Financial calculus. An introduction to derivative pricing. Martin Baxter. Nomura International London. Andrew Rennie. Head ofDebt Analytics, Merrill Lynch. Financial Calculus. The website of Financial Calculus: an introduction to derivative pricing. This book has been written by Martin Baxter and Andrew Rennie, and. Financial Calculus is a presentation of the mathematics behind derivative pricing, building up to the Black-Scholes theorem and then extending the theory to a.

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Ricardo rated it it was amazing Oct 10, Sep 05, Austin rated it liked it Shelves: Keelhaul rated it really liked it Jan 02, Financial Calculus by Martin Baxter.

Financial Calculus

Julius Zhang rated it it was amazing Jul 25, Suzy rated it it was ok Sep 03, For example, in the chapter that introduces the binomial asset pricing model, the authors describe filtrations as being the history of the price process up to a given point in time. Piotr rated it it was amazing Jun 13, This is the most intuitive calculuss concise introduction to asset pricing via equivalent martingale measures that I’ve yet encountered. Simon Thornington rated it it was amazing Sep 07, I could have replaced several of my grad school classes with a self-directed course of study using this fimancial.

Financial Calculus is a presentation of the mathematics behind derivative pricing, building up to the Black-Scholes theorem and then extending the theory to a range of different financial instruments. Minhao Gu rated it it was amazing Mar 09, Robert Patterson rated it it was amazing Mar 18, And a reluctance to lose the beauty of the analytic formalism may make it harder to face up to empirical ugliness. The only evidence provided is a comparison of two small and vaguely similar graphs, one of the UK FTA index from to and the other generated using exponential Brownian motion.


This book will be especially useful to people with a background in economic theory who are having trouble making the conceptual link between risk aversion, subjective-expected utility theory and pricing via equivalent martingale measures.

May External links: The Radon-Nikodym derivative, the Cameron-Martin-Girsanov theorem, and the martingale representation theorem allow a similar construction to that of chapter two, coming together in renmie Black-Scholes theorem. This book is not yet featured on Listopia. Jan 31, Neal Groothuis rated it it was rennir. There are no discussion topics on this book yet. And chapter five, which I only glanced over, builds progressively more complex models for interest rates.

Chan-Ho rated it really liked it Apr 09, The real value of this book lies in how successfully it motivates each of the pieces of theoretical machinery used in risk-neutral asset pricing: Without a proper background to these topics, certain intuitive statements made in this book can be misleading.

Financial Calculus

Lists with This Book. Honestly, while I didn’t love this book, it should still be considered a must-read simply because of the paucity of better offerings. Mijrelax rated it it was amazing Jan 26, One strength of Financial Calculus is that, while it is rigorous and the approach is quite abstract — it assumes familiarity with calculus and a general competence with formal mathematics — concrete worked examples are used to anchor the theory and assist intuition.

Paradoxically, I also worry about the very elegance and rigour of the results in Financial Calculus. Want to Read saving…. Refresh and try again. If most real-world markets are not Brownian, as Mandelbrot and others have argued, that doesn’t undermine any of the mathematics in Financial Calculus but does make its utility entirely unclear.


Ben rated it really liked it Jul 16, Chapter three extends this to the continuous realm, using clculus stochastic calculus, Ito’s formula and stochastic differential equations.

While this is true for a simple binomial model, in continuous time filtrations have a much more subtle nature — this is where a suitable background in measure theory comes in handy.

Misha rated it really liked it Jan 29, Preview — Financial Calculus by Martin Baxter. Sam Nazari rated it liked it Jan 18, Want to Read Currently Reading Read. This is a very nice, reasonably concise little monograph. More interestingly, chapter six extends the basic model: Chapter four bazter and extends this to other kinds of securities: A full Glossary of probabilistic and financial terms is provided along with graphical finanvial with realistic data.

The models presented in Financial Calculus are abstractions, and obviously any real-world application would need to address a whole range of issues not considered: Radha rated it it was amazing Apr 05, There are also a few exercises, with solutions, which mostly test understanding of basic concepts and the ability to use the formal machinery. Chapter one explains the limitations of expectation pricing, introducing instead the use of “no arbitrage” constructions to derive prices.

Kitlo rated it it was ok Jan 20, Return to Book Page. Anthony P Badali rated it really liked it Jul 04, Jack Gidding rated it it was ok Apr 12,