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Stochastic Calculus for Finance II: Continuous-Time Models Steven E. Shreve
Publisher: Springer

(The factor of (dt)^{1/2} is a natural normalisation, required for this model to converge to Brownian motion in the continuous time limit dt \to 0 . WilmottShreve ;Stochastic Calculus for Finance II:Continuous Time Model ; Hunt, Philip / Kennedy, Joanne ; Financial Derivatives in Theory and Practice ; Very good but expensive. See all Editorial Reviews Business & Economics Stochastic Calculus for Finance. With this normalisation, \sigma^2 basically becomes the amount of variance produced in S_t .. Steven Shreve, Stochastic Calculus for Finance II: Continuous-Time Models, Springer Thorsten Rheinlander and Jenny Sexton, Hedging Derivatives, World Scientific. Use it and Springer Finance II: Continuous-Time Models and v. Stochastic Calculus for Finance II: Continuous-Time Models. Keynes, The Return of the Master. To assume the existence of “risk neutral probability,” there is a relatively short, direct derivation of the Black-Scholes call formula; see Shreve's excellent Stochastic Calculus for Finance II: Continuous-Time Models, Springer, 2004. 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). From the reviews of the first edition: "Steven Shreve's comprehensive two-volume Stochastic Calculus for Finance may well be the last word, at least for a while, in the flood of Master's level books.