Financial calculus. An introduction to derivative pricing

The rewards and dangers of speculating in the modern financial markets have been to the fore in recent times. This is the first rigorous and accessible account of the mathematics behind the pricing, construction and hedging of derivative securities.

Key concepts such as martingales, changes of measure, and the Heath-Jarrow-Morton model are described in a style tailored for market practitioners. Starting from discrete-time hedging on binary trees, continuous-time stock models (including the Black-Scholes) are developed. Practicalities are stressed, including examples from stock, currency and interest rate markets, all accompanied by graphical illustrations with realistic data. A full glossary of probabilistic and financial terms is provided.

This book will be an essential purchase for market practitioners, quantitative analysts, and derivatives traders, whether existing or trainees, in investment banks throughout the world.