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Option Theory with Stochastic Analysis : An Introduction to Mathematical Finance - Fred Espen Benth

Option Theory with Stochastic Analysis

An Introduction to Mathematical Finance

By: Fred Espen Benth

Paperback | 26 November 2003

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Since 1972 and the appearance of the famous Black & Scholes option pric- ing formula, derivatives have become an integrated part of everyday life in the financial industry. Options and derivatives are tools to control risk ex- posure, and used in the strategies of investors speculating in markets like fixed-income, stocks, currencies, commodities and energy. A combination of mathematical and economical reasoning is used to find the price of a derivatives contract. This book gives an introduction to the theory of mathematical finance, which is the modern approach to analyse options and derivatives. Roughly speaking, we can divide mathematical fi- nance into three main directions. In stochastic finance the purpose is to use economic theory with stochastic analysis to derive fair prices for options and derivatives. The results are based on stochastic modelling of financial as- sets, which is the field of empirical finance. Numerical approaches for finding prices of options are studied in computational finance. All three directions are presented in this book. Algorithms and code for Visual Basic functions are included in the numerical chapter to inspire the reader to test out the theory in practice. The objective of the book is not to give a complete account of option theory, but rather relax the mathematical rigour to focus on the ideas and techniques.
Industry Reviews

From the reviews:

"This is a ... book concerned solely with describing the mathematics of option pricing and I found it a delight to read. It is very well written, quite comprehensive and non-rigorous so that it can be used on courses aimed at a variety of students. ... The book includes a healthy number of exercises and there are fully worked solutions to most of these." (David Applebaum, The Mathematical Gazette, Vol. 90 (517), 2006)

"The book provides an introduction to the basic ideas of the mathematical theory of financial options valuation, or, more concretely, to the Black-Scholes theory of pricing contingent claims on equity. ... The text is a brief, neat, carefully written introduction to the fundamentals of the mathematics and the modelling of the analysis of options pricing." (Jose Luis Fernandez Perez, Zentralblatt MATH, Vol. 1042 (17), 2004)

You Can Find This Book In

Non-FictionMathematicsApplied MathematicsStochasticsAccounting & FinanceFinanceInvestment & SecuritiesProbability & StatisticsOptimisationGame TheoryEconomicsEconometrics
Economic Statistics

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