An Elementary Introduction to Mathematical Finance

The third edition of a textbook on the basics of option pricing designed for both professional traders and undergraduates studying the basics of finance.

Sheldon M. Ross (Author)

9780521192538, Cambridge University Press

Hardback, published 28 February 2011

322 pages, 19 b/w illus. 9 tables 175 exercises
23.1 x 15.7 x 2.3 cm, 0.61 kg

'… provides an accessible and relatively deep insight into basic and advanced topics of mathematical finance … The lucid style of the exposition will be appreciated by readers interested in the topic, and by researchers, students, and practitioners.' European Maths Society Journal

This textbook on the basics of option pricing is accessible to readers with limited mathematical training. It is for both professional traders and undergraduates studying the basics of finance. Assuming no prior knowledge of probability, Sheldon M. Ross offers clear, simple explanations of arbitrage, the Black-Scholes option pricing formula, and other topics such as utility functions, optimal portfolio selections, and the capital assets pricing model. Among the many new features of this third edition are new chapters on Brownian motion and geometric Brownian motion, stochastic order relations and stochastic dynamic programming, along with expanded sets of exercises and references for all the chapters.

1. Probability
2. Normal random variables
3. Geometric Brownian motion
4. Interest rates and present value analysis
5. Pricing contracts via arbitrage
6. The Arbitrage Theorem
7. The Black–Scholes formula
8. Additional results on options
9. Valuing by expected utility
10. Stochastic order relations
11. Optimization models
12. Stochastic dynamic programming
13. Exotic options
14. Beyond geometric motion models
15. Autoregressive models and mean reversion.

Subject Areas: Applied mathematics [PBW], Investment & securities [KFFM]