Arbitrage Theory in Continuous Time (Oxford Finance S.)

Book Description
The second edition of this popular introduction to the classical underpinnings of the mathematics behind finance continues to combine sounds mathematical principles with economic applications. Concentrating on the probabilistics theory of continuous arbitrage pricing of financial derivatives, including stochastic optimal control theory and Merton's fund separation theory, the book is designed for graduate students and combines necessary mathematical background with a solid economic focus. It includes a solved example for every new technique presented, contains numerous exercises and suggests further reading in each chapter. In this substantially extended new edition, Bjork has added separate and complete chapters on measure theory, probability theory, Girsanov transformations, LIBOR and swap market models, and martingale representations, providing two full treatments of arbitrage pricing: the classical delta-hedging and the modern martingales. More advanced areas of study are clearly marked to help students and teachers use the book as it suits their needs.


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Presented as a textbook for graduate and advanced undergraduates in finance, economics, mathematics, and statistics; this work presents arbitrage theory and its applications to pricing problems for financial derivatives. Focusing on applications and concrete computations, Bjork (mathematical finance, Stockholm School of Finance, Sweden) primarily uses the theory of stochastic differential equations to develop the math later used for arbitrage pricing of financial derivatives. Advanced calculus and basic knowledge of probability theory are prerequisites. Annotation ©2004 Book News, Inc., Portland, OR


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