Discrete Models of Financial Markets (Mastering. Capinski, Kopp<|

Discrete Models of Financial MarketsAuthor(s): Marek Capi?ski, Ekkehard Kopp\nFormat: Hardback\nPublisher: Cambridge University Press, United Kingdom\nImprint: Cambridge University Press\nISBN-13: 9781107002630, 978-1107002630\nSynopsis\nThis book explains in simple settings the fundamental ideas of financial market modelling and derivative pricing, using the no-arbitrage principle. Relatively elementary mathematics leads to powerful notions and techniques - such as viability, completeness, self-financing and replicating strategies, arbitrage and equivalent martingale measures - which are directly applicable in practice. The general methods are applied in detail to pricing and hedging European and American options within the CoxRossRubinstein (CRR) binomial tree model. A simple approach to discrete interest rate models is included, which, though elementary, has some novel features. All proofs are written in a user-friendly manner, with each step carefully explained and following a na.