Pricing models for derivatives in modern financial markets are presented in this book. Significant material from current areas of active research can be found in this new edition.

REVIEW

The reviews were from.

A graduate student likes to have a book in their reference collection. The number of textbooks in mathematical finance is increasing faster than the number of revolutionary contributions to the field, but this text stands above the crowd. SIAM Review in December 2005.

The second edition was reviewed.

The book is formatted in a way that makes it easy to read. The number of textbooks in mathematical finance is increasing faster than the number of revolutionary contributions to the field, but this text stands above the crowd. SIAM Reviews, December 2005, byAlexandre D’Aspremont.

The first edition of the book focused on developing the mathematical concepts for the rapidly expanding field of mathematical finance. There are many changes and additions in the second edition. Readers with sound mathematical background are the target audience. It will be a very useful addition to any scholarly library, and should be equally valuable to practitioners interested in the mathematical tools. Theofanis Sapatinas is an author of the Journal of Applied Sciences. There are 32 articles in 2005,

New matieral from current active research areas are added in the second edition. The recent trend in research and applications in the area of risk management is reflected in a new chapter on coherent risk measures. This is an excellent textbook in mathematical finance, and I can definitely recommend it. The ISI has short book reviews.

FROM THE BACK COVER

The mathematics that underpins pricing models for derivatives are presented in this book. The Black-Scholes theory requires sophisticated mathematical tools to build idealized continuous-time models. Many of the underlying ideas can be explained simply. This substantially revised second edition includes a detailed analysis of the Black-Scholes model and its generalizations, American put options, term structure models and consumption-investment problems in order to motivate the technically more demanding continuous-time theory. There is a need for the mathematics of martingales.

Significant material from current areas of active research is added in the new edition.

There is a new chapter on risk measures.

There is a proof of the first fundamental theorem of asset pricing.

The interval for incomplete markets.

The markets are characterization using extended models.

The Black-Sholes model has risk and return and sensitivity analysis.

The treatment is careful and detailed, with a clear focus on options. The reader can move on to the current research literature and use of similar methods for exotic financial instruments.

The text should be useful to graduates with a sound mathematical background who wish to understand the mathematical models used in derivative markets and credit institutions. The first edition has been used successfully in a wide range of Master’s programs in mathematical finance and this new edition should prove even more popular in this expanding market. It should be useful for risk managers and practitioners to master the mathematical tools needed for modern pricing and hedging techniques.

Robert J.Elliott is a professor of finance at the Haskayne School of Business at the University of calgary. He is the author of over 300 research papers and several books, including Stochastic Calculus and Applications, Hidden Markov Models, and Measure Theory and Filtering: Theory and Applications. He is an Associate Editor of the Canadian Applied Mathematics Quarterly. P. Ekkehard Kopp was a Pro-Vice-Chancellor at the University of Hull. He is the author of Martingales and Stochastic Integrals, Analysis. He is on the Editorial Board of Springer Finance.

Robert Elliott is a mathematician of financial markets.

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