Authors:
- Provides a complete and rigorous treatment of no-arbitrage pricing for both European and American derivatives in complete and incomplete discrete markets
- Requires only elementary linear algebra and probability theory, hence accessible to students of quantitative subjects (such as economics or physics) as well as students of mathematics
- Provides a foundation for understanding the more advanced theory of continuous-time models
- Contains copious fully worked out examples and numerous class-tested exercises (many with solutions)
- Includes supplementary material: sn.pub/extras
- Request lecturer material: sn.pub/lecturer-material
Part of the book series: Springer Undergraduate Mathematics Series (SUMS)
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Table of contents (8 chapters)
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Front Matter
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Back Matter
About this book
To keep the mathematics as simple as possible, while explaining the basic principles, only discrete time models with a finite number of possible future scenarios are considered. The theory examines the simplest possible financial model having only one time step, where many of the fundamental ideas occur, and are easily understood. Proceeding slowly, the theory progresses to more realistic models with several stocks and multiple time steps, and includes a comprehensive treatment of incomplete models. Theemphasis throughout is on clarity combined with full rigour.
The later chapters deal with more advanced topics, including how the discrete time theory is related to the famous continuous time Black-Scholes theory, and a uniquely thorough treatment of American options. The book assumes no prior knowledge of financial markets, and the mathematical prerequisites are limited to elementary linear algebra and probability. This makes it accessible to undergraduates in mathematics as well as students of other disciplines with a mathematical component. It includes numerous worked examples and exercises, making it suitable for self-study.
Reviews
From the reviews:
“Derivative Pricing in Discrete Time introduces the basic ideas of financial derivatives with a minimum of prerequisites. … Indeed, as an undergraduate-level mathematical treatment of the subject, this is the best textbook I have seen. … I would recommend the book to students preparing for financial careers, such as actuaries. Practical pricing models should make more sense with the theoretical grounding provided by this book.” (John Curran, MAA Reviews, May, 2014)
Authors and Affiliations
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Dept. Mathematics, University of York, York, United Kingdom
Nigel J. Cutland
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York, United Kingdom
Alet Roux
About the authors
Alet Roux also teaches at the University of York, UK, where she is Chair of the Board of Examiners and a member of the Mathematical Finance and Stochastic Analysis Research Group.
Bibliographic Information
Book Title: Derivative Pricing in Discrete Time
Authors: Nigel J. Cutland, Alet Roux
Series Title: Springer Undergraduate Mathematics Series
DOI: https://doi.org/10.1007/978-1-4471-4408-3
Publisher: Springer London
eBook Packages: Mathematics and Statistics, Mathematics and Statistics (R0)
Copyright Information: Springer-Verlag London Ltd., part of Springer Nature 2013
Softcover ISBN: 978-1-4471-4407-6Published: 07 September 2012
eBook ISBN: 978-1-4471-4408-3Published: 13 September 2012
Series ISSN: 1615-2085
Series E-ISSN: 2197-4144
Edition Number: 1
Number of Pages: XV, 325
Number of Illustrations: 63 b/w illustrations
Topics: Quantitative Finance, Probability Theory and Stochastic Processes, Finance, general
Industry Sectors: Finance, Business & Banking