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The mathematics of financial derivatives. A student introduction. (English) Zbl 0842.90008

Cambridge: Cambridge Univ. Press. xiii, 317 p., £35.00; $ 49.95/hbk (1995).
This book is divided into four parts. Part one is “basic option theory”, it covers the Black-Scholes Model and variations of it. Part two is “numerical methods”, it includes a chapter on “finite-difference methods”, a chapter on “binomial methods”, and a chapter on the numerical solution of free boundary value problems for American options. Part three is “further option theory”, it covers exotic and path-dependent options. Among the path-dependent options covered in detail in this part are Asian options and lookback options. The last part of this book is “interest rate derivative products”.
This book only assumes a minimal knowledge of mathematics, anything that is not contained in the early calculus, probability and algebra courses are clearly and thoroughly explained. So this is a very good book for students in business schools who would like to better understand the mathematical aspect of finance. This book also gives details of the finance aspect of the models, though more detailed explanation of the financial ideas will be very helpful to the students with very little knowledge of financial markets. By incorporating some material from the more finance-oriented books, such as John Hull’s “Options, futures and other derivative securities” (Prentice-Hall, 1993), this book can also serve as a very good text book on financial mathematics for those students who are just starting to learn financial mathematics.
Reviewer: R.Song (Ann Arbor)

MSC:

91-01 Introductory exposition (textbooks, tutorial papers, etc.) pertaining to game theory, economics, and finance
91G20 Derivative securities (option pricing, hedging, etc.)
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