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Preface | |
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Preface to the Second Editions | |
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Preface to the First Edition | |
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The Theory of Interest | |
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Simple Interest | |
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Compound Interest | |
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Continuously Compounded Interest | |
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Present Value | |
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Time-Varying Interest Rates | |
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Rate of Return | |
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Continuous Income Streams | |
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Exercises | |
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Discrete Probability | |
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Events and Probabilities | |
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Addition Rule | |
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Conditional Probability and Multiplication Rule | |
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Random Variables and Probability Distributions | |
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Binomial Random Variables | |
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Expected Value | |
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Variance and Standard Deviation | |
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Exercises | |
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Normal Random Variables and Probability | |
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Continuous Random Variables | |
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Expected Value of Continuous Random Variables | |
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Variance and Standard Deviation | |
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Normal Random Variables | |
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Central Limit Theorem | |
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Lognormal Random Variables | |
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Properties of Expected Value | |
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Properties of Variance | |
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Exercises | |
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The Arbitrage Theorem | |
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The Concept of Arbitrage | |
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An Introduction to Linear Programming | |
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Dual Problems | |
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The Fundamental Theorem of Finance | |
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Exercises | |
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Random Walks and Brownian Motion | |
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Intuitive Idea of a Random Walk | |
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Discrete Random Walks | |
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First Step Analysis | |
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Continuous Random Walks | |
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The Stochastic Integral | |
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Continuous Random Walks with Drift | |
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It� Processes | |
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It�'s Lemma | |
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Stock Market Example | |
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Exercises | |
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Forwards and Futures | |
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Definition of a Forward Contract | |
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Pricing a Forward Contract | |
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Dividends and Pricing | |
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Incorporating Transaction Costs | |
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Futures | |
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Exercises | |
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Options | |
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Properties of Options | |
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Including the Effects of Dividends | |
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Pricing an Option Using a Binary Model | |
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Black-Scholes Partial Differential Equation | |
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Boundary and Initial Conditions | |
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Option Strategies | |
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Exercises | |
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Solution of the Black-Scholes Equation | |
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Fourier Transforms | |
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Inverse Fourier Transforms | |
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Changing Variables in the Black-Scholes PDE | |
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Solving the Black-Scholes Equation | |
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Binomial Model (Optional) | |
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Exercises | |
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Derivatives of Black-Scholes Option Prices | |
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Theta | |
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Delta | |
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Gamma | |
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Vega | |
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Rho | |
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Relationships Between �, �, and � | |
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Exercises | |
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Hedging | |
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General Principles | |
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Delta Hedging | |
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Delta Neutral Portfolios | |
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Gamma Neutral Portfolios | |
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Exercises | |
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Extensions of the Black-Scholes Model | |
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Options on Stocks Paying Continuous Dividends | |
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Options on Stocks Paying Discrete Dividends | |
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Exercises | |
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Optimizing Portfolios | |
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Covariance and Correlation | |
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Optimal Portfolios | |
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Utility Functions | |
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Expected Utility | |
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Portfolio Selection | |
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Minimum Variance Analysis | |
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Mean-Variance Analysis | |
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Exercises | |
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American Options | |
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Parity and American Options | |
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American Puts Valued by a Binomial Model | |
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Properties of the Binomial Pricing Formula | |
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Optimal Exercise Time | |
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Exercises | |
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Sample Stock Market Data | |
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Solutions to Chapter Exercises | |
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The Theory of Interest | |
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Discrete Probability | |
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Normal Random Variables and Probability | |
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The Arbitrage Theorem | |
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Random Walks and Brownian Motion | |
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Forwards and Futures | |
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Options | |
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Solution of the Black-Scholes Equation | |
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Derivatives of Black-Scholes Option Prices | |
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Hedging | |
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Extensions of the Black-Scholes Model | |
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Optimizing Portfolios | |
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American Options | |
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Bibliography | |
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Index | |