Introduction to Stochastic Finance with Market Examples: Edition 2

Nicolas Privault

dhj 2022 · CRC Press

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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 Edition

• New chapters on Barrier Options, Lookback Options, Asian Options, Optimal Stopping Theorem, and Stochastic Volatility
• Contains over 235 exercises and 16 problems with complete solutions available online from the instructor resources
• Added over 150 graphs and figures, for more than 250 in total, to optimize presentation

• 57 R coding examples now integrated into the book for implementation of the methods

• Substantially class-tested, so ideal for course use or self-study

With 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.

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Nicolas Privault received a PhD degree from the University of Paris VI, France. He was with the University of Evry, France, the University of La Rochelle, France, and the University of Poitiers, France. He is currently a Professor with the School of Physical and Mathematical Sciences, Nanyang Technological University, Singapore. His research interests are in the areas of stochastic analysis and its applications.