Introduction to the Economics and Mathematics of Financial Markets [Hardcover]

Jaksa Cvitanic (Author), Fernando Zapatero (Author)

Book Description

ISBN-10: 0262033208 | ISBN-13: 978-0262033206 | Publication Date: February 27, 2004

Introduction to the Economics and Mathematics of Financial Markets fills the longstanding need for an accessible yet serious textbook treatment of financial economics. The book provides a rigorous overview of the subject, while its flexible presentation makes it suitable for use with different levels of undergraduate and graduate students. Each chapter presents mathematical models of financial problems at three different degrees of sophistication: single-period, multi-period, and continuous-time. The single-period and multi-period models require only basic calculus and an introductory probability/statistics course, while an advanced undergraduate course in probability is helpful in understanding the continuous-time models. In this way, the material is given complete coverage at different levels; the less advanced student can stop before the more sophisticated mathematics and still be able to grasp the general principles of financial economics.The book is divided into three parts. The first part provides an introduction to basic securities and financial market organization, the concept of interest rates, the main mathematical models, and quantitative ways to measure risks and rewards. The second part treats option pricing and hedging; here and throughout the book, the authors emphasize the Martingale or probabilistic approach. Finally, the third part examines equilibrium models -- a subject often neglected by other texts in financial mathematics, but included here because of the qualitative insight it offers into the behavior of market participants and pricing.

Editorial Reviews

Review

"This book provides a very clear and readable approach to the structure, background, and theory of modern financial markets. It can easily be used as a text for a graduate course in quantitative finance and as a reference by practitioners. Unlike more mathematical treatments, however, most of its content should also be accessible to good MBA students."--Robert J. Elliott, RBC Financial Group Professor of Finance, University of Calgary

"This book is the first of its kind—an accessible but rigorous treatment of classic dynamic asset-pricing models, appropriate for master's-level or introductory doctoral courses, and suitable for students from various fields, including economics, finance, or applied mathematics. An excellent contribution." Darrell Duffie, Graduate School of Business, Stanford University

"This book is the first of its kind -- an accessible but rigorous treatment of classic dynamic asset-pricing models, appropriate for master's-level or introductory doctoral courses, and suitable for students from various fields, including economics, finance, or applied mathematics. An excellent contribution."--Darrell Duffie, Graduate School of Business, Stanford University

From the Inside Flap

"This is a sophisticated yet highly readable introduction to the most important ideas of modern financial economics by two leading experts in mathematical finance." --Andrew W. Lo, Harris & Harris Group Professor, Sloan School, MIT

"This book provides a very clear and readable approach to the structure, background, and theory of modern financial markets. It can easily be used as a text for a graduate course in quantitative finance and as a reference by practitioners. Unlike more mathematical treatments, however, most of its content should also be accessible to good MBA students." --Robert J. Elliott, RBC Financial Group Professor of Finance, University of Calgary

"This is a very well done text that lives up to its billing as an introduction to both the economics and the mathematics of finance. The authors are to be commended for having avoided both the Scylla of the typical mathematical exposition in which economic examples are treated as asides that merely illustrate some mathematical technique, and the Charybdis of the introductory text that timidly skirts the substantive mathematical issues. The reader who sets down at the table to master this text will come away from the meal fully satisfied." --Stephen A. Ross, Franco Modigliani Professor of Finance and Economics, MIT

"This book is the first of its kind -- an accessible but rigorous treatment of classic dynamic asset-pricing models, appropriate for master's-level or introductory doctoral courses, and suitable for students from various fields, including economics, finance, or applied mathematics. An excellent contribution." --Darrell Duffie, Graduate School of Business, Stanford University

See all Editorial Reviews

Product Details

• Reading level: Ages 18 and up
  
• Hardcover: 516 pages
• Publisher: The MIT Press (February 27, 2004)
• Language: English
• ISBN-10: 0262033208
• ISBN-13: 978-0262033206
• Product Dimensions: 9 x 7.8 x 1 inches
• Shipping Weight: 2.3 pounds (View shipping rates and policies)
• Average Customer Review: 3.7 out of 5 stars  See all reviews (7 customer reviews)
• Amazon Best Sellers Rank: #428,127 in Books (See Top 100 in Books)

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Customer Reviews

Most Helpful Customer Reviews

10 of 10 people found the following review helpful:

4.0 out of 5 stars Above Average but not Excellent, August 21, 2005

By 

C. Ang "cliff_ang" (Chicago, IL) - See all my reviews
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This review is from: Introduction to the Economics and Mathematics of Financial Markets (Hardcover)

This book is easier to read than Duffie's Dynamic Asset Pricing Theory and I would say is comparable to that of Bjork's Arbitrage Theory in Continuous-Time. The good thing about this book is that it covers the major topics required for the understanding of financial markets, i.e. stocks, bonds, interest rates, risk, dynamic programming, options, etc. One thing that I did not like is that in the middle of the section they switch for discrete-time to continuous-time and then back and forth again. It would have been better, in my opinion, to do discrete-time as a whole and then a separate section in continuous-time. In addition, the solutions manual that accompany does not seem like it's worth the $20+ you pay for it. It's extremely thin and contains solutions to "some" problems only.

9 of 10 people found the following review helpful:

4.0 out of 5 stars Good but far from perfection, September 5, 2007

By 

Banchongsan Charoensook (Italy) - See all my reviews

This review is from: Introduction to the Economics and Mathematics of Financial Markets (Hardcover)

I used this book as a TA for a course in introduction to finance for first-year graduate students last semester. Proofs and mathematical expositions are quite rigorous. The contents cover most of the importan parts in modern theories of finance. It is quite self-contained with introduction to Brownian Motion and Ito's lemma. However, its shortcoming is much like other books in modern advanced economics - it fails to capture the intuition behind those fancy expositions. Although brownian motion, Ito's calculus and fundamental theorems of finance are thoroughly introduced, it fails to explain students the basic ideas behind these concepts. Because I used this book to teach students as a TA, I know that without any guidance students are very likely to be lost in the mathematical expositions in these books. Moreover, this book has a lot of typos! Be careful! Overall, this is quite a good book. The level is appropriate for first-year graduate course in finance. Although the level is appropriate, it is far from being a good textbook.

1 of 1 people found the following review helpful:

5.0 out of 5 stars Mathematical aspect of Financial Markets' functionning, January 30, 2010

By 

Nada Zouag (Washington, DC) - See all my reviews

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This review is from: Introduction to the Economics and Mathematics of Financial Markets (Hardcover)

The book presents many formulas and mathematical derivation of the well known pricing models that we use without even thinking about how they were created and what assumptions they are based upon. You'd be surprised by the number of assumptions we take for granted while they don't really make sense in a practical market.