Lectures on Financial Mathematics: Discrete Asset Pricing

by Greg Anderson, Alec Kercheval

This is a short book on the fundamental concepts of the no-arbitrage theory of pricing financial derivatives. Its scope is limited to the general discrete setting of models for which the set of possible states is finite and so is the set of possible trading times--this includes the popular binomial tree model. This setting has the advantage of being fairly general while not requiring a sophisticated understanding of analysis at the graduate level. Topics include understanding the several variants of "arbitrage", the fundamental theorems of asset pricing in terms of martingale measures, and applications to forwards and futures. The authors' motivation is to present the material in a way that clarifies as much as possible why the often confusing basic facts are true. Therefore the ideas are organized from a mathematical point of view with the emphasis on understanding exactly what is under the hood and how it works. Every effort is made to include complete explanations and proofs, and the reader is encouraged to work through the exercises throughout the book. The intended audience is students and other readers who have an undergraduate background in mathematics, including exposure to linear algebra, some advanced calculus, and basic probability. The book has been used in earlier forms with students in the MS program in Financial Mathematics at Florida State University, and is a suitable text for students at that level. Students who seek a second look at these topics may also find this book useful. Table of Single-Period Models / The General Discrete Model / The Fundamental Theorems of Asset Pricing / Forwards and Futures / Incomplete Markets

62 pages, Paperback

Published August 2, 2010

About the author

“A man on a mission…”

Greg Anderson is the founder of Cancer Recovery Foundation International, a global affiliation of national organizations whose mission is to help all people prevent and survive cancer.

Cancer Recovery Foundation focuses on the human services side of cancer. It does not fund clinical research or medical treatments. The Foundation provides adults with training and support for implementing whole-person cancer prevention and survival strategies. Children with cancer and their families are served through the Children’s Project. The Foundation has established affiliates in the United States, Canada, the United Kingdom, Germany and France.

Greg Anderson was diagnosed with metastatic lung cancer in 1984. He was given 30 days to live. Refusing to accept the hopelessness of this prognosis, he went searching for people who had lived even though their doctors had told them they were “terminal.” His findings from interviews with over 16,000 cancer survivors form the strategies and action points for what has become an international cancer survival movement.

Anderson is widely recognized as one of the world’s leading wellness authorities. He is the author of eight books which have been translated into 29 languages.