Product Description

The purpose of this book is to provide a rigorous yet accessible introduction to the modern financial theory of security markets. The main subjects are derivatives and portfolio management. The book is intended to be used as a text by advanced undergraduates and beginning graduate students. It is also likely to be useful to practicing financial engineers, portfolio manager, and actuaries who wish to acquire a fundamental understanding of financial theory. The book makes heavy use of mathematics, but not at an advanced level. Various mathematical concepts are developed as needed, and computational examples are emphasized.

Product Details

• Amazon Sales Rank: #748904 in Books
• Published on: 1997-07-14
• Original language: English
• Number of items: 1
• Binding: Hardcover
• 262 pages

Review
"I believe that this is an excellent text for undergraduate or MBA classes on Mathematical Finance. The bulk of the book describes a model with finitely many, discrete trading dates, and a finite sample space, thus it avoids the technical difficulties associated with continuous time models. The major strength of this book is its careful balance of mathematical rigor and intuition." Peter Lakner, New York University

From the Back Cover
This book is designed to serve as a textbook for advanced undergraduate and beginning graduate students who seek a rigorous yet accessible introduction to the modern financial theory of security markets. This is a subject that is taught in both business schools and mathematical science departments. The full theory of security markets requires knowledge of continuous time stochastic process models, measure theory, mathematical economics, and similar prerequisites which are generally not learned before the advanced graduate level. Hence a proper study of the full theory of security markets requires several years of graduate study. However, by restricting attention to discrete time models of security prices it is possible to acquire mathematics. In particular, while living in a discrete time world it is possible to learn virtually all of the important financial concepts. The purpose of this book is to provide such an introductory study.

There is still a lot of mathematics in this book. The reader should be comfortable with calculus, linear algebra, and probability theory that is based on calculus, (but not necessarily measure theory). Random variables and expected values will be playing important roles. The book will develop important notions concerning discrete time stochastic processes; prior knowledge here will be useful but is not required. Presumably the reader will be interested in finance and thus will come with some rudimentary knowledge of stocks, bonds, options, and financial decision making. The last topic involves utility theory, of course; hopefully the reader will be familiar with this and related topics of introductory microeconomic theory. Some exposure to linear programming would be advantageous, but not necessary.

The aim of this book is to provide a rigorous treatment of the financial theory while maintaining a casual style. Readers seeking institutional knowledge about securities, derivatives, and portfolio management should look elsewhere, but those seeking a careful introduction to financial engineering will find that this is a useful and comprehensive introduction to the subject.

About the Author
Stanley Pliska is the founding editor of the scholarly journal Mathematical Finance. He is noted for his fundamental research on the mathematical and economic theory of security prices, especially his development of important bridges between stochastic calculus and arbitrage pricing theory as well as his discovery of the risk neutral computational approach for portfolio optimization problems. He is currently teaching and researching in the areas of interest rate derivatives and dynamic asset allocation.

Customer Reviews

Clear & concise
Pliska's book lays out the fundamentals of discrete time models in a clear and concise manner. The book is mostly self contained and well supported with examples that enhance understanding. I read it as a part of my introductory Phd finance course along with Theory of Financial Decision Making by Ingersoll and Foundations for Financial Economics Huang & Litzenberger (not direct competitors) and found Pliska's book to be the most understandable of the three.

Unreadable
Pliska may be a genius, however this book is not an "introduction" to anything. It is very information dense and incredibly difficult to follow on a undergrad level. Expect lots of theorems, equations, badly laid-out text and formulae - very little practical application and common sense explanation of what he's trying to do.

Pliska wrote a great book
I am a vet in finance but new to mathematical finance.

Pliska's book is dense, but the density ends up as the primary virtue, because all you have to do is master the vocabulary and follow the logic.

It is actually brilliant.