian Models 357
16 Swap Derivatives 387
17 Cross-currency Derivatives 419
App. A Conditional Expectations 455
App. B Ito Stochastic Calculus 459
References 471
Index 507
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