Stochastic Calculus for Finance I: The Binomial Asset Pricing Model (Springer Finance) (v. 1),   ISBN:9780387249681

Customer Rating: 

Shreve's book is an excellent introduction to basic options pricing. He not only deals with plain vanilla options, but also shows how the binomial model can be used to to value exotic options. Each chapter has exercises which not only apply what is taught but force you to think and ensure that you really understand it.

Little more than basic algebra is required to understand the text, making it very accessible. His expositions of topics such as martingales, markov processes, etc. are very good. The text can be dense, though--there's a great deal of information.

In short, if you want an introduction of how options can be priced without the partial differential equations in the Black-Scholes model, this is an excellent choice.

Customer Rating: 

I have the 1st version (pdf), so I hesitated before I make the purchase. Now it turns out that the book is worthy every buck.

1. Use coin tossing space consistently as working sample. Very intuitive, never get the idea lost in abstract concepts.

2. Detailed workout of examples. Very good for self study.

3. Plenty of hands-on homeworks. Not necessarily very challenging. But provide good amount of extra examples.

If anything the book can add, I hope it can supply implementations, in Matlab or C++. Well, it may be far stretching for a math book.

Customer Rating: 

excellent book for anybody who is a student of financial calculus . One can get some insight into how financial managers plan portfolios and how they make investment decisions.

Customer Rating: 

I studied this book for the first half of a fourth year financial maths subject at univerisity of melbourne. Binomial models are the only feasible model for pricing american derivatives at the moment, so it is worthwhile to learn the mechanics of such practical models. The author proves all his theorems elegantly using mathematical induction. He even uses proability theory and discrete-time martingale theories to simplify the valuation of European-type derivatives (just take conditional expectations and discount straight back to the current time -- instead of doing those backward averaging and discount node by node; both methods are done under the risk-neutral measure).

Customer Rating: 

i have read so many books on financial engineering but this one makes all theories so streamlined!!! I read Neftci and I liked it. After reading this, all steps come out clear. The part 2 is fascinating as well. Hail Mugambo!