Table of Contents

1: Introduction
2: The Binomial Model
3: A More General One period Model
4: Stochastic Integrals
5: Differential Equations
6: Portfolio Dynamics
7: Arbitrage Pricing
8: Completeness and Hedging
9: Parity Relations and Delta Hedging
10: The Martingale Approach to Arbitrage Theory
11: The Mathematics of the Martingale Approach
12: Black-Scholes from a Martingale Point of View
13: Multidimensional Models: Classical Approach
14: Multidimensional Models: Martingale Approach
15: Incomplete Markets
16: Dividends
17: Currency Derivatives
18: Barrier Options
19: Stochastic Optimal Control
20: The Martingale Approach to Optimal Investment
21: Optimal Stopping Theory and American Options
22: Bonds and Interest Rates
23: Short Rate Models
24: Martingale Models for the Short Rate
25: Forward Rate Models
26: Change of Numeraire
27: LIBOR and Swap Market Models
28: Potentials and Positive Interest
29: Forwards and Futures
A: Measure and Integration
B: Probability Theory
C: Martingales and Stopping Times

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 Associate Editor of Finance and Stochastics. He has published numerous journal articles on mathematical finance in general, and in particular on interest rate theory.

Reviews

`Review from previous edition This book is one of the best of a large number of new books on mathematical and probabilistic models in finance, positioned between the books by Hull and Duffie on a mathematical scale...This is a highly reasonable book and strikes a balance between mathematical development and intuitive explanation
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