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Following the success of Option Pricinq among financial practitioners, we have written this student-oriented version as an introduction to the subject. Our aim in The Mathematics of Financial Derivatives: A Student Introduction is to introduce the principles in a clear and readable way while leaving the more advanced topics and detailed practicalities, especially numerical issues, to the earlier book.
In what follows we describe the modelling of financial derivative products from an applied mathematician's viewpoint> from modelling through analysis to elementary computation. Some mathematics is assumed, but we explain everything that is not contained in the early calculus, probability and algebra courses of an undergraduate degree or equivalent in mathematics, physics, chemistry, engineering or similar subjects. We also give enough detail of the finance that the book can be read by mathematicians whose knowledge of financial markets is only sketchy. It is sufficientIy self-contained that it could be used for a course on the subject, on its own or in conjunction either with a more probability-based text such as Duffie (1992) or with a more practically oriented book such as Hull (1993) or Gemmill (1992), Our philosophy may be described briefly as follows:
° We present a unified approach to modelling many derivative products as partial differential equations. We make no more fuss over valuing an average strike option (a particularly exotic product) than over valuing the simplest option. There is a minimal use of fudges or approximations.
° We describe the theory of partial differential equations, We explain why they are one of the best approaches to modelling in many physical or financial subjects.
° We are happy to use numerical solutions. We would rather have an accurate numerical solution of the correct model than an explicit solution of the wrong model. ....

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