The origin of this book can be traced to courses on financial mathematics taught by us at the University of New South Wales in Sydney, Technical University of Warsaw (Politechnika Watszawska) and Institut National Polytechnique de Grenoble. Our initial aim was to write a short text around the material used in two one-semester graduate courses attended by students with diverse disciplinary backgrounds (mathematics, physics, computer science, engineering, economics and commerce). The anticipated d

Preface
NoteontheSecondPrinting
PartⅠ. SpotandFuturesMarkets
1. AnIntroductiontoFinancialDerivatives
1.1 Options
1.2 FuturesContractsandOptions
1.3 ForwardContracts
1.4 CallandPutSpotOptions
1.5 FuturesCallandPutOptions
1.6 ForwardContracts
1.7 OptionsofAmericanStyle
2. TheCox-Ross-RubinsteinModel
2.1 TheCRRModelofaStockPrice
2.2 ProbabilisticApproach
2.3 ValuationofAmericanOptions
2.4 OptionsonaDividend-payingStock
2.5 TransactionCosts
3. FiniteSecurityMarkets
3.1 FiniteSpotMarkets
3.2 FiniteFuturesMarkets
3.3 FuturesPricesVersusForwardPrices
4. MarketImperfections
4.1 PerfectHedging
4.2 Mean-varianceHedging
5. TheBlack-ScholesModel
5.1 SpotMarket
5.2 ARisklessPortfolioMethod
5.3 SensitivityAnalysis
6. ModificationsoftheBlack-ScholesModel
6.1 FuturesMarket
6.2 OptiononaDividend-payingStock
6.3 StockPriceVolatility
7. ForeignMarketDerivatives
7.1 Cross-currencyMarketModel
7.2 CurrencyForwardContractsandOptions
7.3 ForeignEquityForwardContracts
7.4 ForeignMarketFuturesContracts
7.5 ForeignEquityOptions
8. AmericanOptions
9. ExoticOptions
10. Continuous-timeSecurityMarkets
PartⅡ. Fixed-incomeMarkets
11. InterestRatesandRelatedContracts
12. ModelsoftheShort-termRate
13. ModelsofInstantaneousForwardRates
14. ModelsofBondPricesandLIBORRates
15. OptionValuationinGaussianModels
16. SwapDerivatives
17. Cross-currencyDerivatives
PartⅢ. APPENDICES
A. ConditionalExpectations
B. It6StochasticCalculus
References
Index