An Introduction to Quantitative Finance

Paperback | December 7, 2013

byStephen Blyth

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The worlds of Wall Street and The City have always held a certain allure, but in recent years have left an indelible mark on the wider public consciousness and there has been a need to become more financially literate. The quantitative nature of complex financial transactions makes them afascinating subject area for mathematicians of all types, whether for general interest or because of the enormous monetary rewards on offer. An Introduction to Quantitative Finance concerns financial derivatives - a derivative being a contract between two entities whose value derives from the price of an underlying financial asset - and the probabilistic tools that were developed to analyse them. The theory in the text is motivated by adesire to provide a suitably rigorous yet accessible foundation to tackle problems the author encountered whilst trading derivatives on Wall Street. The book combines an unusual blend of real-world derivatives trading experience and rigorous academic background. Probability provides the key tools for analysing and valuing derivatives. The price of a derivative is closely linked to the expected value of its pay-out, and suitably scaled derivative prices are martingales, fundamentally important objects in probability theory. The prerequisite for mastering the material is an introductory undergraduate course in probability. The book is otherwise self-contained and in particular requires no additional preparation or exposure to finance. It is suitable for a one-semester course, quickly exposing readers to powerful theoryand substantive problems. The book may also appeal to students who have enjoyed probability and have a desire to see how it can be applied. Signposts are given throughout the text to more advanced topics and to different approaches for those looking to take the subject further.

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From the Publisher

The worlds of Wall Street and The City have always held a certain allure, but in recent years have left an indelible mark on the wider public consciousness and there has been a need to become more financially literate. The quantitative nature of complex financial transactions makes them afascinating subject area for mathematicians of a...

Stephen Blyth is managing director and head of public markets at the Harvard Management Company, the subsidiary of Harvard University responsible for the management of the University's endowment. He is also Professor of the Practice of Statistics at Harvard University. Before joining Harvard in 2006, Professor Blyth was managing direc...
Format:PaperbackDimensions:192 pages, 9.21 × 6.14 × 0.45 inPublished:December 7, 2013Publisher:Oxford University PressLanguage:English

The following ISBNs are associated with this title:

ISBN - 10:0199666598

ISBN - 13:9780199666591

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Table of Contents

I Introduction and Preliminaries1. Introduction2. PreliminariesII Forwards, Swaps and Options3. Forward contracts and forward prices4. Forward rates and libor5. Interest rate swaps6. Futures contracts7. No-arbitrage principle8. OptionsIII Replication, risk-neutrality and the fundamental theorem9. Replication and risk-neutrality on the binomial tree10. Martingales, numeraires and the fundamental theorem11. Continuous time limit and Black-Scholes formula12. Option price and probability dualityIV Interest Rate Options13. Caps, floors and swaptions14. Cancellable swaps and Bermudan swaptions15. Additional topics in interest rate derivativesV Through Continuous Time16. Rough guide to continuous time

Editorial Reviews

"It is all too rare to find clear thinking, based on first principles, combined with practical understanding of financial markets. This is precisely what Stephen Blyth offers, drawing equally on his mathematical and statistical training and his career in quantitative finance. This bookbeautifully explains both the profound implications of no-arbitrage theory for the prices of fixed-income derivative securities, and also the pitfalls in practical applications." --John Y Campbell, Harvard University