Product Description

The second edition of this popular introduction to the classical underpinnings of the mathematics behind finance continues to combine sound mathematical principles with economic applications. Concentrating on the probabilistic theory of continuous arbitrage pricing of financial derivatives, including stochastic optimal control theory and Merton's fund separation theory, the book is designed for graduate students and combines necessary mathematical background with a solid economic focus. It includes a solved example for every new technique presented, contains numerous exercises, and suggests further reading in each chapter. In this substantially extended new edition Bjork has added separate and complete chapters on measure theory, probability theory, Girsanov transformations, LIBOR and swap market models, and martingale representations, providing two full treatments of arbitrage pricing: the classical delta-hedging and the modern martingales. More advanced areas of study are clearly marked to help students and teachers use the book as it suits their needs.

Product Details

• Amazon Sales Rank: #340064 in Books
• Published on: 2004-03-04
• Original language: English
• Number of items: 1
• Binding: Hardcover
• 488 pages

About the Author
Tomas Björk is Professor of Mathematical Finance at the Stockholm School of Economics. His background is in probability theory and he was formerly at the Mathematics Department of the Royal Institute of Technology in Stockholm. He is co-editor of Mathematical Finance and is on the editorial board of Finance and Stochastics. He has published numerous journal articles on mathematical finance in general, and in particular on interest rate theory.

Customer Reviews

A very good book to understand derivatives pricing
The book by T. Bjork illustrates how to price derivatives, and how term structure models work. It applies a consistent and modern approach to this tasks, starting by explaining the maths which is required to understand modern finance (without using a purely mathematical perspective) and moving on to illustrate pricing problems in order of difficulty. The author explains all the main models (Black and Scholes, Black, Vasiceck, CIR, etc.) and the main approaches to pricing (risk neutral pricing and change of numeraire techniques). Used in conjuction with Hull (which is a very good introduction) this book can really alow one to understand the foundations of modern financial theory without going into abstract mathematical models.

The only "interesting" one in this area
This book is highly recommended by my professer and past students. It covers everything you need to know about financial application of stocastical method. And the most important point is, this book is interesting!

amazing book, by far the best rigorous introduction on the subject
This is an excellent book, precise, rigorous and damn interesting.

Although I would recommend a good mathematical background almost all you need is included and some more advanced optional chapters are here to statisfy the mathematically inclined reader.
There are a few typos in the book, but nothing an attentive reader couldn't correct immediatly so it doesn't spoil any of it.
If you are looking for an introduction to modern financial maths, this is THE title to get.