Introduction to Stochastic Calculus for Finance

A New Didactic Approach

  • Dieter Sondermann

Part of the Lecture Notes in Economics and Mathematical Systems book series (LNE, volume 579)

Table of contents

  1. Front Matter
    Pages I-X
  2. Pages 1-2
  3. Pages 3-14
  4. Pages 95-112
  5. Back Matter
    Pages 135-138

About this book

Introduction

The large number of already available textbooks on stochastic calculus with specific applications to finance requires a justification for another contribution to this subject. The justifcation is mainly pedagogical. These lecture notes start with an elementary approach to stochastic calculus due to Föllmer, who showed that one can develop Ito's calculus "pathwise" as an exercise in real analysis. The text opens to students interested in finance a quick (but by no means "dirty") road to the tools required for advanced finance in continuous time, including option pricing by martingale methods, term structure models in a HJM-framework and the Libor market model. The reader is supposed only to be familiar with elementary real analysis (e.g. Taylor's Theorem) and basic probability theory. The text is also useful for mathematicians interested in the methods of modern mathematical finance without prior knowledge of advanced stochastic analysis.

Keywords

Finance Fincancial Economics Libor Market Model Local Times Option Pricing Probability theory Stochastic calculus Term Structure Models

Authors and affiliations

  • Dieter Sondermann
    • 1
  1. 1.Department of EconomicsUniversity of BonnBonnGermany

Bibliographic information

  • DOI https://doi.org/10.1007/3-540-34837-9
  • Copyright Information Springer-Verlag Berlin Heidelberg 2006
  • Publisher Name Springer, Berlin, Heidelberg
  • eBook Packages Business and Economics
  • Print ISBN 978-3-540-34836-8
  • Online ISBN 978-3-540-34837-5
  • Series Print ISSN 0075-8442
  • About this book