An Introduction to Financial Markets: A Quantitative Approach

The book is organized into five parts. Part One, Overview, consists of two chapters in which we introduce market structures and the basic quantitative problems in finance (portfolio optimization, risk management, asset pricing by no arbitrage). Part Two, Fixed-income assets, consists of four chapters dealing with interest rates, bond pricing, fixed-income markets (including basic derivatives), and interest rate risk management. Part Three, Equity portfolios, consists of four chapters covering decision making under uncertainty and risk measures, mean-variance optimization, factor models, and equilibrium models (CAPM and APT). In the four chapters of Part Four, Derivatives, we deal with dynamic stochastic models (including stochastic calculus), futures and forward contracts, and option pricing in complete and incomplete markets, including model calibration issues. Finally, Part Five, Advanced optimization models, illustrates the role of advanced optimization models, in terms of both building and solving, including stochastic and robust optimization, dynamic programming, decision rules, and conic optimization.