Introduction to Stochastic Finance with Market Examples

Introduction to Stochastic Finance with Market Examples Second Edition presents an introduction to pricing and hedging in discrete and continuous-time financial models emphasizing both analytical and probabilistic methods. It demonstrates both the power and limitations of mathematical models in finance covering the basics of stochastic calculus for finance and details the techniques required to model the time evolution of risky assets. The book discusses a wide range of classical topics including Black–Scholes pricing American options derivatives term structure modeling and change of numéraire. It also builds up to special topics such as exotic options stochastic volatility and jump processes.New to this EditionNew chapters on Barrier Options Lookback Options Asian Options Optimal Stopping Theorem and Stochastic VolatilityContains over 235 exercises and 16 problems with complete solutions available online from the instructor resourcesAdded over 150 graphs and figures for more than 250 in total to optimize presentation57 R coding examples now integrated into the book for implementation of the methodsSubstantially class-tested so ideal for course use or self-studyWith abundant exercises problems with complete solutions graphs and figures and R coding examples the book is primarily aimed at advanced undergraduate and graduate students in applied mathematics financial engineering and economics. It could be used as a course text or for self-study and would also be a comprehensive and accessible reference for researchers and practitioners in the field.