Mathematics for Finance: An Introduction to Financial Engineering (Springer Undergraduate Mathematics Series) [Paperback]

Marek Capinski (Author), Tomasz Zastawniak (Author)

Book Description

ISBN-10: 1852333308 | ISBN-13: 978-1852333300 | Publication Date: July 6, 2003

This textbook contains the fundamentals for an undergraduate course in mathematical finance aimed primarily at students of mathematics. Assuming only a basic knowledge of probability and calculus, the material is presented in a mathematically rigorous and complete way. The book covers the time value of money, including the time structure of interest rates, bonds and stock valuation; derivative securities (futures, options), modelling in discrete time, pricing and hedging, and many other core topics. With numerous examples, problems and exercises, this book is ideally suited for independent study.

Editorial Reviews

Review

From the reviews:

"This text is an excellent introduction to Mathematical Finance. Armed with a knowledge of basic calculus and probability a student can use this book to learn about derivatives, interest rates and their term structure and portfolio management. The text serves as an easily understood introduction to the economic concepts but also manages to cover the topics in a mathematically rigorous manner."

Zentralblatt MATH

"For the most part, the authors employ just pre-calculus and basic probability theory. Almost all concepts are presented in discrete time. Only later in the book is a small account of calculus and linear algebra used. Given these basic tools, it is surprising how high a level of sophistication the authors achieve, covering such topics as arbitrage-free valuation, binomial trees, and risk-neutral valuation... Despite its elementary nature, the book is mathematically VERY formal. This is excellent for clarifying definitions. Notions such as arbitrage or admissible portfolio are indicated with mathematical precision. The result is mathematically elegant and will appeal to students who have a degree of mathematical sophistication."

www.riskbook.com

"As the authors modestly announce … the book ‘is an excellent financial investment. … The level of exposition is pretty basic … . That makes the book accessible to second year undergraduate students (not only for students of mathematics, but hopefully also for students of business management, finance and economics). … the overall impression of the book is quite positive. The reviewer can only congratulate the authors with successful completion of a difficult task of writing a useful textbook on a traditionally hard topic." (K. Borovkov, The Australian Mathematical Society Gazette, Vol. 31 (4), 2004)

"This text is an excellent introduction to Mathematical Finance. … The text serves as an easily understood introduction to the economic concepts … . The book contains many worked examples and exercises and would make a useful textbook for a first course in Financial Mathematics." (Julann O’Shea, Zentralblatt MATH, Vol. 1035, 2004)

"Designed to form the basis of an undergraduate course in mathematical finance, the text builds on mathematical models of bond and stock prices … . It covers the material … at a level accessible to second or third year undergraduate students. … provides ample material for tutorials, and makes the book ideal for self-study. It is suitable not only for students of mathematics, but also students of business management, finance and economics, and anyone with an interest in finance … ." (Zentralblatt für Didaktik der Mathematik, August, 2004)

"The book … is designed as a textbook for an undergraduate course aimed at 2nd or 3rd year mathematics students and also of business management or economics. … the authors have tried to aim their book at too wide a potential readership. … the authors have written a very useful book. … are to be applauded for the broad scope of this book. … The book contains a number of exercises … . Worked solutions are given at the back … . " (David Applebaum, The Mathematical Gazette, Vol. 88 (512), 2004)

From the Back Cover

As with the first edition, Mathematics for Finance: An Introduction to Financial Engineering combines financial motivation with mathematical style. Assuming only basic knowledge of probability and calculus, it presents three major areas of mathematical finance, namely option pricing based on the no-arbitrage principle in discrete and continuous time setting, Markowitz portfolio optimisation and the Capital Asset Pricing Model, and basic stochastic interest rate models in discrete setting. In this second edition, the material has been thoroughly revised and rearranged. New features include: • A case study to begin each chapter – a real-life situation motivating the development of theoretical tools; • A detailed discussion of the case study at the end of each chapter; • A new chapter on time-continuous models with intuitive outlines of the mathematical arguments and constructions; • Complete proofs of the two fundamental theorems of mathematical finance in discrete setting. From the reviews of the first edition: ”This text is an excellent introduction to Mathematical Finance. Armed with a knowledge of basic calculus and probability a student can use this book to learn about derivatives, interest rates and their term structure and portfolio management.”(Zentralblatt MATH) ”Given these basic tools, it is surprising how high a level of sophistication the authors achieve, covering such topics as arbitrage-free valuation, binomial trees, and risk-neutral valuation.” (www.riskbook.com) ”The reviewer can only congratulate the authors with successful completion of a difficult task of writing a useful textbook on a traditionally hard topic.” (K. Borovkov, The Australian Mathematical Society Gazette, Vol. 31 (4), 2004) --This text refers to an alternate Paperback edition.

Product Details

• Paperback: 310 pages
• Publisher: Springer (July 6, 2003)
• Language: English
• ISBN-10: 1852333308
• ISBN-13: 978-1852333300
• Product Dimensions: 9.2 x 7.3 x 0.8 inches
• Shipping Weight: 1.3 pounds
• Average Customer Review: 4.0 out of 5 stars  See all reviews (14 customer reviews)
• Amazon Best Sellers Rank: #468,591 in Books (See Top 100 in Books)

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Most Helpful Customer Reviews

35 of 36 people found the following review helpful:

5.0 out of 5 stars A great introduction to financial engineering, April 9, 2004

By A Customer

This review is from: Mathematics for Finance: An Introduction to Financial Engineering (Springer Undergraduate Mathematics Series) (Paperback)

This is a great book at a great price. As an undegraduate student reading for a degree in mathematics with financial management, I've found this textbook to be of great help in the derivative securities and portfolio theory modules I am doing this year. There is a nice balance between examples, theory, and exercises (all complete with solutions). The examples and excercises have been particularly helpful to me - they don't just illustrate and consolidate the various topics, but most importantly prepare the ground for the exciting new ideas to come. Compared to other books recommended for my mudules in mathematical finance, this is by far the most readable. What seems to be daunting mathematical theory full of unnesessary abstractions in the other books I have tried, this one has somehow managed to appear easy, indeedd almost obvious when you come to think of it (just look at pricing American options, for example!).

There are a few typos in various places and it is well worth visiting the book's web page at www.springeronline.com/1-85233-330-8 (and click on the accompanying website) for a list of corrections. At the same place, I have also located some nice Excel files that can be downloaed, with numerical solutions to case studies and excercises in the more advanced chapters - these are neatly designed and are of great help in following the text. I just wish there was even more material covered in similar Excel files.

In all respects, a great book this, and well worth spending under 20 quid.

34 of 35 people found the following review helpful:

5.0 out of 5 stars Excellent Starting Place for Financial Software Developers, December 29, 2004

By 

J.F. "Jonathan" (NY, NY) - See all my reviews

This review is from: Mathematics for Finance: An Introduction to Financial Engineering (Springer Undergraduate Mathematics Series) (Paperback)

While shy on the mathematics for the would-be-quants, this treatment of mathematical financial is way beyond the mundane coverage typically seen in MBA-level texts, is widely accessible, and very well written.

The other reviewer's comments on Black-Scholes are wrong. Chapter eight is entirely devoted to the Black-Scholes formula and models and Chapter nine is a study in its applications (hedging the greeks, etc...)

Smarter than many of the more high-level math texts (Joshi, Willmott, Neftci, etc...) in that it is both an introduction to the financial topics as well as the mathematics and links the intuitive (and counter-intuitive) observations of how financial instruments should behave with the formal and mathematical discussion of how they really do behave.

Not nearly as good in the math as the others mentioned.

37 of 39 people found the following review helpful:

5.0 out of 5 stars The very best intro. . .Ideal for self-study, June 6, 2005

By 

Polymath-In-Training (Olive Branch, MS United States) - See all my reviews

This review is from: Mathematics for Finance: An Introduction to Financial Engineering (Springer Undergraduate Mathematics Series) (Paperback)

Part of my job is executing derivatives trades and doing risk management. This is the best introduction to financial engineering that I have seen. The authors explain their topic clearly. A major strength of the book is the numerous exercises, WITH WORKED SOLUTIONS. If you work through most of the exercises, your understanding of financial engineering will be greatly enhanced.

This book is ideal for self-study. At under $40, it is better than other books at twice the price. I recommend it without reservation.