Mathematical Financial Economics: A Basic Introduction (Springer Texts in Business and Economics)

This textbook is an elementary introduction to the key topics in mathematical finance and financial economics - two realms of ideas that substantially overlap but are often treated separately from each other. Our goal is to present the highlights in the field, with the emphasis on the financial and economic content of the models, concepts and results. The book provides a novel, unified treatment of the subject by deriving each topic from common fundamental principles and showing the interrelations between the key themes. Although the presentation is fully rigorous, with some rare and clearly marked exceptions, the book restricts itself to the use of only elementary mathematical concepts and techniques. No advanced mathematics (such as stochastic calculus) is used. Front Matter....Pages i-ix Front Matter....Pages 1-1 Portfolio Selection: Introductory Comments....Pages 3-9 Mean-Variance Portfolio Analysis: The Markowitz Model....Pages 11-18 Solution to the Markowitz Optimization Problem....Pages 19-25 Properties of Efficient Portfolios....Pages 27-32 The Markowitz Model with a Risk-Free Asset....Pages 33-41 Efficient Portfolios in a Market with a Risk-Free Asset....Pages 43-51 Capital Asset Pricing Model (CAPM)....Pages 53-59 CAPM Continued....Pages 61-67 Factor Models and the Ross-Huberman APT....Pages 69-81 Problems and Exercises I....Pages 83-102 Front Matter....Pages 103-103 Dynamic Securities Market Model....Pages 105-114 Risk-Neutral Pricing....Pages 115-123 The Cox–Ross–Rubinstein Binomial Model....Pages 125-135 American Derivative Securities....Pages 137-144 From Binomial Model to Black–Scholes Formula....Pages 145-155 Problems and Exercises II....Pages 157-165 Front Matter....Pages 167-167 Capital Growth Theory....Pages 169-176 Capital Growth Theory: Continued....Pages 177-186 General Equilibrium Analysis of Financial Markets....Pages 187-195 Behavioral Equilibrium and Evolutionary Dynamics....Pages 197-204 Front Matter....Pages 167-167 Problems and Exercises III....Pages 205-212 Back Matter....Pages 213-224