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The Mathematics of Finance: Modeling and Hedging
Victor Goodman and Joseph Stampfli, Indiana University, Bloomington, IN

Pure and Applied Undergraduate Texts
2001; 250 pp; hardcover
Volume: 7
ISBN-10: 0-8218-4793-7
ISBN-13: 978-0-8218-4793-0
List Price: US$66
Member Price: US$52.80
Order Code: AMSTEXT/7
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This book is ideally suited for an introductory undergraduate course on financial engineering. It explains the basic concepts of financial derivatives, including put and call options, as well as more complex derivatives such as barrier options and options on futures contracts. Both discrete and continuous models of market behavior are developed in this book. In particular, the analysis of option prices developed by Black and Scholes is explained in a self-contained way, using both the probabilistic Brownian Motion method and the analytical differential equations method.

The book begins with binomial stock price models, moves on to multistage models, then to the Cox-Ross-Rubinstein option pricing process, and then to the Black-Scholes formula. Other topics presented include Zero Coupon Bonds, forward rates, the yield curve, and several bond price models. The book continues with foreign exchange models and the Keynes Interest Rate Parity Formula, and concludes with the study of country risk, a topic not inappropriate for the times.

In addition to theoretical results, numerical models are presented in much detail. Each of the eleven chapters includes a variety of exercises.

An instructor's manual for this title is available electronically. Please send email to for more information.

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Undergraduate students interested in financial engineering.


"[T]he book is a worthwhile contribution to the literature...Its main strength is that it provides an introduction to mathematical finance at a level that is not too technical. Indeed, it is very successful in achieving this outcome...[P]rospective undergraduate students of financial mathematics will find life much easier by reading [this] book."

-- Kam Fong Chan, Pacific Accounting Review

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