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This book is a comprehensive and readable description of the applications of mathematics to option pricing. It covers the subject from basic modeling to sophisticated analytical and numerical treatments of the most up-to-date derivative products.Special features of the book include: - The financial foundations of option pricing models. Clear descriptions of their mathematical formulation - The basic mathematical tools necessary for analysis of the Black-Scholes equation - European American exercise features in the unifying framework of complementary problems and variational inequalities - Detailed models and analysis of exotic and path-dependent options, including compound options, Asians, lookbacks and barriers - Models for transaction costs - Interest rate derivative products: bonds, bond options, convertible bonds, swaps, caps and floors - First exit times and moving averages - Practical treatment of accurate numerical methods for option pricing models
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