Introduction to Mathematical Finance Discrete Time Models [Hardcover]

The purpose of this book is to provide a rigorous yet accessible introduction to the modern financial theory of security markets. The main subjects are derivatives and portfolio management. The book is intended to be used as a text by advanced undergraduates and beginning graduate students. It is also likely to be useful to practicing financial engineers, portfolio manager, and actuaries who wish to acquire a fundamental understanding of financial theory. The book makes heavy use of mathematics, but not at an advanced level. Various mathematical concepts are developed as needed, and computational examples are emphasized.Part I: Single Period Securities Markets:.

Model Specifications.

Arbitrage and Other Economic Consideration.

Risk Neutral Probability Measures.

Valuation of Contingent Claims.

Complete and Incomplete Markets.

Risk and Return.

Part II: Single Period Consumption and Investment:.

Optimal Portfolios and Viability.

Risk Neutral Computational Approach.

Consumption Investment Problems.

Mean-Variance Portfolio Analysis.

Portfolio Management with Short Sales Constraints and Similar Restrictions.

Optimal Portfolios in Incomplete Markets.

Equilibrium Models.

Part III: Multiperiod Securities Markets:.

Model Specifications, Filtrations, and Stochastic Processes.

Information Structures.

Stochastic Process Models of Security Prices.

Trading Strategies.

Value Processes and Gains Processes.

Self-Financing Trading Strategies.

Discounted Prices.

Return and Dividend Processes.