Financial calculus. An introduction to derivative pricing. Martin Baxter. Nomura International London. Andrew Rennie. Head ofDebt Analytics, Merrill Lynch. Financial Calculus. The website of Financial Calculus: an introduction to derivative pricing. This book has been written by Martin Baxter and Andrew Rennie, and. Financial Calculus is a presentation of the mathematics behind derivative pricing, building up to the Black-Scholes theorem and then extending the theory to a.
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Chapter three extends this to the continuous realm, using basic stochastic calculus, Ito’s formula and stochastic differential equations. Federico rated it really liked it Jun 16, And, retrospectively, I probably should have. More interestingly, chapter six extends the basic model: Honestly, while I didn’t love this book, it should still be considered a must-read simply because of the paucity of better offerings.
Feb 10, Taylor rated it it was amazing. Want to Read Currently Reading Read. Alexander rated it liked it Mar 19, Jack Gidding rated it tennie was ok Baxteer 12, Jan 31, Neal Groothuis rated it it was amazing.
This book will be especially useful to people with a background in economic theory who are having trouble making the conceptual link between risk aversion, subjective-expected utility theory and pricing via equivalent martingale measures.
Chan-Ho rated it really liked it Apr 09, Some of this involves clever constructions, but it doesn’t add that much to the core theory.
Goodreads helps you keep track of books you want to read. Keelhaul rated it really liked it Jan 02, Return to Book Page. Without a proper background to these topics, certain intuitive statements made in flnancial book can be misleading. The models presented in Financial Calculus are abstractions, and obviously any real-world application would need to address a whole range of issues not fennie Hans-peter rated it it was amazing Aug 08, Beginning with the discrete case, chapter two introduces a simple binomial tree model.
Financial Calculus by Martin Baxter
No trivia or quizzes yet. In any event, there’s probably too financlal detail in Financial Calculus for anyone who isn’t actually planning to work in the finance industry.
The approach is based around martingales, or processes whose expected future value, given the past history, is the same as the current value. Piotr rated it it was amazing Jun 13, Open Preview See a Problem? Financial Calculus by Martin Baxter.
The first rigorous and accessible account of the mathematics behind the pricing, construction, and hedging of derivative securities, financiql book explains, with mathematical precision and in a style tailored for market practitioners, such key concepts as martingales, change of measure, and the Heath-Jarrow-Morton model.
There are also a few exercises, with solutions, which mostly test understanding of basic concepts and the ability to use the formal machinery.
Paradoxically, I also worry about the very elegance and rigour of the results in Financial Calculus. It is clearly presented, with a systematic build up of the necessary results, and with extensions separated from the core ideas. And chapter five, which I only glanced over, builds progressively more complex models for interest rates. Radha rated it it was amazing Apr 05, This book will be especially useful to people with a background in economic theory who are having trouble making the conceptual link between risk aversion, financizl This is the most intuitive and baxtr introduction to asset pricing via equivalent martingale measures that I’ve yet encountered.
Trivia Aclculus Financial Calculus. Jan rated it liked it Dec 30, The only evidence provided is a comparison of two small and vaguely similar graphs, one of the UK FTA index from to and the other generated using exponential Brownian motion.
Hardcoverpages. Emmanuel rated it it was amazing Apr rennle, Gleb rated it it was amazing Mar 23, Sep 05, Austin rated it liked calculjs Shelves: Chapter four applies and extends this to other kinds of securities: This covers basic options.
Books by Martin Baxter. This is a very nice, reasonably concise little monograph. Robert Patterson rated it it was amazing Mar 18, This is the most intuitive and concise introduction to asset pricing via equivalent martingale measures that Xalculus yet encountered. Ricardo rated it it was amazing Oct 10, While this is true for a simple binomial model, in continuous time filtrations have a much more subtle nature — this is where a suitable background in measure theory comes in handy.
Martin Baxter + Andrew Rennie
Now “interesting finacial tractable” is a fine basis for doing mathematics, but not a strong basis for applying the results to reality. In contrast to messier models involving explicit simulations or numerical methods, it’s not so clear here how to evaluate the sensitivity of the results to uncertainties or to changes in the assumptions.
If most real-world markets are not Brownian, as Mandelbrot and others have argued, that doesn’t undermine any of the mathematics in Financial Calculus but does make its utility entirely unclear.