In the below files are some solutions to the exercises in Alison Etheridge’s textbook “A Course in Financial Calculus” (Cambridge University Press, 2002). The files are grouped by chapter and I will add new solutions from time to time.

# Monthly Archives: September 2010

# Stochastic Calculus for Finance I – Some Solutions

In the below files are some solutions to the exercises in Steven Shreve’s textbook “Stochastic Calculus for Finance I – The Binomial Asset Pricing Model” (Springer, 2004). The files are grouped by chapter.

# Stochastic Calculus for Finance II – Some Solutions

In the below files are some solutions to the exercises in Steven Shreve’s textbook “Stochastic Calculus for Finance II – Continuous Time Models” (Springer, 2004). The files are grouped by chapter.

# Local Volatility in Terms of Implied Volatility

Jim Gatheral’s book “The Volatility Surface – A Pratitioner’s Guide” (Wiley, 2006) provides an excellent treatment on volatility modelling. Most of the proofs and derivations are only outlined in the book and it is left to the reader to do the intermediate steps. The attached document provides the missing steps in the derivation of the local volatility as a function of the implied volatility on pages 11 – 13 in the book.