An Introduction to the Mathematics of Financial Derivatives book cover

An Introduction to the Mathematics of Financial Derivatives

An Introduction to the Mathematics of Financial Derivatives is a popular, intuitive text that eases the transition between basic summaries of financial engineering to more advanced treatments using stochastic calculus. Requiring only a basic knowledge of calculus and probability, it takes readers on a tour of advanced financial engineering. This classic title has been revised by Ali Hirsa, who accentuates its well-known strengths while introducing new subjects, updating others, and bringing new continuity to the whole. Popular with readers because it emphasizes intuition and common sense, An Introduction to the Mathematics of Financial Derivatives remains the only "introductory" text that can appeal to people outside the mathematics and physics communities as it explains the hows and whys of practical finance problems.

Audience

Upper-division undergraduates and graduate students seeking an introduction to the mathematics and concepts underlying financial derivatives in specific and investment vehicles (options, futures, and other financial engineering products) in general.

Hardbound, 480 Pages

Published: December 2013

Imprint: Academic Press

ISBN: 978-0-12-384682-2

Reviews

  • "Ali Hirsa has done a superb job with this third edition of the very popular Neftci's An Introduction to the Mathematics of Financial Derivatives. New chapters and sections have been added covering in particular credit derivatives (Chapter 23) and jump processes and the associated partial integro-differential equations. The new material on numerical methods, in particular on Fourier techniques (Chapter 22) and calibration (Chapter 25), and added examples and exercises are very welcome. Overall, this new edition offers substantially more that the previous one in all of its chapters. This is a unique sophisticated introduction to financial mathematics accessible to a wide audience. Truly remarkable!"  --Jean-Pierre Fouque, University of California, Santa Barbara

    "The publication of this expansive and erudite text in a new edition by one of the most highly respected scholars in the field should be a welcome event for practitioners and academics alike."  --Lars Tyge Nielsen, Columbia University

    "There are many books on mathematics, probability, and stochastic calculus, but relatively few focus entirely on the pricing and hedging of financial derivatives.  I have used the second edition for finance and financial engineering classes for years, and will continue with the third edition; the book will no doubt remain a valuable reference for industry practitioners as well." --Robert L. Kimmel,  National University of Singapore

    "An excellent introduction to a wide range of topics in pricing financial derivatives with highly accessible mathematical treatment. Its heuristic style in explaining basic mathematical concepts relevant to financial markets greatly facilitates understanding the fundamentals of derivative pricing." - Seppo Pynnonen, Unversity of Vaasa

    "What makes this introductory text unique for students or practitioners without a major in mathematics or physics is that it provides the most helpful heuristics while clearly stating how or why the concepts are useful for practical problems in finance. The timely additions on credit derivatives and PDEs provide considerable value-added in comparison to the second edition."   --Mishael Milaković, University of Bamberg


     


Contents

  • 1: Financial Derivatives: A Brief Introduction

    2: A Primer on Arbitrage Theorem

    3: Review of Deterministic Calculus

    4: Pricing Derivatives: Models and Notations

    5: Tools in Probability Theory

    6: Martingales and Martingale Representations

    7: Wiener Process, Levy Processes, and Rare Events

    8: Differentiation in Stochastic Environments

    9: Integration in Stochastic Environments

    10: Ito's Lemma

    11: The dynamics of Derivatives Prices: Stochastic Differential

    12: Pricing Derivatives Products via Partial Differential Equations

    13: Equivalent Martingale Measures

    14: Equivalent Martingale Measures: Applications

    15: Arbitrage Theorem in a New Setting

    16: Term Structure Modeling and Related Concepts

    17: Approaches to Modeling Term Structure

    18: Conditional Expectations and PDEs

    19: Derivative Pricing via Transform Techniques

    20: Credit Spread and Credit Derivatives

    21: Stopping Times and American-Style Derivatives

    22: A Primer on Calibration and Estimation Techniques

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