Stochastic Finance: An Introduction with Market Examples presents an introduction to pricing and hedging in discrete and continuous time financial models without friction, emphasizing the complementarity of analytical and probabilistic methods. It demonstrates both the power and limitations of mathematical models in finance, covering the basics of

chapter |6 pages


chapter 1|16 pages

Assets, Portfolios and Arbitrage

chapter 2|16 pages

Discrete-Time Model

chapter 3|24 pages

Pricing and Hedging in Discrete Time

chapter 4|26 pages

Brownian Motion and Stochastic Calculus

chapter 5|22 pages

The Black–Scholes PDE

chapter 6|24 pages

Martingale Approach to Pricing and Hedging

chapter 7|10 pages

Estimation of Volatility

chapter 8|68 pages

Exotic Options

chapter 9|40 pages

American Options

chapter 10|24 pages

Change of Nume´raire and Forward Measures

chapter 11|38 pages

Forward Rate Modeling

chapter 12|20 pages

Pricing of Interest Rate Derivatives

chapter 13|10 pages

Default Risk in Bond Markets

chapter 14|24 pages

Stochastic Calculus for Jump Processes

chapter 15|12 pages

Pricing and Hedging in Jump Models

chapter 16|8 pages

Basic Numerical Methods