Option Valuation

Option Valuation

by Hugo D. Junghenn
Released November 2011
Publisher(s): CRC Press
ISBN: 9781439889121

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Book description

Option Valuation: A First Course in Financial Mathematics provides a straightforward introduction to the mathematics and models used in the valuation of financial derivatives. It examines the principles of option pricing in detail via standard binomial and stochastic calculus models. Developing the requisite mathematical background as needed, the text presents an introduction to probability theory and stochastic calculus suitable for undergraduate students in mathematics, economics, and finance.

The first nine chapters of the book describe option valuation techniques in discrete time, focusing on the binomial model. The author shows how the binomial model offers a practical method for pricing options using relatively elementary mathematical tools. The binomial model also enables a clear, concrete exposition of fundamental principles of finance, such as arbitrage and hedging, without the distraction of complex mathematical constructs. The remaining chapters illustrate the theory in continuous time, with an emphasis on the more mathematically sophisticated Black-Scholes-Merton model.

Largely self-contained, this classroom-tested text offers a sound introduction to applied probability through a mathematical finance perspective. Numerous examples and exercises help students gain expertise with financial calculus methods and increase their general mathematical sophistication. The exercises range from routine applications to spreadsheet projects to the pricing of a variety of complex financial instruments. Hints and solutions to odd-numbered problems are given in an appendix and a full solutions manual is available for qualifying instructors.

Table of contents

  1. Front Cover
  2. Dedication
  3. Contents
  4. Preface
  5. 1. Interest and Present Value (1/3)
  6. 1. Interest and Present Value (2/3)
  7. 1. Interest and Present Value (3/3)
  8. 2. Probability Spaces (1/3)
  9. 2. Probability Spaces (2/3)
  10. 2. Probability Spaces (3/3)
  11. 3. Random Variables (1/4)
  12. 3. Random Variables (2/4)
  13. 3. Random Variables (3/4)
  14. 3. Random Variables (4/4)
  15. 4. Options and Arbitrage (1/4)
  16. 4. Options and Arbitrage (2/4)
  17. 4. Options and Arbitrage (3/4)
  18. 4. Options and Arbitrage (4/4)
  19. 5. Discrete-Time Portfolio Processes (1/2)
  20. 5. Discrete-Time Portfolio Processes (2/2)
  21. 6. Expectation of a Random Variable (1/2)
  22. 6. Expectation of a Random Variable (2/2)
  23. 7. The Binomial Model (1/3)
  24. 7. The Binomial Model (2/3)
  25. 7. The Binomial Model (3/3)
  26. 8. Conditional Expectation and Discrete-Time Martingales (1/3)
  27. 8. Conditional Expectation and Discrete-Time Martingales (2/3)
  28. 8. Conditional Expectation and Discrete-Time Martingales (3/3)
  29. 9. The Binomial Model Revisited (1/4)
  30. 9. The Binomial Model Revisited (2/4)
  31. 9. The Binomial Model Revisited (3/4)
  32. 9. The Binomial Model Revisited (4/4)
  33. 10. Stochastic Calculus (1/5)
  34. 10. Stochastic Calculus (2/5)
  35. 10. Stochastic Calculus (3/5)
  36. 10. Stochastic Calculus (4/5)
  37. 10. Stochastic Calculus (5/5)
  38. 11. The Black-Scholes-Merton Model (1/2)
  39. 11. The Black-Scholes-Merton Model (2/2)
  40. 12. Continuous-Time Martingales (1/3)
  41. 12. Continuous-Time Martingales (2/3)
  42. 12. Continuous-Time Martingales (3/3)
  43. 13. The BSM Model Revisited (1/2)
  44. 13. The BSM Model Revisited (2/2)
  45. 14. Other Options (1/8)
  46. 14. Other Options (2/8)
  47. 14. Other Options (3/8)
  48. 14. Other Options (4/8)
  49. 14. Other Options (5/8)
  50. 14. Other Options (6/8)
  51. 14. Other Options (7/8)
  52. 14. Other Options (8/8)
  53. A. Sets and Counting (1/2)
  54. A. Sets and Counting (2/2)
  55. B. Solution of the BSM PDE
  56. C. Analytical Properties of the BSM Call Function (1/2)
  57. C. Analytical Properties of the BSM Call Function (2/2)
  58. D. Hints and Solutions to Odd-Numbered Problems (1/5)
  59. D. Hints and Solutions to Odd-Numbered Problems (2/5)
  60. D. Hints and Solutions to Odd-Numbered Problems (3/5)
  61. D. Hints and Solutions to Odd-Numbered Problems (4/5)
  62. D. Hints and Solutions to Odd-Numbered Problems (5/5)
  63. Bibliography

Product information

  • Title: Option Valuation
  • Author(s): Hugo D. Junghenn
  • Release date: November 2011
  • Publisher(s): CRC Press
  • ISBN: 9781439889121