Designed to form the basis of an undergraduate course in mathematical finance,
this book builds on mathematical models of bond and stock prices and covers
three major areas of mathematical finance that all have an enormous impact on
the way modern financial markets operate, namely: Black-Scholes´ arbitrage
pricing of options and other derivative securities; Markowitz portfolio
optimization theory and the Capital Asset Pricing Model; and interest rates and
their term structure. Assuming only a basic knowledge of probability and
calculus, it covers the material in a mathematically rigorous and complete way
at a level accessible to second or third year undergraduate students. The text
is interspersed with a multitude of worked examples and exercises, so it is
ideal for self-study and suitable not only for students of mathematics, but
also students of business management, finance and economics, and anyone with an
interest in finance who needs to understand the underlying theory. TOC:
Introduction: A Simple Market Model.- Risk-Free Assets.- Risky Assets.-
Discrete Time Market Models.- Portfolio Management.- Forward and Futures
Contracts.- Options: General Properties.- Option Pricing.- Financial
Engineering.- Variable Interest Rates.- Stochastic Interest Rates.- Solutions.-
Bibliography.- Glossary of Symbols.- Index.
