This book provides an introduction to the valuation of financial instruments on equity markets. Written from the perspective of trading, risk management and quantitative research functions and written by a practitioner with many years’ experience in markets and in academia, it provides a valuable learning tool for students and new entrants to these markets.

Coverage includes:

·Trading and sources of risk, including credit and counterparty risk, market and model risks, settlement and Herstatt risks.

·Numerical methods including discrete-time methods, finite different methods, binomial models and Monte Carlo simulations.

·Probability theory and stochastic processes from the financial modeling perspective, including probability spaces, sigma algebras, measures and filtrations.

·Continuous time models such as Black-Scholes-Merton; Delta-hedging and Delta-Gamma-hedging; general diffusion models and how to solve Partial Differential Equation using theFeynmann-Kac representation.