Book description
COVERS THE FUNDAMENTAL TOPICS IN MATHEMATICS, STATISTICS, AND FINANCIAL MANAGEMENT THAT ARE REQUIRED FOR A THOROUGH STUDY OF FINANCIAL MARKETS
This comprehensive yet accessible book introduces students to financial markets and delves into more advanced material at a steady pace while providing motivating examples, poignant remarks, counterexamples, ideological clashes, and intuitive traps throughout. Tempered by reallife cases and actual market structures, An Introduction to Financial Markets: A Quantitative Approach accentuates theory through quantitative modeling whenever and wherever necessary. It focuses on the lessons learned from timely subject matter such as the impact of the recent subprime mortgage storm, the collapse of LTCM, and the harsh criticism on risk management and innovative finance. The book also provides the necessary foundations in stochastic calculus and optimization, alongside financial modeling concepts that are illustrated with relevant and handson examples.
An Introduction to Financial Markets: A Quantitative Approach starts with a complete overview of the subject matter. It then moves on to sections covering fixed income assets, equity portfolios, derivatives, and advanced optimization models. This book’s balanced and broad view of the stateoftheart in financial decisionmaking helps provide readers with all the background and modeling tools needed to make “honest money” and, in the process, to become a sound professional.
 Stresses that gut feelings are not always sufficient and that “critical thinking” and real world applications are appropriate when dealing with complex social systems involving multiple players with conflicting incentives
 Features a related website that contains a solution manual for endofchapter problems
 Written in a modular style for tailored classroom use
 Bridges a gap for business and engineering students who are familiar with the problems involved, but are less familiar with the methodologies needed to make smart decisions
An Introduction to Financial Markets: A Quantitative Approach offers a balance between the need to illustrate mathematics in action and the need to understand the real life context. It is an ideal text for a first course in financial markets or investments for business, economic, statistics, engineering, decision science, and management science students.
PAOLO BRANDIMARTE is Full Professor at the Department of Mathematical Sciences of Politecnico di Torino in Italy, where he teaches Business Analytics and Financial Engineering. He is the author of several publications, including more than ten books on the application of optimization and simulation to diverse areas such as production and supply chain management, telecommunications, and finance.
Table of contents
 Preface
 About the Companion Website
 Part One Overview

Part Two Fixedincome assets

Chapter Three Elementary Theory of Interest Rates
 3.1 The time value of money: Shifting money forward in time
 3.2 The time value of money: Shifting money backward in time
 3.3 Nominal vs. real interest rates
 3.4 The term structure of interest rates
 3.5 Elementary bond pricing
 3.6 A digression: Elementary investment analysis
 3.7 Spot vs. forward interest rates
 Problems
 Further reading
 Bibliography
 Notes
 Chapter Four Forward Rate Agreements, Interest Rate Futures, and Vanilla Swaps
 Chapter Five FixedIncome Markets

Chapter Six Interest Rate Risk Management
 6.1 Duration as a firstorder sensitivity measure
 6.2 Further interpretations of duration
 6.3 Classical durationbased immunization
 6.4 Immunization by interest rate derivatives
 6.5 A secondorder refinement: Convexity
 6.6 Multifactor models in interest rate risk management
 Problems
 Further reading
 Bibliography
 Notes

Chapter Three Elementary Theory of Interest Rates

Part Three Equity portfolios
 Chapter Seven DecisionMaking under Uncertainty: The Static Case

Chapter Eight Mean–Variance Efficient Portfolios
 8.1 Risk aversion and capital allocation to risky assets
 8.2 The meanvariance efficient frontier with risky assets
 8.3 Mean–variance efficiency with a riskfree asset: The separation property
 8.4 Maximizing the Sharpe ratio
 8.5 Mean–variance efficiency vs. expected utility
 8.6 Instability in mean–variance portfolio optimization
 S8.1 The attainable set for two risky assets is a hyperbola
 S8.2 Explicit solution of mean–variance optimization in matrix form
 Problems
 Further reading
 Bibliography
 Notes
 Chapter Nine Factor Models
 Chapter Ten Equilibrium Models: CAPM and APT

Part Four Derivatives

Chapter Eleven Modeling Dynamic Uncertainty
 11.1 Stochastic processes
 11.2 Stochastic processes in continuous time
 11.3 Stochastic differential equations
 11.4 Stochastic integration and Itô’s lemma
 11.5 Stochastic processes in financial modeling
 11.5.1 Geometric Brownian Motion
 11.5.2 Generalizations
 11.6 Sample path generation
 S11.1 Probability spaces, measurability, and information
 Problems
 Further reading
 Bibliography
 Notes
 Chapter Twelve Forward and Futures Contracts

Chapter Thirteen Option Pricing: Complete Markets
 13.1 Option terminology
 13.2 Modelfree price restrictions
 13.3 Binomial option pricing
 13.4 A continuoustime model: The Black–Scholes–Merton pricing formula
 13.5 Option price sensitivities: The Greeks
 13.6 The role of volatility
 13.7 Options on assets providing income
 13.8 Portfolio strategies based on options
 13.9 Option pricing by numerical methods
 Problems
 13.12 Further reading
 Bibliography
 Notes
 Chapter Fourteen Option Pricing: Incomplete Markets

Chapter Eleven Modeling Dynamic Uncertainty

Part Five Advanced optimization models

Chapter Fifteen Optimization Model Building
 15.1 Classification of optimization models
 15.2 Linear programming
 15.3 Quadratic programming
 15.4 Integer programming
 15.5 Conic optimization
 15.6 Stochastic optimization
 15.7 Stochastic dynamic programming
 15.8 Decision rules for multistage SLPs
 15.9 Worstcase robust models
 15.10 Nonlinear programming models in finance
 Problems
 Further reading
 Bibliography
 Notes
 Chapter Sixteen Optimization Model Solving

Chapter Fifteen Optimization Model Building
 Index
 EULA
Product information
 Title: An Introduction to Financial Markets
 Author(s):
 Release date: November 2017
 Publisher(s): Wiley
 ISBN: 9781118014776
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