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Stochastic processes --- Martingales (Mathematics) --- 519.216 --- Stochastic integrals --- Integrals, Stochastic --- Stochastic analysis --- Stochastic processes in general. Prediction theory. Stopping times. Martingales --- Stochastic integrals. --- Martingales (Mathématiques) --- Martingales (Mathematics). --- 519.216 Stochastic processes in general. Prediction theory. Stopping times. Martingales --- Martingales (Mathématiques)

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This book explains in simple settings the fundamental ideas of financial market modelling and derivative pricing, using the no-arbitrage principle. Relatively elementary mathematics leads to powerful notions and techniques - such as viability, completeness, self-financing and replicating strategies, arbitrage and equivalent martingale measures - which are directly applicable in practice. The general methods are applied in detail to pricing and hedging European and American options within the Cox-Ross-Rubinstein (CRR) binomial tree model. A simple approach to discrete interest rate models is included, which, though elementary, has some novel features. All proofs are written in a user-friendly manner, with each step carefully explained and following a natural flow of thought. In this way the student learns how to tackle new problems.

Finance --- Interest rates --- Mathematical models --- E-books --- Mathematical models. --- Mathematical Sciences --- Probability

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"Making up Numbers: A History of Invention in Mathematics offers a detailed but accessible account of a wide range of mathematical ideas. Starting with elementary concepts, it leads the reader towards aspects of current mathematical research.The book explains how conceptual hurdles in the development of numbers and number systems were overcome in the course of history, from Babylon to Classical Greece, from the Middle Ages to the Renaissance, and so to the nineteenth and twentieth centuries. The narrative moves from the Pythagorean insistence on positive multiples to the gradual acceptance of negative numbers, irrationals and complex numbers as essential tools in quantitative analysis.Within this chronological framework, chapters are organised thematically, covering a variety of topics and contexts: writing and solving equations, geometric construction, coordinates and complex numbers, perceptions of ‘infinity’ and its permissible uses in mathematics, number systems, and evolving views of the role of axioms.Through this approach, the author demonstrates that changes in our understanding of numbers have often relied on the breaking of long-held conventions to make way for new inventions at once providing greater clarity and widening mathematical horizons. Viewed from this historical perspective, mathematical abstraction emerges as neither mysterious nor immutable, but as a contingent, developing human activity.Making up Numbers will be of great interest to undergraduate and A-level students of mathematics, as well as secondary school teachers of the subject. In virtue of its detailed treatment of mathematical ideas, it will be of value to anyone seeking to learn more about the development of the subject."

Mathematics --- Inventions --- History. --- Mathematical models. --- Creative ability in technology --- Prior art (Patent law) --- Research, Industrial --- Math --- Science --- mathematical ideas --- development of numbers --- development number systems --- negative numbers --- irrationals numbers --- complex numbers

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This book presents the mathematics that underpins pricing models for derivative securities, such as options, futures and swaps, in modern financial markets. The idealized continuous-time models built upon the famous Black-Scholes theory require sophisticated mathematical tools drawn from modern stochastic calculus. However, many of the underlying ideas can be explained more simply within a discrete-time framework. This is developed extensively in this substantially revised second edition to motivate the technically more demanding continuous-time theory, which includes a detailed analysis of the Black-Scholes model and its generalizations, American put options, term structure models and consumption-investment problems. The mathematics of martingales and stochastic calculus is developed where it is needed. The new edition adds substantial material from current areas of active research, notably :a new chapter on coherent risk measures, with applications to hedging; a complete proof of the first fundamental theorem of asset pricing for general discrete market models; the arbitrage interval for incomplete discrete-time markets; characterization of complete discrete-time markets, using extended models; risk and return and sensitivity analysis for the Black-Scholes model. The treatment remains careful and detailed rather than comprehensive, with a clear focus on options. From here the reader can progress to the current research literature and the use of similar methods for more exotic financial instruments. The text should prove useful to graduates with a sound mathematical background, ideally a knowledge of elementary concepts from measure-theoretic probability, who wish to understand the mathematical models on which the bewildering multitude of current financial instruments used in derivative markets and credit institutions is based. 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 equally be useful to risk managers and practitioners looking to master the mathematical tools needed for modern pricing and hedging techniques.

Investments --- Stochastic analysis. --- Options (Finance) --- Securities --- Mathematics. --- Mathematical models. --- Prices