Book Description
Designed to form the basis of an undergraduate course in mathematical finance, this book builds on mathematical models of bond and stock prices and covers three major areas of mathematical finance that all have an enormous impact on the way modern financial markets operate, namely: Black-Scholes’ arbitrage pricing of options and other derivative securities; Markowitz portfolio optimization theory and the Capital Asset Pricing Model; and interest rates and their term structure. Assuming only a basic knowledge of probability and calculus, it covers the material in a mathematically rigorous and complete way at a level accessible to second or third year undergraduate students. The text is interspersed with a multitude of worked examples and exercises, so it is ideal for self-study and suitable not only for students of mathematics, but also students of business management, finance and economics, and anyone with an interest in finance who needs to understand the underlying theory.
Customer Reviews:
Mathematics for Finance: A useful tool for the unskillled investor.......2007-03-19
I enjoyed reading the book and solving exercises in it. I have a Ph.D.in chemistry and my wife and I did our his and her's MBA in the 1990s. I wanted to learn more concepts in finance and needed an easy entry, something I could enjoy, and without spending much money. The book by Capinski came recommended from a friend who teaches Economics at Cal State. I can speak for myself: I feel reasonably informed and I feel the book gave me concepts I can use to handle my own portfolio.
In the future, this text should be offered with an interactive CD that contains Xls, matrix, calculus, and graphing capabilities so one (I) can visualize the outcomes of proposed solutions.
Incoherent.......2007-01-18
Anyone can scribble a bunch of equations on paper and call it a book. Without sufficient context, they are useless.
Insufficient and disappointing. Not even a good introductury text........2006-05-15
As a graduate student in Financial Engineering I have found this book useless.
The title of the book is "Mathematics for Finance", but can you find in it even an elementary introduction to the stochastic processes? No. Ditto for the Ito's lemma and many other topics. The derivation of the Black Scholes formula is just sketched, and the insight that you can get from it is very limited.
Nevertheless, I wouldn't mind these limitations if this book provided a clear introduction to more advanced topics: unfortunately this book is not good even in that. In comparison to other textbooks the theorems and definitions are convoluted and do not go straight to the point. For example, in Shreve's "Stochastic Calculus for Finance" or Baxter & Rennie "Financial Calculus" the Fundamental Theorem of Asset Pricing is stated in this way: "In a market with risk neutral probability there is no arbitrage". Can you find such a simple and explanatory definition in Capinski's book? Not at all. The theorem at page 83 (you can see it yourself by searching inside the book) basically says the same thing using 8 lines of text and little financial intuition.
The only good thing that I can say about this book is that all exercises are resolved.
Overall, "Mathematics for Finance" has been a big disappointment: it doesn't have either the mathematical depth of Shreve's books or the conciseness in explaining financial concepts of Baxter & Rennie.
Whatever is the level of education that you are pursuing, graduate or undergraduate, I don't see any point in using it.
Great Book for Undergrad Quants.......2005-08-29
Mathematics for Finance (An Introduction to Financial Engineering) is a book intended for undergrad students "IN MATHEMATICS" or other discipline with a relative high mathematical content.
The book assumes some basic notion of Calculus and Probability Theory and it is focused more on the mathematics than in its theory and application of Finance. If you are looking to dwell into the mathematics (Proof of Equations) this is a great book, but if you are looking for a book that is rich in theory and in application then you should consider "Option, Future and Other Derivatives" or "Quantitative Methods for Finance" as an alternative. Both books are "a most" for any finance student and are of great help. Now if you want an introduction into the mathematics behind Finance then this book is a perfect purchase.
Important to state that all the problems presented in this book are solved meaning that it is great for self teaching. Marek Capinsi and Thomas Zastawniak have done a great job on this book.
I gave it four stars, because it has room for impovement.
Joining the chorus.......2005-08-03
I can only echo the other reviewers. As far as I can tell this book has no serious competition. This is an excellent introduction to mathematical finance for those with a solid undergraduate level understanding of higher math but without graduate level exposure. I agree that it is ideal for self study as that is exactly what I am using it for. The price is right especially in contrast with its overpriced brethren. Five stars!
Average customer rating:
- Good Companion Book
- Good book
- Very thoughtful and clear explanation of financial math
- sophisticated maths
- Remarkable Introduction to Serious Math, Serious Finance, and Real-World Applications
|
Introduction to the Mathematics of Financial Derivatives
Salih N. Neftci
Manufacturer: Academic Press
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Similar Items:
-
Options, Futures and Other Derivatives (6th Edition)
-
Principles of Financial Engineering (Academic Press Advanced Finance)
-
Financial Calculus : An Introduction to Derivative Pricing
-
Heard on the Street: Quantitative Questions from Wall Street Job Interviews
-
Stochastic Calculus for Finance II: Continuous-Time Models (Springer Finance)
ASIN: 0125153929 |
Book Description
This popular text, publishing Spring 1999 in its Second Edition, introduces the mathematics underlying the pricing of derivatives. The increase of interest in dynamic pricing models stems from their applicability to practical situations: with the freeing of exchange, interest rates, and capital controls, the market for derivative products has matured and pricing models have become more accurate. Professor Neftci's book answers the need for a resource targeting professionals, Ph.D. students, and advanced MBA students who are specifically interested in these financial products. The Second Edition is designed to make the book the main text in first year masters and Ph.D. programs for certain courses, and will continue to be an important manual for market professionals.
Customer Reviews:
Good Companion Book.......2007-08-29
good companion book for the other book "Principles of Financial Engineering" by the same author
Clear and easy to understand treatment. The author does not assume a high level of math knowledge of the reader.
Good book.......2007-05-09
As title states this is a good Introduction to the mathematics of derivatives.
If you're looking for some book with C/C++/C#/Java code samples this isn't the book. Indeed a good mathematical introduction; its pre-requirements are a good mathematical and statistical ones.
Very thoughtful and clear explanation of financial math.......2007-02-05
I turn to this book after I get frustrated with Tomas Bojork's book "Arbitrage Theory in Continuous Time." As I am not from a strict math background, this Neftci's book makes much more sense to me. What I particularly like about this book is explanation in plain English of why the mathematical formulae are so, and how they are connected to the bigger picture. Also Neftci has a good grasp of how many real-life examples included in this book so that it doesn't lose its focus on the real math in finance.
sophisticated maths.......2006-06-16
Neftci takes us on a mathematically sophisticated tour of financial derivatives. The treatment is on a level akin to a senior-level undergrad text on physics or engineering. Indeed, to a reader who might come from that background, there will be a lot of similarities and familiar ideas.
For example, partial differential equations arise naturally in the pricing of derivative assets. But unlike many places in physics, here it is not sufficient to assume smoothly varying variables. The inherently discrete nature of most financial variables means that derivatives have to be approximated numerically.
Neftci also describes the various types of options, like basket, knock-out, multi-asset and so on. Each has a slightly different modelling. Another key idea involves the time aspect of pricing. So Wiener processes naturally arise, and the text shows how to handle these.
Much more is covered in the book. Perhaps just as importantly, it gives you enough maths preparation that you should be able to analyse other new types of financial instruments. Maybe even ones that you create yourself.
Remarkable Introduction to Serious Math, Serious Finance, and Real-World Applications.......2006-06-14
Neftci's book is easily grouped into a large number of texts that provide graduate level (considerable more rigorous than the MBA version) introductions to mathematical finance. Some are written for MBA with want to be exposed to as little math as possible without short changing the financial and valuation aspects and with considerable attention to a broad range of financial products and applications (Hull's classic comes to mind). Others are extremely implementation driven and are more a hybrid of finance and computer programming (Duffy, London, Wilmont). Still others are math books that speak above the heads of almost all practitioners and cover the finance topics poorly (or not at all).
Netfci's book is a rare gem in this field. Excellent coverage of financial topics and fundamentals (Arbitrage Theorem, Forwards Futures, Equity Derivatives, Interest Rate Derivatives), serious graduate level review of financial math and mathematical techniques (Probability, Numeric Processes, Binomial Methods, Stochastic Calculus, Finite Difference, Martingales, Monte Carlo methods), and applications (Bond Pricing, Term Structure Modeling, Exotic Options, Rare Event Modeling).
Best of all, it start assuming very little, builds aggressively, and progresses logically.
The biggest drawbacks are a lack of coverage for credit modeling and credit derivatives, Merton-model and contingent claim models for distressed equity, and more common financial engineering applications (hedging, rebalancing).
It is also remarkable well-written.
Book Description
Finance is one of the fastest growing areas in the modern banking and corporate world. This, together with the sophistication of modern financial products, provides a rapidly growing impetus for new mathematical models and modern mathematical methods. Indeed, the area is an expanding source for novel and relevant "real-world" mathematics. In this book, the authors describe the modeling of financial derivative products from an applied mathematician's viewpoint, from modeling to analysis to elementary computation. The authors present a unified approach to modeling derivative products as partial differential equations, using numerical solutions where appropriate. The authors assume some mathematical background, but provide clear explanations for material beyond elementary calculus, probability, and algebra. This volume will become the standard introduction for advanced undergraduate students to this exciting new field.
Customer Reviews:
Good Buy.......2007-08-29
maps one to one with many chapters in Hull. more elaborate derivations than Hull. Fixed income area treatment is very slim though. Good Buy for the Price.
Okay but not an introduction.......2006-07-31
If you want an introduction, read another book like Hull. If you want to learn how to apply Partial Differential Equations (PDEs) approach to finance then it is a useful book. However, it is better to read an elementary PDEs book before reading this book. At least, learn how to solve parabolic PDEs analytically because the technical notes in the book would not help much.
Introduction to partial differential equations in finance.......2005-10-13
This book treats only the partial differential equations
in Finance and how to treat them using Finite Differences
and Tree. For this purpose it is very well written and
understandable. A very good beginning for student. Even
undergraduate.
Now after reading it you should understand the martingales reading the baxter and how to implement Monte Carlo using, for example Glasserman (see my reviews)
A good introduction to the PDE approach.......2005-10-10
Contrary to what many readers believe, this book explains the pricing of derivatives much better than Hull. Hull gives an overview of the mechanics and properties of the derivative pricing industry, along with its pricing methodologies, and this book provides an in depth method to one of the pricing methods.
Financial derivatives can be priced by a wide range of methodologies, among some the elegant equivalent martingale measure approach (or risk-neutral pricing), replication, multinomial tree approximation, Monte Carlo simulation, partial differential equations etc etc.
This book gives an excellent introduction, and an insight to the PDE approach. Although being a big fan of the Girsanov-change-of-measure method myself, these analytical methods often fail in the valuation of highly complex derivatives like the exotics. Pricing americans prove to be hard and inefficient too, even with simulation and the risk-neutral approach.
This is where PDE methods come in. Since most derivatives (or term structures) have a PDE describing its evolution, solving the PDE seems to be a good (or sometimes the best) way, no matter how complex the derivative can get. PDEs on the other hand, have very robust and easy methods for solving. Therefore, this book brings the reader through basic PDE solving methods, analytical solutions, techniques for fast and efficient numerical approximations as well as rigorous technical explanations for some of the mathematics of partial differential equations (which arise in the financial industry).
The authors are famous for their research in the field of Industrial and Applied Mathematics, and this book continues to be a classic for undergraduates in mathematics in Oxford. If you want to have an overview of the pde approach to option valuation, without the hassle of learning up Radon-Nikodým and martingales, I highly recommend this book!
waste of time.......2005-03-10
This book is very bad, lacks almost everything you can think of, but if you don't know any better you probably won't care. It certainly needs to be supplemented by a respectable book if you want to learn derivatives (c.f. Hull's textbook, for example), and on the other hand, the math isn't rigorous at all, so you'll need a book on stochastic calculus (e.g. Michael Steele's, actually there are tons of better books out there, it's not hard to find better).
Book Description
This book is intended for use in a rigorous introductory PhD level course in econometrics, or in a field course in econometric theory. It covers the measure-theoretical foundation of probability theory, the multivariate normal distribution with its application to classical linear regression analysis, various laws of large numbers, central limit theorems and related results for independent random variables as well as for stationary time series, with applications to asymptotic inference of M-estimators, and maximum likelihood theory. Some chapters have their own appendices containing the more advanced topics and/or difficult proofs. Moreover, there are three appendices with material that is supposed to be known. Appendix I contains a comprehensive review of linear algebra, including all the proofs. Appendix II reviews a variety of mathematical topics and concepts that are used throughout the main text, and Appendix III reviews complex analysis. Therefore, this book is uniquely self-contained.
Customer Reviews:
Highly recommended - a joy to read . . ........2005-01-07
If you are looking for an introduction to financial option valuation that is well-written and well-referenced than this book is for you. Prof. Higham is an excellent author (I highly recommend his other books Learning LaTeX and MATLAB Guide) and so anything he writes is a joy to read. His latest book is no exception. It is full of figures that help bring the equations and the ideas to life. Like many of his technical papers (which I also recommend you read - they are available at his website), he has incorporated MATLAB (a powerful matrix manipulation and numerical simulation tool) codes throughout the book (not only does he provide code listings but you can actually download the codes and run them assuming you own the software or have a license - I have!). The codes are a great way to see the equations in practice if you don't have MATLAB and experiment with some of the key parameters yourself if you do. Regarding the subject of the book itself, let me say that I am in the mechanical engineering field and can barely balance my checkbook - ok, my wife does it for me) but I am interested in all things mathematical and find the subject of option valuation (and the possibility of making some extra money) enticing. The book clearly introduces topics related to random numbers and stochastics, as well as finite-difference approximations for partial differential equations. The ultimate goal is the Black-Scholes PDE which is treated in the later half of the book. Monte Carlo simulation techniques as applied to finance are covered as well in several chapters. What I really enjoy about this book (and his other books) is the way he actually tries to teach and advise the reader - a good writer must be sensitive to his/her audience - and this is most appreciated by myself and others I am sure. The bottomline is that this is the first book to own if you want to get into the field of computational finance (his references tell you where to go next). I highly recommend it.
A good hands-on intro to option valuation.......2004-12-05
There are a lot of derivatives books out there - most of them follow the same approach. This one's different: no complicated measure-theoretic probability theory (of absolutely no use to practitioners), but lots of hands-on Matlab examples. A very reasonable price too. My only suggestion to the author would be to provide more appropriate names to his Matlab functions (instead of chapter numbers) - but this can easily be changed by the reader.
Average customer rating:
- Stochastic Calculus
- One of the best written books on the foundational mathematics, weaker on implementation and applied techniques
- understanding finance
- A Necessary Book for (aspiring) Financial Engineers
- A gem of a book
|
Financial Calculus : An Introduction to Derivative Pricing
Martin Baxter , and
Andrew Rennie
Manufacturer: Cambridge University Press
ProductGroup: Book
Binding: Hardcover
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Similar Items:
-
Options, Futures and Other Derivatives (6th Edition)
-
Stochastic Calculus for Finance II: Continuous-Time Models (Springer Finance)
-
Heard on the Street: Quantitative Questions from Wall Street Job Interviews
-
Stochastic Calculus for Finance I: The Binomial Asset Pricing Model (Springer Finance)
-
Introduction to the Mathematics of Financial Derivatives
ASIN: 0521552893 |
Book Description
Here is the first rigorous and accessible account of the mathematics behind the pricing, construction, and hedging of derivative securities. With mathematical precision and in a style tailored for market practioners, the authors describe key concepts such as martingales, change of measure, and the Heath-Jarrow-Morton model. Starting from discrete-time hedging on binary trees, the authors develop continuous-time stock models (including the Black-Scholes method). They stress practicalities including examples from stock, currency and interest rate markets, all accompanied by graphical illustrations with realistic data. The authors provide a full glossary of probabilistic and financial terms.
Customer Reviews:
Stochastic Calculus.......2007-08-13
Baxter/Renie's book makes it easier to understand Shreve's texts on stochastic calculus (vol.1,2). In particular, ch 2 (discrete) & ch. 3
(continuous) gives nice and simple descriptions of the essential concepts: filtration, measure, numeraire, drift, Ito formula. (These concepts can be difficult without a more detailed description of a stochastic process). The chapters 4,5,6 can be considered applying the concepts to SDE's in a number of cases, say, forex., equities, interest rates and multi-dimensional problems. These applications provide a good grasp of the mechanics to better understand the more detailed description of the same concepts in Shreve's texts.
One of the best written books on the foundational mathematics, weaker on implementation and applied techniques.......2006-12-06
Baxter starts off with a formula familiar to anyone who has read even one text on mathematical finance. Set up the basic terminology and core mathematical expectations, introduce discret time times, evolve the discret time models to now-classic continuous time models, and then adapt for the continuous time models for specific products and situations (American option expiration, interest rate models, jump diffusion, etc...).
What I liked best about the book was the skillful narrative and witty presentation of the foundational concepts. Chapter 3 -- the introduction to continuous time models and Black Scholes -- is by far the best introduction that I have read -- to why stochastic models do not follow the classic rules of Newtonian calculus and heuristic proof that explain the "why" behind the basics of stochatsic integration, Ito's lemma, and Brownian motion. Although I was familiar with the material before reading it, the clarity and insight of his presentation fundementally changed by view of the craft of quantitative finance and simplified the manner in which these topics were organized in my mind.
This is not a Paul Willmott book -- full of pseudo-code and real-code implementations, sweeping in its coverage of the many topical specifics that practitioners reply on day-to-day. It does not replace the need for these other approaches. Like Willmott, though, it is geared for the new student of computational finance.
The lack of implementations is disappointing because his pedagolical style is so basic that the final expressions evolve right up to the edge of practical use but then stops. Yet the discipline is this evolution keeps the book moving at a fast pace from start to finish and keeps the entirity of the book very short.
Additionally, there is a lack of applications and material relevant to the credit markets and fixed income worlds that would have been nice to have covered with the same style. Perhaps he will follow up with a second book that explores a larger universe of financial markets and products.
understanding finance.......2005-10-11
Good point: you understand the derivatives pricing spirit in particular martingale and risk neutral principle.
The only problem with this book is that there is NO implementation. Therefore after reading it you cannot do anything ... for this read the Clewlow
A Necessary Book for (aspiring) Financial Engineers.......2005-06-24
Baxter/Rennie deserves its reputation as the best introductory book to modern financial engineering because of its terse, elegant description of the martingale approach to asset pricing. The basic machinery of financial engineering comes from fields in applied analysis such as stochastic calculus and martingale theory, whose presentation is often weighed down with overbearing technical considerations. While necessary from a mathematician's perspective (and often relevant even in many real-world cases), a reader with mathematical maturity but without formal training in measure theory or probability can nonetheless appreciate and understand the basic tools used over and over again in Black-Scholes, and more generally, in martingale methods for pricing.
The quantitative analyst often needs to thorougly understand both the theory and the techical aspects of implementation of these models, and often studies these subjects in graduate programs. Many participants in quantitative fields such as fixed income and derivative trading/pricing often want an intuitive notion of what these "quants" are doing. Baxter/Rennie serves as a good book that is far more advanced than the excellent book by Hull; the latter is a wonderful introduction to quantitative fields, but Baxter/Rennie is the first book that truly introduces the math in a unified presentation that encompasses the three most important tools of mathematical finance (assuming, of course, the Ito-Doeblin calculus driven by Brownian motion); the Cameron-Martin-Girsanov (CMG) Theorem that permits changes of measure, the Feynman-Kac formula and the Martingale Representation Theorem.
Like most books on the subject, Baxter/Rennie attempts (but actually succeeds unlike many competing texts) to give a relatively harmless, intuitive introduction to the Ito-Doeblin calculus and martingales; the two are linked through the martingale properties of Brownian motion, which later permits martingale pricing under a risk-neutral measure.
Chapter 3, the core of the book, introudces Black-Scholes-Merton theory as a simple, special case of martingale pricing. For those who are sick of reading PDE proofs of the Black-Scholes formula that are technically correct but don't actually teach anything about finance, this chapter is for you.
Chapter 5, which introduces the market models of modern fixed income pricing, provides a presentation different from most other books by introducing the general methods (Heath-Jarrow-Morton, or HJM) models first, and giving the short-rate models as a special case of the HJM model. While this is chronologically out-of-order and arguably gives the "harder" case first, it is consistent with the no-arbitrage (or martingale) approach to asset pricing and emphasizes the approach that now dominates the feld.
The final chapter provides an extension of the models in the previous chapter, i.e. by generalizing to the multidimensional cases, etc. These are intuitively similar (although technically more complex) to the cases presented in the earlier chapters, and in keeping with the simple, elegant presentation of the book, are treated appropriately as relatively basic extensions.
Baxter/Rennie emphasizes the models, not the pricing of individual securities; the elegance and economic meaning are stressed at the expense of practical considerations in many cases. For this reason, the book would be a good text for a motivated undergradate studying math/"hard" sciences or an MBA student, quantitative traders or other practitioners responsible for using, but not building models.
For those learning quantitative analysis more seriously, this book would be a good complement to Shreve's Stochastic Calculus in Finance Vol II (not to be confused with the MUCH more technical monograph by the same author). The latter covers many more mathematical topics and their applications in pricing actual instruments, and has an exhaustive list of excellent problems; nonetheless, the book is meant for a full-year sequence in mathematical finance at the Masters' level and by the very nature of being so complete it lacks the elegance of Baxter/Rennie.
My recommendation for those learning mathematical finance is to buy both Baxter/Rennie and Shreve Vol. II. Work through the problems in the latter text and you'll know a little bit of everything from stochastic volatility to jump proceses. Review the former before and interview and you'll be able to quickly answer basic questions in simple English (or whatever language you speak other than math). While it doesn't have many good problems (and they are relatively basic compared to Shreve, for example), that's not the point of the book - it's meant to develop intuition, not technical skill or theoretical abstraction. Buy both - if you're entering this field or are already studying/working in it, you can afford both of them.
A gem of a book.......2005-05-07
This small textbook is a hard find in the finance world. The authors have managed to clearly explain a topic that is very difficult and unclear to begin with. It would be nice to see this book expanded into a larger text with practice problems, solution sets, and discourse on relevant research and current journal articles. Nonetheless, I thoroughly recommend this book to students and practitioners of finance alike.
N.
Customer Reviews:
Book+Manual.......2006-11-03
This manual completes the original "five stars" text book of Neftci, a very clear and agreable introduction to the Mathematics of Finance.
same as pdf download from his website.......2006-05-11
Since you can download it from his website, I do not under why they still sell it here the spiral binded version which waste me $15.
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