Introduction to Option Pricing Theory

"Introduction to Option Pricing Theory" is a comprehensive textbook that deals with the mathematical theory of financial options. It provides a detailed examination of the stochastic processes relevant to option pricing. The authors, Gopinath Kallianpur and Rajeeva L. Karandikar, have designed the work to be accessible even to readers without prior knowledge of stochastic processes. The first five chapters introduce the fundamentals of stochastic analysis, including Ito's theory and stochastic differential equations. The following chapters cover specialized topics such as option pricing in discrete and continuous time, arbitrage, and the pricing of assets with stochastic volatility. A standout feature of the book is its emphasis on arbitrage and the derivation of the conditions for the absence of arbitrage. This book is a valuable resource for students and professionals who wish to engage with the theory of financial options.