A First Course in Quantitative Finance

This new and exciting book offers a fresh approach to quantitative finance and utilises novel features, including stereoscopic images which permit 3D visualisation of complex subjects without the need for additional tools. Offering an integrated approach to the subject, A First Course in Quantitative Finance introduces students to the architecture of complete financial markets before exploring the concepts and models of modern portfolio theory, derivative pricing and fixed income products in both complete and incomplete market settings. Subjects are organised throughout in a way that encourages a gradual and parallel learning process of both the economic concepts and their mathematical descriptions, framed by additional perspectives from classical utility theory, financial economics and behavioural finance. Suitable for postgraduate students studying courses in quantitative finance, financial engineering and financial econometrics as part of an economics, finance, econometric or mathematics program, this book contains all necessary theoretical and mathematical concepts and numerical methods, as well as the necessary programming code for porting algorithms onto a computer.

Table of Contents

1 Introduction

Part I Technical Basics

2 A Primer on Probability

3 Vector Spaces

4 Utility Theory

Part II Financial Markets and Portfolio Theory

5 Architecture of Financial Markets

6 Modern Portfolio Theory

7 CAPM and APT

8 Portfolio Performance and Management

9 Financial Econcomics

10 Behavioral Finance

Part III Derivatives

11 Forwards, Futures, and Options

12 The Binomial Model

13 The Black- Scholes-Theory

14 Exotics in the Black- Scholes-Model

15 Deterministic Volatility

16 Stochastic Volatility

17 Processes with Jumps

Part IV The Fixed-Income World

19 Plain Vanilla Fixed-Income Derivatives

20 Term Structure Models

21 The LIBOR Market Model

A Complex Analysis

B Solutions to Problems

Review

‘A First Course in Quantitative Finance is a gentle introduction in a complicated subject. It covers most important topics – such as portfolio optimisation, derivative pricing, and fixed income products – and discusses them from the perspective of financial economics and financial mathematics. It provides the necessary mathematical background, contains the financial discussion, and is full of illustrative examples. It will be useful for anyone who wants to study the subject area on an advanced level.’ Rüdiger Kiesel, Universität Duisburg-Essen

‘This is a remarkably complete book on all aspects of modern finance, covering topics from the puzzles of financial economics, through modern portfolio management to the pricing of exotic options under stochastic volatility at an equally accessible yet state-of-the-art level. Quants, portfolio managers, students and teachers of finance alike will find it to be an invaluable source of insights and a must-have reference to have on their desks.’ Peter Tankov, École nationale de la statistique et de l’administration économique

Book Description

Using stereoscopic images and other novel pedagogical features, this book offers a comprehensive introduction to quantitative finance.

About the Author

Thomas Mazzoni has lectured at the University of Hagen and the Dortmund Business School and is now based at the Universität Greifswald, Germany, where he received the 2014 award for excellence in teaching and outstanding dedication.