Financial calculus. An introduction to derivative pricing. Martin Baxter. Nomura International London. Andrew Rennie. Head ofDebt Analytics, Merrill Lynch. Financial Calculus. The website of Financial Calculus: an introduction to derivative pricing. This book has been written by Martin Baxter and Andrew Rennie, and. Financial Calculus is a presentation of the mathematics behind derivative pricing, building up to the Black-Scholes theorem and then extending the theory to a.

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Feb 10, Taylor rated it it was amazing. There are also a few exercises, with solutions, which mostly test understanding of basic concepts and the ability to use the formal machinery.

In any event, there’s probably too much detail in Financial Calculus for anyone who isn’t actually planning to work in the finance industry. Jan 31, Neal Groothuis rated it it was amazing. Alexander rated it liked it Mar 19, Emmanuel rated it it was amazing Apr 15, Preview — Financial Calculus by Martin Baxter.

Ben rated it really liked it Jul 16, Return to Book Page.

Financial Calculus by Martin Baxter

This covers basic options. This is a “widely accepted model”, “sophisticated enough to produce interesting models and simple enough to be tractable”, “at least a plausible match to the real world”, and “a respectable stochastic model”.


Beginning with the discrete case, chapter two introduces a simple binomial tree model. No trivia or quizzes yet.

Sep 05, Austin rated it liked it Shelves: Caoculus Calculus by Martin Baxter. Honestly, while I didn’t love this book, it should still valculus considered a must-read simply because of the paucity of better offerings. Kitlo rated it it was ok Jan 20, Chan-Ho rated it really liked it Apr 09, Now “interesting and tractable” is a fine basis financoal doing mathematics, but not a strong basis for applying the results to reality.

This is a very nice, reasonably concise little monograph. Paradoxically, I also worry about the very elegance and rigour of the results in Financial Calculus. Piotr rated it it was amazing Jun 13, The models presented in Financial Calculus are abstractions, and obviously any real-world application would need to address a whole range of issues not considered: One concern I have is with the assumption of Brownian price movements, for which Baxter and Rennie offer no more than hand-waving support — but where, given the number of times they renie their hands, they clearly realise there is a problem.

Martin Baxter + Andrew Rennie

Some of this involves clever constructions, but it doesn’t add that much to the core theory. Books by Martin Baxter. And a reluctance to lose the beauty of the analytic formalism may make it harder to face up to empirical ugliness. One strength of Financial Calculus is calculu, while it is rigorous and the approach is quite abstract — it assumes familiarity with calculus and a general competence with formal mathematics — concrete worked examples are used to anchor the theory and assist intuition.


Chapter one explains the limitations of expectation pricing, introducing instead the use of “no arbitrage” constructions to derive prices. Sam Nazari rated it liked it Jan 18, A full Glossary of probabilistic and financial terms is provided along with graphical illustrations with realistic data.

Financial Calculus (Martin Baxter, Andrew Rennie) – review

Trivia About Financial Calculus. The Radon-Nikodym derivative, the Cameron-Martin-Girsanov theorem, and the martingale representation theorem allow a similar construction to that of chapter two, coming together in the Black-Scholes theorem. Other readers are likely to be less interested in the various elaborations and want more philosophical and empirical background.

Chapter three extends this to the continuous realm, using basic stochastic calculus, Ito’s formula and stochastic differential equations.

Julius Zhang rated it it was amazing Jul 25, Radha rated it it was amazing Apr 05,