An Elementary Introduction to
Mathematical Finance, Third Edition
This textbook on the basics of option pricing is accessible to readers with
limited mathematical training. It is for both professional traders and un-
dergraduates studying the basics of finance. Assuming no prior knowledge
of probability, Sheldon M. Ross offers clear, simple explanations of arbi-
trage, the Black–Scholes option pricing formula, and other topics such as
utility functions, optimal portfolio selections, and the capital assets pricing
model. Among the many new features of this third edition are new chap-
ters on Brownian motion and geometric Brownian motion, stochastic order
relations, and stochastic dynamic programming, along with expanded sets
of exercises and references for all the chapters.
Sheldon M. Ross is the Epstein Chair Professor in the Department of
Industrial and Systems Engineering, University of Southern California. He
received his Ph.D. in statistics from Stanford University in 1968 and was a
Professor at the University of California, Berkeley, from 1976 until 2004.
He has published more than 100 articles and a variety of textbooks in the
areas of statistics and applied probability, including
Topics in Finite and
Discrete Mathematics
(2000), Introduction to Probability and Statis-
tics for Engineers and Scientists, Fourth Edition
(2009), A First Course
in Probability, Eighth Edition
(2009), and Introduction to Probability
Models, Tenth Edition
(2009). Dr. Ross serves as the editor for Probabil-
ity in the Engineering and Informational Sciences
.
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