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Macmillan Higher Education Palgrave Higher Education

An Introduction to Mathematical Finance with Applications

Understanding and Building Financial Intuition

ISBN 9781493937813
Publication Date July 2016
Formats Hardcover Ebook 
Publisher Springer

This textbook aims to fill the gap between those that offer a theoretical treatment without many applications and those that present and apply formulas without appropriately deriving them. The balance achieved will give readers a fundamental understanding of key financial ideas and tools that form the basis for building realistic models, including those that may become proprietary. Numerous carefully chosen examples and exercises reinforce the student’s conceptual understanding and facility with applications.  The exercises are divided into conceptual, application-based, and theoretical problems, which probe the material deeper.

The book is aimed toward advanced undergraduates and first-year graduate students who are new to finance or want a more rigorous treatment of the mathematical models used within. While no background in finance is assumed, prerequisite math courses include multivariable calculus, probability, and linear algebra. The authors introduce additional mathematical tools as needed. The entire textbook is appropriate for a single year-long course on introductory mathematical finance. The self-contained design of the text allows for instructor flexibility in topics courses and those focusing on financial derivatives. Moreover, the text is useful for mathematicians, physicists, and engineers who want to learn finance via an approach that builds their financial intuition and is explicit about model building, as well as business school students who want a treatment of finance that is deeper but not overly theoretical.

Arlie Oswald Petters is a Professor of Mathematics, Physics, and Business Administration at Duke University. Petters is also co-author of Birkhauser's Singularity Theory and Gravitational Lensing


Xiaoying Dong is an Adjunct Assistant Professor of Mathematics at Duke University and has been a professional trader for over 20 years.

Preface
1. Preliminaries and Financial Markets
2. The Time Value of Money
3. Markowitz Portfolio Theory
4. Capital Market Theory and Portfolio Risk Measures
5. Binomial Trees and Security Pricing Modeling
6. Stochastic Calculus and Geometric Brownian Motion Model
 7. Derivatives: Forwards, Futures, Swaps and Options
8. The BSM Model and European Option Pricing
Index. 

Reviews

“The book is thick with rich with applications and solid justifications of all concepts. … If you are a financial mathematics instructor, this book is for you. It progresses through easier topics to more advanced topics very well and is practical, meaningful, and more importantly, relevant to the 21st century financial student. … can be used as the one standard book for your class but can also be a springboard to research projects with your more advanced and curious students.” (Peter T. Olszewski, MAA Reviews, August, 2017)“The book is an undergraduate textbook in mathematical finance with applications. … The textbook is aimed at advanced undergraduates, and also at master's degree students who want a more rigorous treatment of the mathematical models in finance. This text will be a very good textbook for a year-long course on introductory mathematical finance.” (Anatoliy Swishchuk, zbMATH 1348.91002, 2016)
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