An Intuitive Introduction to Finance and Derivatives

Concepts, Terminology and Models

verfasst von: Alex Backwell

Verlag: Springer International Publishing

Buchreihe : Springer Texts in Business and Economics

Enthalten in: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

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Über dieses Buch

This book gives a self-contained, intuitive overview of some of the most important topics of finance, such as investment risk, market pricing and market efficiency, arbitrage, hedging, and the pricing and application of financial derivatives. It provides a first-principles introduction to the relevant material and concepts, emphasising intuition. Financial terminology, and the understanding implicit therein, is carefully introduced. The books starts with finance in the most general terms, and gradually specialises to investment theory and then derivatives. This book is tailor-made for readers new to finance, such as graduate students entering or interested in finance, or financial practitioners moving to a more quantitative role.

Inhaltsverzeichnis

Frontmatter

1. Preliminaries

Abstract

A working understanding of the first principles of finance is developed. This includes ideas such as investing, assets and liabilities, financial systems and institutions, various financial (sub-)markets, corporate finance versus investment finance, and others. The calculation of returns is addressed in detail.

Alex Backwell

2. Risk and Expected Utility

Abstract

Having discussed return, we then turn to the fundamental notation of risk. The general idea is introduced, and then various risk measures are described. Utility theory—a particular method of measuring and incorporating investment risk—is considered.

Alex Backwell

3. Market Pricing and Market Efficiency

Abstract

Competitive market pricing and the concept of market efficiency are addressed in this chapter. Risk and risk aversion need to be considered. The famous efficient-market hypothesis is discussed in detail.

Alex Backwell

4. Modern Portfolio Theory

Abstract

Modern portfolio theory is rigorously introduced. This formalises the benefits of diversification and leads to a quantitative method of optimising the tradeoff between risk and return for a particular investor.

Alex Backwell

5. Asset Pricing

Abstract

Models of the investment market are considered, given that individual investors are competitively seeking optimal risk–return profiles. The famous Capital Asset Pricing Model and Single-Index Model are introduced, as well as extensions.

Alex Backwell

6. Introduction to Derivatives

Abstract

Financial derivatives are introduced, in terms of both broad concepts and specific examples. Option payoff functions are constructed, interpreted, and combined into more complicated strategies.

Alex Backwell

7. Arbitrage- and Model-Free Pricing Methods

Abstract

The essential idea of arbitrage is discussed. Using the principle of the absence of arbitrage, some model-free derivative pricing results are attained. Forward contracts are priced, and bounds on possible option premia are derived.

Alex Backwell

8. Modelling, Pricing, and Hedging

Abstract

Derivative pricing and hedging are tackled, in the context of stochastic models. The canonical binomial model and Black–Scholes–Merton model are introduced and discussed. Limitations, extensions, and tradeoffs are explored.

Alex Backwell

Titel: An Intuitive Introduction to Finance and Derivatives
verfasst von: Alex Backwell
Verlag: Springer International Publishing
Electronic ISBN: 978-3-031-23453-8
Print ISBN: 978-3-031-23452-1
DOI: https://doi.org/10.1007/978-3-031-23453-8