Preface This text is an introduction to pricing and hedging in discrete and continuous time financial models without friction (i.e. without transaction costs), with an emphasis on the complementarity between analytical and probabilistic methods. Its contents are mostly mathematical, and also aim...

Key Features:A complete introduction accessible to advanced undergraduatesAlso covers recent aspects of interest rate modelingIncludes many graphs illustrating the multidimensional aspects of interest rate modelsEach chapter is accompanied with exercises and their complete solutions.

"Introduction to Stochastic Finance with Market Examples, Second Edition presents an introduction to pricing and hedging in discrete and continuous time financial models, emphasizing both analytical and probabilistic methods. It demonstrates both the power and limitations of mathematical models...