XWe have detected your location as outside the U.S/Canada, if you think this is wrong, you can choose your location.

Macmillan Higher Education

Derivative Pricing in Discrete Time

Author(s):
Publisher:

Springer

Pages: 325
Further Actions:

Recommend to library

AVAILABLE FORMATS

Paperback - 9781447144076

07 September 2012

$49.95

In stock

Ebook - 9781447144083

13 September 2012

$49.95

In stock

This book provides an introduction to the mathematical modelling of real world financial markets and the rational pricing of derivatives, which is part of the theory that not only underpins modern financial practice but is a...

Show More

This book provides an introduction to the mathematical modelling of real world financial markets and the rational pricing of derivatives, which is part of the theory that not only underpins modern financial practice but is a thriving area of mathematical research. The central theme is the question of how to find a fair price for a derivative; defined to be a price at which it is not possible for any trader to make a risk free profit by trading in the derivative. 


To keep the mathematics as simple as possible, while explaining the basic principles, only discrete time models with a finite number of possible future scenarios are considered. The theory examines the simplest possible financial model having only one time step, where many of the fundamental ideas occur, and are easily understood. Proceeding slowly, the theory progresses to more realistic models with several stocks and multiple time steps, and includes a comprehensive treatment of incomplete models. The emphasis throughout is on clarity combined with full rigour. 

The later chapters deal with more advanced topics, including how the discrete time theory is related to the famous continuous time Black-Scholes theory, and a uniquely thorough treatment of American options. The book assumes no prior knowledge of financial markets, and the mathematical prerequisites are limited to elementary linear algebra and probability. This makes it accessible to undergraduates in mathematics as well as students of other disciplines with a mathematical component. It includes numerous worked examples and exercises, making it suitable for self-study.

Show Less

Provides a complete and rigorous treatment of no-arbitrage pricing for both European and American derivatives in complete and incomplete discrete markets

Requires only elementary linear algebra and probability theory, hence accessible to students of quantitative subjects (such as economics or physics) as well as students of mathematics

Provides a foundation for understanding the more advanced theory of continuous-time models

Contains copious fully worked out examples and numerous class-tested exercises (many with solutions)

Derivative Pricing and Hedging
A Simple Market Model
Single-Period Models
Multi-Period Models: No-Arbitrage Pricing
Multi-Period Models: Risk-Neutral Pricing
The Cox-Ross-Rubinstein model
American Options
Advanced Topics.
From the reviews:
“Derivative Pricing in Discrete Time introduces the basic ideas of financial derivatives with a minimum of prerequisites. … Indeed, as an undergraduate-level mathematical treatment of the subject, this is the best textbook I have seen. … I would recommend the book to students preparing for financial careers, such as actuaries. Practical pricing models should make more sense with the theoretical grounding provided by this book.” (John Curran, MAA Reviews, May, 2014)
Add a review

​Nigel J. Cutland is Professor of Mathematics at the University of York, UK. 


Alet Roux also teaches at the University of York, UK, where she is Chair of the Board of Examiners and a member of the Mathematical Finance and Stochastic Analysis Research Group.

Show More

​Nigel J. Cutland is Professor of Mathematics at the University of York, UK. 


Alet Roux also teaches at the University of York, UK, where she is Chair of the Board of Examiners and a member of the Mathematical Finance and Stochastic Analysis Research Group.

Show Less

Best Sellers