Discrete Models of Financial Markets (Mastering Mathematical Finance) 1st Edition by Marek Capiński (PDF)

Description

This book explains in simple settings the fundamental ideas of financial market modelling and derivative pricing, using the no-arbitrage principle. Relatively elementary mathematics leads to powerful notions and techniques – such as viability, completeness, self-financing and replicating strategies, arbitrage and equivalent martingale measures – which are directly applicable in practice. The general methods are applied in detail to pricing and hedging European and American options within the Cox–Ross–Rubinstein (CRR) binomial tree model. A simple approach to discrete interest rate models is included, which, though elementary, has some novel features. All proofs are written in a user-friendly manner, with each step carefully explained and following a natural flow of thought. In this way the student learns how to tackle new problems.

User’s Reviews

Reviews from Amazon users which were colected at the time this book was published on the website:

⭐I read (studied) the first 20 pages, which covers the single-step binomial tree.And I found the explanations of the single-step binomial tree much clearer in bothMcDonald’s “Derivatives Markets” book and in Hull’s “Options, Futures, and other Derivatives” book.And, the first exercise in the book, 2.1, is wrong. It wants the reader to Show that the option price INCREASE as D [the % the underlying moves in a downstep of the binary pricing model]. Of course as D increases then the value of the underlying would be increasing and the value of the option would stay the same or only go up as D increase.Also, the exercise just says “the option price” and it must have meant to say ” A CALL option price”So, careless writing on the very first Exercise.And there is also an error on the second exercise,2.2 in the solution pdf.where it says: “…does not increase…” it should say “…does not NECESSARILY increase…”

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