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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Financial Calculus by Martin Baxter. Simon Thornington rated it it was amazing Sep 07, Keelhaul rated it really liked it Jan 02, Chapter four applies and extends this to other kinds of securities: Alexander rated it liked it Mar 19, John rated it really liked it Aug 15, A full Glossary of probabilistic and financial terms is The first rigorous and accessible account of the mathematics behind the pricing, construction, and hedging of derivative securities, this book explains, with mathematical precision and in a style tailored for market practitioners, such key concepts as martingales, change of measure, and the Heath-Jarrow-Morton model.

Kitlo rated it it was ok Jan 20, Lists with This Book.

### Financial Calculus (Martin Baxter, Andrew Rennie) – review

If most real-world markets are not Brownian, as Caluclus and others have argued, that doesn’t undermine any of the mathematics in Financial Calculus but does make its utility entirely unclear. May External links: Chapter three extends this to the continuous realm, using basic stochastic calculus, Ito’s formula and stochastic differential equations.

Feb 10, Taylor rated it it was amazing. Misha rated it really liked it Jan 29, I could have replaced several of my grad school classes with a self-directed course of study using renjie book.

To see what your friends thought of this book, please sign up. There are no discussion topics on this book yet. Minhao Gu rated it it was amazing Mar 09, Suzy rated it it was ok Sep 03, Beginning with the discrete case, chapter two introduces a simple binomial tree model.

The real value of this book lies baxtsr how successfully it motivates each of the pieces of theoretical machinery used in risk-neutral asset pricing: Unfortunately, this isn’t self-contained, and readers will need to consult other sources to get a full rigorous introduction to the topics of measure theory, martingale theory, and rigorous probability theory.

And, retrospectively, I probably should have. Preview — Financial Calculus rnenie Martin Baxter. Other readers are likely to be less interested in the various elaborations and want more philosophical and empirical background.

And a reluctance to lose the beauty of the analytic baxtter may make it harder to face up to empirical ugliness.

### Financial Calculus

While some background knowledge of options and Black-Scholes is appropriate, this is a fairly self-contained introduction to risk-neutral pricing. There are also a fihancial exercises, with solutions, which mostly test understanding of basic concepts and the ability to use the formal machinery. Dalculus 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 This is the most intuitive and concise introduction to asset pricing via equivalent martingale measures that I’ve yet encountered.

Hardcoverpages. Radha rated it it was amazing Apr 05, This is a very nice, reasonably concise little monograph.

## Martin Baxter + Andrew Rennie

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: Now “interesting and tractable” is a fine basis for doing mathematics, but not a strong basis for applying the results to reality.

Jan 31, Neal Groothuis rated it it was amazing.

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. 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. Naxter Gidding rated it it was ok Apr 12, Honestly, while I didn’t love this book, it should still be considered a must-read simply because of the paucity of better offerings.