Product Description

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.

Product Details

• Amazon Sales Rank: #134417 in Books
• Published on: 2003-07-06
• Original language: English
• Number of items: 1
• Binding: Paperback
• 310 pages

Review

From the reviews:

"This text is an excellent introduction to Mathematical Finance. Armed with a knowledge of basic calculus and probability a student can use this book to learn about derivatives, interest rates and their term structure and portfolio management. The text serves as an easily understood introduction to the economic concepts but also manages to cover the topics in a mathematically rigorous manner."

Zentralblatt MATH

"For the most part, the authors employ just pre-calculus and basic probability theory. Almost all concepts are presented in discrete time. Only later in the book is a small account of calculus and linear algebra used. Given these basic tools, it is surprising how high a level of sophistication the authors achieve, covering such topics as arbitrage-free valuation, binomial trees, and risk-neutral valuation... Despite its elementary nature, the book is mathematically VERY formal. This is excellent for clarifying definitions. Notions such as arbitrage or admissible portfolio are indicated with mathematical precision. The result is mathematically elegant and will appeal to students who have a degree of mathematical sophistication."

www.riskbook.com

"As the authors modestly announce … the book ‘is an excellent financial investment. … The level of exposition is pretty basic … . That makes the book accessible to second year undergraduate students (not only for students of mathematics, but hopefully also for students of business management, finance and economics). … the overall impression of the book is quite positive. The reviewer can only congratulate the authors with successful completion of a difficult task of writing a useful textbook on a traditionally hard topic." (K. Borovkov, The Australian Mathematical Society Gazette, Vol. 31 (4), 2004)

"This text is an excellent introduction to Mathematical Finance. … The text serves as an easily understood introduction to the economic concepts … . The book contains many worked examples and exercises and would make a useful textbook for a first course in Financial Mathematics." (Julann O’Shea, Zentralblatt MATH, Vol. 1035, 2004)

"Designed to form the basis of an undergraduate course in mathematical finance, the text builds on mathematical models of bond and stock prices … . It covers the material … at a level accessible to second or third year undergraduate students. … provides ample material for tutorials, and makes the book ideal for self-study. It is suitable not only for students of mathematics, but also students of business management, finance and economics, and anyone with an interest in finance … ." (Zentralblatt für Didaktik der Mathematik, August, 2004)

"The book … is designed as a textbook for an undergraduate course aimed at 2nd or 3rd year mathematics students and also of business management or economics. … the authors have tried to aim their book at too wide a potential readership. … the authors have written a very useful book. … are to be applauded for the broad scope of this book. … The book contains a number of exercises … . Worked solutions are given at the back … . " (David Applebaum, The Mathematical Gazette, Vol. 88 (512), 2004)

Customer Reviews

A great introduction to financial engineering
This is a great book at a great price. As an undegraduate student reading for a degree in mathematics with financial management, I've found this textbook to be of great help in the derivative securities and portfolio theory modules I am doing this year. There is a nice balance between examples, theory, and exercises (all complete with solutions). The examples and excercises have been particularly helpful to me - they don't just illustrate and consolidate the various topics, but most importantly prepare the ground for the exciting new ideas to come. Compared to other books recommended for my mudules in mathematical finance, this is by far the most readable. What seems to be daunting mathematical theory full of unnesessary abstractions in the other books I have tried, this one has somehow managed to appear easy, indeedd almost obvious when you come to think of it (just look at pricing American options, for example!).

There are a few typos in various places and it is well worth visiting the book's web page at www.springeronline.com/1-85233-330-8 (and click on the accompanying website) for a list of corrections. At the same place, I have also located some nice Excel files that can be downloaed, with numerical solutions to case studies and excercises in the more advanced chapters - these are neatly designed and are of great help in following the text. I just wish there was even more material covered in similar Excel files.

In all respects, a great book this, and well worth spending under 20 quid.

Excellent Starting Place for Financial Software Developers
While shy on the mathematics for the would-be-quants, this treatment of mathematical financial is way beyond the mundane coverage typically seen in MBA-level texts, is widely accessible, and very well written.

The other reviewer's comments on Black-Scholes are wrong. Chapter eight is entirely devoted to the Black-Scholes formula and models and Chapter nine is a study in its applications (hedging the greeks, etc...)

Smarter than many of the more high-level math texts (Joshi, Willmott, Neftci, etc...) in that it is both an introduction to the financial topics as well as the mathematics and links the intuitive (and counter-intuitive) observations of how financial instruments should behave with the formal and mathematical discussion of how they really do behave.

Not nearly as good in the math as the others mentioned.

The very best intro. . .Ideal for self-study
Part of my job is executing derivatives trades and doing risk management. This is the best introduction to financial engineering that I have seen. The authors explain their topic clearly. A major strength of the book is the numerous exercises, WITH WORKED SOLUTIONS. If you work through most of the exercises, your understanding of financial engineering will be greatly enhanced.

This book is ideal for self-study. At under $40, it is better than other books at twice the price. I recommend it without reservation.