Introduction to Stochastic Calculus Applied to Finance, Second Edition (Chapman & Hall/CRC Financial Mathematics Series)

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In recent years the growing importance of derivative products financial markets has increased financial institutions' demands for mathematical skills. This book introduces the mathematical methods of financial modeling with clear explanations of the most useful models. Introduction to Stochastic Calculus begins with an elementary presentation of discrete models, including the Cox-Ross-Rubenstein model. This book will be valued by derivatives trading, marketing, and research divisions of investment banks and other institutions, and also by graduate students and research academics in applied probability and finance theory.

Introduction to Stochastic Calculus Applied to Finance, Second Edition (Chapman & Hall/CRC Financial Mathematics Series) Review

As precisely mentioned in the title, this book is only an introduction; and it is not an introduction to finance, but to stochastic calculus applied to finance. The buyer of this book should therefore be aware of three facts:1. After having read this book you are not (yet) an expert on stochastic calculus applied to finance. You have to continue with other books mentioned in Lamberton/Lapeyre. But this book is an excellent framework that leads you to many important results, omiting proofs that are only technical. 2. Mathematics is used in many other areas of Finance too (Time Series Analysis for example). What is treated in this book is only a very small part of Finance Mathematics, but an important one.3. One should read another book with more economic background at the same time.The authors begin with discrete-time models to present many important ideas in a (mathematically) simple environment before treating the contiuous models. Introduction to stochastic integration and stochastic differential equations is brief. Stochastic integration is only with respect to the standard browning motion. After having reached the Black-Scholes model and american options, the approach via partial differential equations is treated, followed by interest rate models, models with jumps and, a good idea: a chapter on simulations.The book has very few mistakes, no important ones, only a strange layout failure on pages 6 to 7.So I highly recommend this book as an INTRODUCTION to ONE important part of finance mathematics if read in combination with another book with more economic background. It can especially be used for upper graduate student seminars or as a basis for lecture courses. Help other customers find the most helpful reviews Was this review helpful to you? Yes No Report abuse | PermalinkComment�Comment

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