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  3. Stochastic Calculus for Finance
  • Cited by 3
Publisher:
Cambridge University Press
Online publication date:
November 2012
Print publication year:
2012
Online ISBN:
9781139017367
DOI:
https://doi.org/10.1017/CBO9781139017367
Subjects:
Mathematics, Mathematical Finance, Statistics for Econometrics, Finance and Insurance, Finance and Accountancy, Statistics and Probability
Series:
Mastering Mathematical Finance
Information

Book description

This book focuses specifically on the key results in stochastic processes that have become essential for finance practitioners to understand. The authors study the Wiener process and Itô integrals in some detail, with a focus on results needed for the Black–Scholes option pricing model. After developing the required martingale properties of this process, the construction of the integral and the Itô formula (proved in detail) become the centrepiece, both for theory and applications, and to provide concrete examples of stochastic differential equations used in finance. Finally, proofs of the existence, uniqueness and the Markov property of solutions of (general) stochastic equations complete the book. Using careful exposition and detailed proofs, this book is a far more accessible introduction to Itô calculus than most texts. Students, practitioners and researchers will benefit from its rigorous, but unfussy, approach to technical issues. Solutions to the exercises are available online.

Reviews

'… a very accessible and comprehensive introduction.'

Robert Stelzer Source: Mathematical Reviews

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