Ralf Korn Libros

Using a conversational style, the book presents over sixty engaging stories that delve into financial mathematics and markets. It covers a range of topics including returns, real interest rates, present values, and complex financial instruments like options and swaps. Readers will gain insights into navigating financial decisions in everyday life, making complex concepts accessible and entertaining. The authors aim to demystify financial mathematics, equipping readers with the knowledge to analyze and manage their financial choices effectively.

The focus of the book is the construction of optimal investment strategies in a security market model where the prices follow diffusion processes. It begins by presenting the complete Black-Scholes type model and then moves on to incomplete models and models including constraints and transaction costs. The models and methods presented will include the stochastic control method of Merton, the martingale method of Cox-Huang and Karatzas et al., the log optimal method of Cover and Jamshidian, the value-preserving model of Hellwig etc. Stress is laid on rigorous mathematical presentation and clear economic interpretations while technicalities are kept to the minimum. The underlying mathematical concepts will be provided. No a priori knowledge of stochastic calculus, stochastic control or partial differential equations is necessary (however some knowledge in stochastics and calculus is needed).