An Elementary Introduction to Mathematical Finance – Sheldon M. Ross – 1st Edition

Description

This mathematically elementary introduction to the theory of options pricing presents the Black–Scholes theory of options as well as introducing such topics in as the time value of money; mean variance ; optimal portfolio selection; and the capital assets pricing .

The author assumes no prior of and presents all the necessary preliminary material simply and clearly. He explains the concept of arbitrage with examples; and then uses the arbitrage theorem; along with an of geometric Brownian motion; to obtain a simple derivation of the Black-Scholes formula.

In the later chapters he presents real price data indicating that this model is not always appropriate and shows how the model can be generalized to deal with such situations.

No other text presents such topics in a mathematically accurate but accessible way. It will appeal to professional traders as well as undergraduates studying the basics of finance.

Table of Contents

1. Probability
2. Normal random variables
3. Geometric Brownian motion
4. Interest rates and present value analysis
5. Pricing contracts via arbitrage
6. The arbitrage theorem
7. The Black-Scholes formula
8. Valuing by expected utility
9. Exotic options
10. Beyond geometric Brownian motion models
11. Autoregressive models and mean reversion.

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