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Mathematics and Models for Financial Derivatives 1st Edition Author: Wilson

ISBN(s): 978-1-64756-778-1 | 978-1-64756-778-1

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A text on financial derivatives tailored to the specific needs and strengths of actuarial science, mathematics, and quantitative finance students!

With very minimal prerequisites—only a bit of probability is needed—Mathematics and Models for Financial Derivatives proceeds in a friendly and efficient way, with examples illustrating the concepts throughout. A twin emphasis on application and on understanding the “why” of the mathematical aspects helps the reader to become fluent in the workings of payoff and pricing models and their uses.

Mathematics and Models introduces forward contracts, futures contracts, puts, and calls and shows the student how derivatives can be combined to achieve specific financial or risk management objectives. Basic facts such as put-call parity and convexity results are introduced using concrete examples. The binomial and lognormal models are developed in an intuitive way, and this leads to the Black Scholes pricing formulas and an introduction to hedging using option Greeks. Candidates for Exam FAM will appreciate that each learning objective for financial derivative is given a full, detailed, precise, and highly readable treatment. Students will find this book to be a valuable reference with its easy-to-understand explanations and dozens of exercises. A complete digital solutions manual is included.

Highlights and Details

This book has over 100 examples and almost 150 exercises. The text can be used for a one-semester university course. Alternatively, it is an excellent supplement to the SOA syllabus texts for derivative options learning objectives, helpfully providing many examples and expanded coverage for those topics. A number of optional supplemental topics allow instructors and interested readers to expand coverage beyond the core topics mentioned above. These optional topics include options on currencies, exotic options, methods for Monte Carlo simulation (with notes on implementing in Excel), interest rate derivatives, stochastic calculus & the Black Scholes PDE, debt/equity as derivatives, annuity guarantees, and real options.

About the Author

Chris Wilson, PhD, ASA, is a Professor of Actuarial Science at Butler University, Indianapolis, where he has been a faculty member since 2007. He has led Butler’s actuarial science program for over a decade and was chair of what is now called the Department of Mathematical Sciences from 2018-2021. His publications include articles about the pedagogy of actuarial science as well as articles in noncommutative ring theory. He is a classically trained pianist and enjoys making music with others and traveling with his family.

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