Mathematics of Finance: Modeling and Hedging

Mathematics of Finance: Modeling and Hedging

by Victor Goodman, Joseph G. Stampfli
     
 

ISBN-10: 0821847937

ISBN-13: 9780821847930

Pub. Date: 03/10/2009

Publisher: American Mathematical Society

This book is ideally suited for an introductory undergraduate course on financial engineering. It explains the basic concepts of financial derivatives, including put and call options, as well as more complex derivatives such as barrier options and options on futures contracts. Both discrete and continuous models of market behavior are developed in this book. In

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Overview

This book is ideally suited for an introductory undergraduate course on financial engineering. It explains the basic concepts of financial derivatives, including put and call options, as well as more complex derivatives such as barrier options and options on futures contracts. Both discrete and continuous models of market behavior are developed in this book. In particular, the analysis of option prices developed by Black and Scholes is explained in a self-contained way, using both the probabilistic Brownian Motion method and the analytical differential equations method. The book begins with binomial stock price models, moves on to multistage models, then to the Cox-Ross-Rubinstein option pricing process, and then to the Black-Scholes formula. Other topics presented include Zero Coupon Bonds, forward rates, the yield curve, and several bond price models. The book continues with foreign exchange models and the Keynes Interest Rate Parity Formula, and concludes with the study of country risk, a topic not inappropriate for the times. In addition to theoretical results, numerical models are presented in much detail. Each of the eleven chapters includes a variety of exercises.

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Product Details

ISBN-13:
9780821847930
Publisher:
American Mathematical Society
Publication date:
03/10/2009
Series:
Pure and Applied Undergraduate Texts Series, #7
Edition description:
New Edition
Pages:
250
Product dimensions:
7.00(w) x 10.20(h) x 0.80(d)

Table of Contents

1Financial Markets1
2Binomial Trees, Replicating Portfolios and Arbitrage25
3The Models for Stocks and Options44
4Using Spreadsheets to Compute Stock and Option Trees71
5Continuous Models and the Black-Scholes Formula81
6The Analytic Approach to Black-Scholes109
7Hedging122
8Bond Models and Interest Rate Options137
9Computational Methods for Bonds190
10Currency Markets and Foreign Exchange Risks207
11International Political Risk Analysis221
Answers to Selected Exercises241
Index247

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