Stochastic Finance

This book is an introduction to financial mathematics. It is intended for graduate students in mathematics and for researchers working in academia and industry.

The focus on stochastic models in discrete time has two immediate benefits. First, the probabilistic machinery is simpler, and one can discuss right away some of the key problems in the theory of pricing and hedging of financial derivatives. Second, the paradigm of a complete financial market, where all derivatives admit a p ...