An Elementary Introduction to Mathematical Finance

by Sheldon M. Ross

This textbook on the basics of option pricing is accessible to readers with limited mathematical training. It is for both professional traders and undergraduates studying the basics of finance. Assuming no prior knowledge of probability, Sheldon M. Ross offers clear, simple explanations of arbitrage, the Black-Scholes option pricing formula, and other topics such as utility functions, optimal portfolio selections, and the capital assets pricing model. Among the many new features of this third edition are new chapters on Brownian motion and geometric Brownian motion, stochastic order relations and stochastic dynamic programming, along with expanded sets of exercises and references for all the chapters.

Genres: Finance, Mathematics, Economics

92 pages, Kindle Edition

First published November 18, 2002

About the author

Sheldon M. Ross is the Epstein Chair Professor at the Department of Industrial and Systems Engineering, University of Southern California. He received his Ph.D. in statistics at Stanford University in 1968 and was formerly a Professor at the University of California, Berkeley, from 1976 until 2004. He has published more than 100 articles and a variety of textbooks in the areas of statistics and applied probability, including Topics in Finite and Discrete Mathematics (2000), Introduction to Probability and Statistics for Engineers and Scientists, 4th edition (2009), A First Course in Probability, 8th edition (2009), and Introduction to Probability Models, 10th edition (2009), among others. Dr Ross serves as the editor for Probability in the Engineering and Informational Sciences.

Reviews

[Tom Schulte · Rating 3 out of 5]

This new, third edition further bolsters Ross’ text as an excellent introduction to mathematical finance. Plentiful with preliminary material, the book can work for self-study, given that the reader has a solid background in calculus and statistics fundamentals. It would also be helpful to understand the fundamentals of LP models and their duals, as this is an expectation made on the reader for grasping the key proof of the Arbitrage Theorem. Of course, the text can work well as an introductory course for undergraduates. The usage as a textbook on the basics of option pricing better fits the structure of the text which includes exercises at the end of each chapter without any solutions. Also, the examples, while detailed, are less numerous than the proofs, lemmas, and propositions the reader will need in order to comprehend in order to progress.

[Franklin Hurst · Rating 4 out of 5]

This was a good introductory book. It was kind of cryptic in places. You really had to be on your toes or you would miss something. But altogether, a good book and one that I am will use as reference in the future.

[David Gerth · Rating 1 out of 5]

This is a pretty bad book especially for self study. Nothing is well written, which I probably should have gotten from the overly redundant title.