Product Description

Stochastic Calculus for Finance evolved from the first ten years of the Carnegie Mellon Professional Master's program in Computational Finance. The content of this book has been used successfully with students whose mathematics background consists of calculus and calculus-based probability. The text gives both precise statements of results, plausibility arguments, and even some proofs, but more importantly intuitive explanations developed and refine through classroom experience with this material are provided. The book includes a self-contained treatment of the probability theory needed for stochastic calculus, including Brownian motion and its properties. Advanced topics include foreign exchange models, forward measures, and jump-diffusion processes.

This book is being published in two volumes. The first volume presents the binomial asset-pricing model primarily as a vehicle for introducing in the simple setting the concepts needed for the continuous-time theory in the second volume.

Chapter summaries and detailed illustrations are included. Classroom tested exercises conclude every chapter. Some of these extend the theory and others are drawn from practical problems in quantitative finance.

Advanced undergraduates and Masters level students in mathematical finance and financial engineering will find this book useful.

Steven E. Shreve is Co-Founder of the Carnegie Mellon MS Program in Computational Finance and winner of the Carnegie Mellon Doherty Prize for sustained contributions to education.

Product Details

• Amazon Sales Rank: #20620 in Books
• Published on: 2005-06-28
• Original language: English
• Number of items: 1
• Binding: Paperback
• 187 pages

Features

• ISBN13: 9780387249681
• Condition: NEW
• Notes: Brand New from Publisher. No Remainder Mark.
• Click here to view our Condition Guide and Shipping Prices

Review

From the reviews of the first edition:

Steven Shreve’s comprehensive two-volume Stochastic Calculus for Finance may well be the last word, at least for a while, in the flood of Master’s level books.... a detailed and authoritative reference for "quants” (formerly known as "rocket scientists”). The books are derived from lecture notes that have been available on the Web for years and that have developed a huge cult following among students, instructors, and practitioners. The key ideaspresented in these works involve the mathematical theory of securities pricing based upon the ideas of classical finance.

...the beauty of mathematics is partly in the fact that it is self-contained and allows us to explore the logical implications of our hypotheses. The material of this volume of Shreves’s text is a wonderful display of the use of mathematical probability to derive a large set of results from a small set of assumptions.

In summary, this is a well-written text that treats the key classical models of finance through an applied probability approach. It is accessible to a broad audience and has been developed after years of teaching the subject. It should serve as an excellent introduction for anyone studyin the mathematics of the classical theory of finance.

-- SIAM, 2005

"This is the first of the two-volume series evolving from the author’s mathematics courses in M.Sc. Computational Finance program at Carnegie Mellon University (USA). The content of this book is organized such as to give the reader precise statements of results, plausibility arguments, mathematical proofs and, more importantly, the intuitive explanations of the financial and economic phenomena. Each chapter concludes with summary of the discussed matter, bibliographic notes, and a set of really useful exercises." (Neculai Curteanu, Zentralblatt MATH, Vol. 1068, 2005)

Customer Reviews

One of the best!
It would be hard to overstate my enthusiasm for this text and its companion volume. In field that is too frequently represented by poorly thought out drafts rushed to market or by advanced mathematical treatments that are not easily understood by individuals more focused on practice, Shreve's texts stand out by being both rigorous and accessible with well thought out examples and exercises.

This particular volume, covering binomial models, covers advanced concepts in a discrete setting. For some it will represent a waste of time and those individuals are best advised to skip to Volume II. However, many intelligent students who are not so comfortable with abstract mathematics will find this a simple and concrete exposition that can serve as a bridge to more advanced theory.

A gentle introduction
I am always a fan of books that can simplify advanced concepts instead of drowning the reader in rigour. Shreve's introduction to probablistic asset pricing is gentle, covering basic stochastic processes, the concepts behind derivative pricing and hedging, as well as setting up the reader for subsequent readings. It's one of those books that you come back to when you are stuck with a problem from a conceptual point of view because things are explained in the book at an intuitive level.
All in all, a good foundation book or reference for starting quants.

Very good to understand the basics of pricing-theory.
This book is great book about theory. Using a simple binomial tree as asset evolution model, all key notions are introduced. Neutral-risk probabilities come up in a simple, natural way, and I never found such a clear explanation of the the change of measure and its meaning in finances. Examples help to understand every ussue.

The only case in which you should not buy it: if you are looking for real-market instruments and techniques.