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Arbitrage theory in continuous time. 2nd ed. (English) Zbl 1140.91038

Oxford: Oxford University Press (ISBN 0-19-927126-7/hbk). xviii, 466 p. (2004).
Publisher’s description: The second edition (first ed. 1998) of this popular introduction to the classical underpinnings of the mathematics behind finance continues to combine sound mathematical principles with economic applications. Concentrating on the probabilistic theory of continuous arbitrage pricing of financial derivatives, including stochastic optimal control theory and Merton’s fund separation theory, the book is designed for graduate students and combines necessary mathematical background with a solid economic focus. It includes a solved example for every new technique presented, contains numerous exercises and suggests further reading in each chapter. In this substantially extended new edition, Björk has added separate and complete chapters on measure theory, probability theory, Girsanov transformations, LIBOR and swap market models, and martingale representations, providing two full treatments of arbitrage pricing: the classical delta-hedging and the modern martingales. More advanced areas of study are clearly marked to help students and teachers use the book as it suits their needs.

MSC:

91-01 Introductory exposition (textbooks, tutorial papers, etc.) pertaining to game theory, economics, and finance
91Gxx Actuarial science and mathematical finance
93E20 Optimal stochastic control
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