Concepts and Practice of Mathematical Finance, Chapter 3

Stefan79 · December 17th, 2010, 3:49 pm

Hi there,It has been while since I manipulated mathematical expressions. I am reading chapter 3 of Mark Joshi's book. Can anyone please fill in the steps to arrive at the RHS of 3.18 and 3.19? Moreover I tried to verify the second equation from the top on page 60 Thanks!!

Balmung · December 20th, 2010, 3:15 pm

Hi,you´re getting the RHS of Eq 3.18 and 3.19 by using exp(x)=1 + x + x*x / 2! + x*x*x / 3 ! + ... . I guess this is what the author meant by "expanding exp(x) in powers of x". By removing the stochastic part in Eq 3.22 you get the mean value of S(T) on top of page 60.Regards

mj · December 21st, 2010, 9:52 pm

which edition are you reading? more of the details were added in this section in the second edition.

Stefan79 · December 23rd, 2010, 10:50 am

Thanks a lot. I've got the second edition of the C++ Design Patterns and the first edition of "Concepts and Practice..." but my intentio was to have the second editions of both. Maybe I will return it to Amazon and order the second edition then if it contains more in between steps.Happy holidays!

mj · December 23rd, 2010, 8:06 pm

you might find it easier to use look inside in amazon or borrow a copy -- this is one of the few sections that were expanded. Most changes were to do with more problems and solutions.