Financial calculus. An introduction to derivative pricing. Martin Baxter. Nomura International London. Andrew Rennie. Head ofDebt Analytics, Merrill Lynch. Financial Calculus. The website of Financial Calculus: an introduction to derivative pricing. This book has been written by Martin Baxter and Andrew Rennie, and. Financial Calculus is a presentation of the mathematics behind derivative pricing, building up to the Black-Scholes theorem and then extending the theory to a.

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To ask other readers questions about Financial Calculusplease sign up. Chan-Ho rated it rennif liked it Apr 09, Honestly, while I didn’t love this book, it should still be considered a must-read simply because of the paucity of better offerings.

### Financial Calculus

Suzy rated it it was ok Sep 03, Anthony P Badali rated it really liked it Jul 04, Sep 05, Austin rated it liked it Shelves: Unfortunately, this isn’t self-contained, and readers will need to consult other sources to get a full rigorous introduction to the topics renjie measure theory, martingale theory, and rigorous probability theory. Without a proper background to these topics, certain intuitive statements made in this book can be misleading. Now “interesting and tractable” is a fine basis for doing mathematics, but not a strong basis for applying the results to reality.

Paradoxically, I also worry about the very elegance and rigour of the results in Financial Calculus. Goodreads helps you keep track financiql books you want to read. Return to Book Page. The only evidence provided is a comparison rennid two small and vaguely similar graphs, one of the UK FTA index from to and the other generated using exponential Brownian motion.

Chapter one explains the limitations of expectation pricing, introducing instead the use of “no arbitrage” constructions to derive prices. Thanks for telling us about the problem. Open Preview See a Problem? Chapter three extends this to the continuous realm, using basic stochastic calculus, Ito’s formula and stochastic differential calcupus. The first rigorous and accessible account of the mathematics behind the pricing, construction, and hedging of derivative securities, this book explains, with mathematical precision and in a style tailored for market practitioners, such key concepts as martingales, change of measure, and the Heath-Jarrow-Morton model.

Keelhaul rated it really liked it Jan 02, Want to Read Currently Reading Read. Bxater Thornington rated it calfulus was amazing Sep 07, Ben rated it really liked it Jul 16, Minhao Gu rated it it was amazing Mar 09, Federico rated it really liked it Jun 16, bxater Piotr rated it it was amazing Jun 13, May External links: Just a moment while we sign you in to your Goodreads account.

More interestingly, chapter six extends the basic model: Financial Calculus by Martin Baxter. John rated it really liked it Aug 15, A full Glossary of probabilistic and financial terms is The first rigorous and accessible account of the mathematics behind the pricing, construction, and hedging of derivative securities, this book explains, with mathematical precision and in a style tailored for market practitioners, such key concepts as martingales, change of measure, and the Heath-Jarrow-Morton model.

The Radon-Nikodym derivative, the Cameron-Martin-Girsanov theorem, and the martingale representation theorem allow a similar construction to that of chapter two, coming together in the Black-Scholes theorem. Jan 31, Neal Groothuis rated it it was amazing.

### Financial Calculus by Martin Baxter

No trivia or quizzes yet. Emmanuel rated it it was amazing Apr 15, While some background knowledge of options and Black-Scholes is appropriate, this is a fairly self-contained xalculus to risk-neutral pricing. One concern I have is with the assumption of Brownian price movements, for which Baxter and Rennie offer no more than hand-waving support — but where, given the number of times they wave their hands, they clearly calculis there is a problem.

Duncan rated it really liked it Nov 30, Want to Read saving….

## Financial Calculus

Fianncialpages. Sam Nazari rated it liked it Jan 18, This is a very nice, reasonably concise little monograph. Ricardo rated it it was amazing Oct 10, Refresh and try again. Alexander rated it liked it Mar 19, There are also a few exercises, with solutions, which mostly test understanding of basic concepts and baxtef ability caculus use the formal machinery. If most real-world markets are not Brownian, as Mandelbrot and others have argued, that doesn’t undermine any of the mathematics in Financial Calculus but does make its utility entirely unclear.

There are no discussion topics on this book yet. This is a “widely accepted model”, “sophisticated enough to produce interesting models and simple enough to be tractable”, “at least a plausible match to the real world”, and “a respectable stochastic model”.

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## Martin Baxter + Andrew Rennie

For example, in the chapter that introduces caluclus binomial asset pricing model, the authors describe filtrations as being the history of the price process up to a given funancial in time. It is clearly presented, with a systematic build up of the necessary results, and with extensions separated from the core ideas.

This book will be especially useful to people with a background in economic theory who are having trouble making the conceptual link between risk aversion, subjective-expected utility theory and pricing via equivalent martingale measures. I could have replaced several of my grad school classes with a self-directed course of study using this book.

Trivia About Financial Calculus.