ThispageintentionallyleftblankAnElementaryIntroductiontoMathematicalFinance,ThirdEditionThistextbookonthebasicsofoptionpricingisaccessibletoreaderswithlimitedmathematicaltraining.Itisforbothprofessionaltradersandun-dergraduatesstudyingthebasicsoffinance.Assumingnopriorknowledgeofprobability,SheldonM.Rossoffersclear,simpleexplanationsofarbi-trage,theBlack–Scholesoptionpricingformula,andothertopicssuchasutilityfunctions,optimalportfolioselections,andthecapitalassetspricingmodel.Amongthemanynewfeaturesofthisthirdeditionarenewchap-tersonBrownianmotionandgeometricBrownianmotion,stochasticorderrelations,andstochasticdynamicprogramming,alongwithexpandedsetsofexercisesandreferencesforallthechapters.SheldonM.RossistheEpsteinChairProfessorintheDepartmentofIndustrialandSystemsEngineering,UniversityofSouthernCalifornia.HereceivedhisPh.D.instatisticsfromStanfordUniversityin1968andwasaProfessorattheUniversityofCalifornia,Berkeley,from1976until2004.Hehaspublishedmorethan100articlesandavarietyoftextbooksintheareasofstatisticsandappliedprobability,includingTopicsinFiniteandDiscreteMathematics(2000),IntroductiontoProbabilityandStatis-ticsforEngineersandScientists,FourthEdition(2009),AFirstCourseinProbability,EighthEdition(2009),andIntroductiontoProbabilityModels,TenthEdition(2009).Dr.RossservesastheeditorforProbabil-ityintheEngineeringandInformationalSciences.AnElementaryIntroductiontoMathematicalFinanceThirdEditionSHELDONM.ROSSUniversityofSouthernCaliforniaCAMBRIDGEUNIVERSITYPRESSCambridge,NewYork,Melbourne,Madrid,CapeTown,Singapore,SãoPaulo,Delhi,Tokyo,MexicoCityCambridgeUniversityPress32AvenueoftheAmericas,NewYork,NY10013-2473,USAwww.cambridge.orgInformationonthistitle:www.cambridge.org/9780521192538©CambridgeUniversityPress1999,2003,2011Thispublicationisincopyright.Subjecttostatutoryexceptionandtotheprovisionsofrelevantcollectivelicensingagreements,noreproductionofanypartmaytakeplacewithoutthewrittenpermissionofCambridgeUniversityPress.Firstpublished1999Secondeditionpublish...
