Lando David. Lecture Notes for Finance

Unpublished, 2015. — 176 p.These notes are intended for the introductory finance course mathematics economics program at the University of Copenhagen. They cover (the) basic pillars of finance: (1) analysis of deterministic cash-flows (Chapter 3), (2) mean-variance analysis and the capital asset pricing model (CAPM) (Chapter 9), (3) valuation by absence of arbitrage in multi-period models (Chapters 46). (For those with OCD: Chapter 2 is an introduction with two examples — which we will not really return to, Chapter 7 is a brief look at the continuous time Black-Scholes model and formula, and Chapter 8 analyses stochastic interest rate models.)The aim is to be mathematically precise without abandoning neither the economic intuition (such intuition is hard word, not just hand-waving) not the ability be quantitative (i.e. do calculations with sensible numbers).
Except for the brief introduction to the Black-Scholes model in Chapter 7, the presentation is done through discrete-time models emphasizing definitions and setups that prepare the students for the study of continuous-time models.
The notes are not littered with references books and research papers. Let’s say that is intentional. But let us mention two standard text-books — from which we have learned a lot — that cover roughly the same material: John Hull’s Options, Futures and Other Derivative Securities (it comes in a new edition roughly every second year) and David Luenberger’s lesser known Investment Science (whose only edition so far was published in 1997 by Oxford University Press).