Martingale methods in financial modelling. (Q703592)

For the first edition (1997) see Zbl 0906.60001, where a detailed review can be found. In the 2nd edition some sections of Part I are omitted, and a new chapter is devoted to volatility risk. Hedging of plain-vanilla options and valuation of exotic options are not limited to the Black-Scholes framework with constant volatility. Stochastic volatility also reappears in the second part of the book, which has been revised fundamentally. The analysis of the various interest-rate models available is more detailed than in the 1st edition.