Concepts of hedging and no arbitrage
understand ‘Black-Scholes world’

Chapters

Chapter 1: Products and Markets - An overview of the workings of the financial markets and their products.
Chapter 2: Derivatives - An introduction to options, options markets, market conventions. Definitions of the common terms, simple no arbitrage, put-call parity and elementary trading strategies
Chapter 3: The random behavior of assets - An examination of data for various financial quantities, leading to a model for the random behavior of prices. Almost all of sophisticated finance theory assumes that prices are random, the question is how to model that randomness.
Chapter 4: elementary stochastic calculus - The key concept is Ito’s lemma
Chapter 5: the Black-Scholes model - Model for the fair value of options on stocks, currencies, and commodities. Delta hedging and no arbitrage and show how they lead to a unique price for an option.
Chapter 6: partial differential equations
Chapter 7: the Black-Scholes formulae and the Greeks - Derivatives of option prices with respect to variables or parameters are important for hedging
Chapter 8: simple generalizations of the Black-Scholes word
Chapter 9: early exercise and American options
Chapter 10: probability density functions and first-exit times
Chapter 11: multi-asset options
Chapter 12: how to delta hedge
Chapter 13: fixed-income products and analysis: yield, duration and convexity
Chapter 14: swaps
Chapter 15: the binomial model
Chapter 16: how accurate is the normal approximation?
Chapter 17: investment lessons from Blackjack and gambling
Chapter 18: portfolio management - the classical ideas of Modern portfolio theory and the capital asset pricing model
Chapter 19: value at risk
Chapter 20: forecasting the markets? - The hypothesis is that information about short-term future asset price movements are contained within the past history of prices

Quantitative Finance - Part one

Contents

Chapters