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Introduction to Option Pricing Theory

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I am a relatively new student of stochastic processes. The first 4 chapters which are essentially devoted to explaining the theoretical concepts (Ito inetgration, semi-martingales, etc..) are so lucidly written that it is very easy for someone with a limited idea of stochastic process to comprehend them. After establishing these concepts, the book discusses how the earlier theory is applied to pricing by discussing the options pricing models under different scenarios. I felt that although i understood the earlier discussions regarding arbitrage, the part on how it relates with equivalent martingales was quite difficult to understand. But it is probably because i am new to this subject. In all this is an excellent effort by the authors to make a difficult topic readable and understandable. Finally i feel that people, who are genuinely interested in investing their hard earned money in options, should take the time and effort to learn from this book rather than the typical stereotype "How I Became a Millionaire Overnight Trading Options" books.

Introduction to option pricing theory.

Stochastic calculus.