Derivative pricing in discrete time

By: Cutland, Nigel
Contributor(s): Roux, Alet [Co-author]
Material type: TextTextSeries: Springer undergraduate mathematicsPublisher: London Springer-Verlag 2012Description: xv, 325 p. Includes indexISBN: 9781447144076Subject(s): Derivative securities | Discrete-time systems | Financial market derivativeDDC classification: 332.6457 Summary: 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 rigor. http://www.springer.com/in/book/9781447144076
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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 rigor.

http://www.springer.com/in/book/9781447144076

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