Stochastic Calculus for Finance I: The Binomial Asset Pricing Model [Hardcover]

Steven E. Shreve (Author)

Book Description

ISBN-10: 0387401008 | ISBN-13: 978-0387401003 | Publication Date: April 21, 2004 | Edition: 1

Developed for the professional Master's program in Computational Finance at Carnegie Mellon, the leading financial engineering program in the U.S. Has been tested in the classroom and revised over a period of several years Exercises conclude every chapter; some of these extend the theory while others are drawn from practical problems in quantitative finance

Editorial Reviews

Review

From the reviews of the first edition:

Steven Shrevea (TM)s comprehensive two-volume Stochastic Calculus for Finance may well be the last word, at least for a while, in the flood of Mastera (TM)s level books.... a detailed and authoritative reference for "quantsa (formerly known as "rocket scientistsa ). The books are derived from lecture notes that have been available on the Web for years and that have developed a huge cult following among students, instructors, and practitioners. The key ideaspresented in these works involve the mathematical theory of securities pricing based upon the ideas of classical finance.

...the beauty of mathematics is partly in the fact that it is self-contained and allows us to explore the logical implications of our hypotheses. The material of this volume of Shrevesa (TM)s text is a wonderful display of the use of mathematical probability to derive a large set of results from a small set of assumptions.

In summary, this is a well-written text that treats the key classical models of finance through an applied probability approach. It is accessible to a broad audience and has been developed after years of teaching the subject. It should serve as an excellent introduction for anyone studyin the mathematics of the classical theory of finance.

-- SIAM, 2005

"This is the first of the two-volume series evolving from the authora (TM)s mathematics courses in M.Sc. Computational Finance program at Carnegie Mellon University (USA). The content of this book is organized such as to give the reader precise statements of results, plausibility arguments, mathematical proofs and, more importantly, the intuitive explanations of the financial andeconomic phenomena. Each chapter concludes with summary of the discussed matter, bibliographic notes, and a set of really useful exercises." (Neculai Curteanu, Zentralblatt MATH, Vol. 1068, 2005)

From the Back Cover

Stochastic Calculus for Finance evolved from the first ten years of the Carnegie Mellon Professional Master's program in Computational Finance. The content of this book has been used successfully with students whose mathematics background consists of calculus and calculus-based probability. The text gives both precise statements of results, plausibility arguments, and even some proofs, but more importantly intuitive explanations developed and refine through classroom experience with this material are provided. The book includes a self-contained treatment of the probability theory needed for stchastic calculus, including Brownian motion and its properties. Advanced topics include foreign exchange models, forward measures, and jump-diffusion processes. This book is being published in two volumes. The first volume presents the binomial asset-pricing model primarily as a vehicle for introducing in the simple setting the concepts needed for the continuous-time theory in the second volume. Chapter summaries and detailed illustrations are included. Classroom tested exercises conclude every chapter. Some of these extend the theory and others are drawn from practical problems in quantitative finance. Advanced undergraduates and Masters level students in mathematical finance and financial engineering will find this book useful. Steven E. Shreve is Co-Founder of the Carnegie Mellon MS Program in Computational Finance and winner of the Carnegie Mellon Doherty Prize for sustained contributions to education.

Product Details

• Hardcover: 250 pages
• Publisher: Springer; 1 edition (April 21, 2004)
• Language: English
• ISBN-10: 0387401008
• ISBN-13: 978-0387401003
• Product Dimensions: 9.3 x 6.3 x 0.7 inches
• Shipping Weight: 1 pounds (View shipping rates and policies)
• Average Customer Review: 4.2 out of 5 stars  See all reviews (18 customer reviews)
• Amazon Best Sellers Rank: #223,525 in Books (See Top 100 in Books)

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Customer Reviews

Most Helpful Customer Reviews

29 of 33 people found the following review helpful:

5.0 out of 5 stars One of the best!, December 3, 2004

By 

Robert J. Frey "redmouse" (Stony Brook, NY) - See all my reviews
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This review is from: Stochastic Calculus for Finance I: The Binomial Asset Pricing Model (Hardcover)

It would be hard to overstate my enthusiasm for this text and its companion volume. In field that is too frequently represented by poorly thought out drafts rushed to market or by advanced mathematical treatments that are not easily understood by individuals more focused on practice, Shreve's texts stand out by being both rigorous and accessible with well thought out examples and exercises.

This particular volume, covering binomial models, covers advanced concepts in a discrete setting. For some it will represent a waste of time and those individuals are best advised to skip to Volume II. However, many intelligent students who are not so comfortable with abstract mathematics will find this a simple and concrete exposition that can serve as a bridge to more advanced theory.

16 of 18 people found the following review helpful:

5.0 out of 5 stars A gentle introduction, November 25, 2005

By 

Hobbes "Hobbes" (Germany) - See all my reviews

This review is from: Stochastic Calculus for Finance I: The Binomial Asset Pricing Model (Hardcover)

I am always a fan of books that can simplify advanced concepts instead of drowning the reader in rigour. Shreve's introduction to probablistic asset pricing is gentle, covering basic stochastic processes, the concepts behind derivative pricing and hedging, as well as setting up the reader for subsequent readings. It's one of those books that you come back to when you are stuck with a problem from a conceptual point of view because things are explained in the book at an intuitive level.
All in all, a good foundation book or reference for starting quants.

9 of 10 people found the following review helpful:

5.0 out of 5 stars Great book, June 5, 2005

By 

A Reader (Massachusetts) - See all my reviews

This review is from: Stochastic Calculus for Finance I: The Binomial Asset Pricing Model (Hardcover)

I think the reviewer below who gave it one star seems biased and has an attitude. I would invite this reviewer to right a book half as good as this book. Personally, for me this book explained a lot of materials without having to master the more advanced measure theory and probability concepts. As a first introduction to the stocahstic calculus applications in finance, I highly recommend this book. And yes, I was always a big fan of Shreve's lecture notes on the net. They are the best.