An introduction to derivative pricing

Contents

These are the contents as they will appear in the published version.

**Preface****The Parable of the bookmaker****Introduction**- Expectation pricing
- Arbitrage pricing
- Expectation vs arbitrage

**Discrete processes**- The binomial branch model
- The binomial tree model
- Binomial representation theorem
- Overture to continuous models

**Continuous processes**- Continuous processes
- Stochastic calculus
- Itôum; calculus
- Change of measure - the C-M-G theorem
- Martingale representation theorem
- Constructing strategies
- Black-Scholes model
- Black-Scholes in action

**Pricing market securities**- Foreign exchange
- Equities and dividends
- Bonds
- Market price of risk
- Quantos

**Interest rates**- The interest rate market
- A simple model
- Single-factor HJM
- Short-rate models
- Multi-factor HJM
- Interest rate products
- Multi-factor models

**Bigger Models**- General stock model
- Log-normal models
- Multiple stock models
- Numeraires
- Foreign currency interest-rate models
- Arbitrage-free complete models

**Appendices**- Further reading
- Notation
- Answers to exercises
- Glossary of technical terms
- Index