Introduction to Option Pricing Theory

Since the appearance of seminal works by R. Merton, and F. Black and M. Scholes, shastic processes have assumed an increasingly important role in the development of the mathematical theory of finance. This work examines, in some detail, that part of shastic finance pertaining to option pricing theory. Thus the exposition is confined to areas of shastic finance that are relevant to the theory, omitting such topics as futures and term-structure. This self-contained work begins with five intro...