The Concepts and Practice of Mathematical Finance (Mathematics, Finance and Risk)

An ideal introduction for those starting out as practitioners of mathematical finance, this book provides a clear understanding of the intuition behind derivatives pricing, how models are implemented, and how they are used and adapted in practice. Strengths and weaknesses of different models, e.g. Black-Scholes, stochastic volatility, jump-diffusion and variance gamma, are examined. Both the theory and the implementation of the industry-standard LIBOR market model are considered in detail. Each pricing problem is approached using multiple techniques including the well-known PDE and martingale approaches. This second edition contains many more worked examples and over 200 exercises with detailed solutions. Extensive appendices provide a guide to jargon, a recap of the elements of probability theory, and a collection of computer projects. The author brings to this book a blend of practical experience and rigorous mathematical background and supplies here the working knowledge needed to become a good quantitative analyst. Concept-MJ.01......Page 1 Concept-MJ.03......Page 31 Concept-MJ.05......Page 57 Concept-MJ.06......Page 82 Concept-MJ.07......Page 99 Concept-MJ.08......Page 110 Concept-MJ.08a......Page 112 Concept-MJ.09......Page 120 Concept-MJ.11......Page 139 Concept-MJ.12......Page 151 Concept-MJ.13......Page 159 Concept-MJ.14......Page 168 Concept-MJ.15......Page 189 Concept-MJ.16......Page 203 Concept-MJ.18......Page 215 Concept-MJ.AA......Page 226 Concept-MJ.AD......Page 243 Concept-MJ.AE......Page 265