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...

We obtain lower and upper bounds on option prices in one-dimensional jump-diffusion markets with point process components. Our proofs rely in general on the classical Kolmogorov equation argument and on the propagation of convexity property for Markov semigroups, but the bounds on intensities...

"It is a fairly complete introduction accessible to advanced undergraduates; Also covers more advanced aspects of interest rate modeling; Includes many graphs and code illustrating the modeling of interest rates; Each chapter is accompanied with exercises and their complete solutions."

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...