FINANCIAL MATHEMATICS: An Introduction attempts to provide an introductory text on Financial Mathematics to cater to the needs of students at various universities/ institutes in India and abroad. Apart from presenting two Nobel Prize winning theories of Black, Scholes and Merton for option pricing and Mean-Variance approach of Markowitz for portfolio optimization, the text also includes now standard topics of interest rate and interest rate derivatives. Certain interesting and useful topics e.g., Optimal Trading Strategies, Credit Scoring Models and Portfolio Credit Risk Management, which are normally not covered in a text of this kind, are also included here. A significant portion of the book is devoted to the study of Stochastics of Finance that is very much needed to understand basic concepts related to pricing of derivatives. A special care is taken to evolve a balanced approach between “precise mathematical presentation” and “economic/physical interpretations”. A distinctive feature of the book is also to provide applications of MATLAB Financial Toolbox for class room teaching.

• • A simple class room teaching style of presentation that attempts to provide an optimal trade-off between “precise mathematical presentation” and “economic/physical interpretations”. • Numerous small illustrative examples throughout the book with end chapter exercises for practice. • Inclusion of certain special topics in Finance, e.g., Optimal Trading Strategies, Credit Scoring Models, and Portfolio Credit Risk Management. • A section on Summary and Additional Notes to provide a glimpse of current research scenario. • Finance related MATLAB programming and applications of Financial Toolbox. • Suitable as a text for M.Sc (Financial Mathematics/ Financial Engineering), M.Sc (Mathematics/ Statistics/ Operations Research), B.Tech/B.E., B.Sc (Hons.), and M.B.A students. Also suitable as reference book for researchers and practitioners.

Financial Mathematics: An Overview / Forward and Futures Contracts / Basic Theory of Option Pricing-I / Basic Theory of Option Pricing-II / Portfolio Optimization-I / Portfolio Optimization-II / Stochastic Processes / s -Fields and Conditional Expectation / Stochastic Calculus / Black-Scholes Formula Revisited / Interest Rate Modelling / Interest Rate Derivatives / Optimal Trading Strategies / Credit Risk Management / Monte Carlo Simulation/ Glossary of Financial Terms / MATLAB and Financial Toolbox / References and Index.

Undergraduate and Postgraduate Students