10
$\begingroup$

What book should I start with in order to learn about the mathematics behind financial (derivatives I think!) trading that would be used in HF's & IB's (Not sure whether there would be a difference).

I have a strong background in mathematics particularly with regard to measure theory, probability theory and stochastic calculus having studied Rana, Kai-Lee Chung & Oksendals famous texts on these subjects. I also have a strong knowledge of partial differential equations. (Not sure what other areas of mathematics would be useful?)

I am looking for the most concise and quickest way to teach myself about the core mathematics and ideas behind quantative finance.

Improve this question
$\endgroup$
1
  • $\begingroup$ ...or lecture notes $\endgroup$
    – Trajan
    Commented Aug 5, 2014 at 18:13

3 Answers 3

Reset to default
4
$\begingroup$

I would consider:

  1. Wilmott, P., Paul Wilmott on Quantitative Finance 3 Volume Set
  2. Hull, J. C., Options, Futures and Other Derivatives
  3. Baxter, M. & Rennie, A., Financial Calculus: An Introduction to Derivative Pricing
  4. McNeil, A. et al, Quantitative Risk Management: Concepts, Techniques and Tools
  5. Brigo, D. & Mercurio, F., Interest Rate Models - Theory and Practice

for $\mathbb{Q}$-type introductory reading. On the $\mathbb{P}$-side, it depends what you're looking for - volatility trading, interest rates, $\Delta1$, cash products, risk management, market models, numerical techniques, data-driven techniques etc.

Improve this answer
$\endgroup$
10
  • $\begingroup$ What about equity derivatives? Interest rate products? $\endgroup$
    – Trajan
    Commented Aug 5, 2014 at 18:36
  • 1
    $\begingroup$ For interest rates... Rebonato has two books - Modern Pricing of Interest-Rate Derivatives and Interest-Rate Option Models. I would also look at Pelsser's Efficient Methods for Valuing Interest Rate and James & Webber's Interest Rate Modelling. $\endgroup$
    – madilyn
    Commented Aug 5, 2014 at 18:50
  • 1
    $\begingroup$ Equity options are probably the most thoroughly-covered among financial engineering texts so I think the 4 books I've recommended cover most of the introductory reading that you need. In addition to that, perhaps you could take a look at Rebonato's Volatility and Correlation, and Sinclair's two books. $\endgroup$
    – madilyn
    Commented Aug 5, 2014 at 18:53
  • $\begingroup$ how about credit trading? $\endgroup$
    – athos
    Commented Aug 6, 2014 at 7:24
  • $\begingroup$ Im really not sure what I would like most, so may be interested. $\endgroup$
    – Trajan
    Commented Aug 6, 2014 at 10:42
5
$\begingroup$

Introductory: "Introduction to the Mathematics of Financial Derivatives"; Salih Neftci

More mathematical: "Stochastic Calculus for Finance I and II"; Steven Shreve

Improve this answer
$\endgroup$
2
  • $\begingroup$ Is stochastic calculus for finance I really worth reading? Looks pretty discrete $\endgroup$
    – Trajan
    Commented Aug 7, 2014 at 14:22
  • 1
    $\begingroup$ Stoch Calc I can be useful. Some interesting foundational material. Yes its largely discrete. But it could be skipped if you are already familiar with Oksendal et al. $\endgroup$
    – jupiter
    Commented Aug 8, 2014 at 4:38
3
$\begingroup$

I would suggest to start with one of the coursera course, Mathematical Methods for Quantitative Finance. It's an introductory course on mathematical concepts that can be applied in finance.

Books: 1) A Primer for Mathematics of Financial Engineering. 2) Paul Wilmott on Quantitative Finance.

Also, check out this article on Quantnet: Master Reading list for Financial Engineering Students

I hope this helps you.

Improve this answer
$\endgroup$

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge you have read our privacy policy.

Not the answer you're looking for? Browse other questions tagged or ask your own question.