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49

General Finance Textbooks Options, Futures and Other Derivatives, John Hull The Concepts and Practice of Mathematical Finance, Mark Joshi Paul Wilmott on Quantitative Finance, Paul Wilmott Asset Pricing Asset Pricing (Revised Edition), Cochrane, John H. Princeton University Press, 2009. Financial Decisions and Markets: A Course in Asset Pricing, Campbell, ...


23

My two favorites books on microstructure are: Barry Johnson's Algorithmic Trading and DMA - very good on technological aspects and for an overview of needed implementations; L and Laruelle's Market Microstructure in Practice - for common knowledge and understanding of market microstructure and its mechanisms. Recently, three new books have been published: ...


14

I am not an investment banker, but usually the procedure is something like this: (0) The IB knows the yield of existing bonds with the same maturity and credit rating, so it is not too difficult for them to estimate the yield of the new bonds. They usually announce this as a spread above a benchmark (Ex: "We estimate the new bonds will yield 25 to 50 bps ...


11

I've not yet read it, but Lehalle's recent book is bound to be a goldmine of good micro-structure bits and pieces. Market Microstructure in Practice EDIT: I'm reading the book now, so far it's quite good.


10

Classical book on market microstructure is: Trading and Exchanges: Market Microstructure for Practitioners by Larry Harris. It's a bit outdated (2002) and missing few recent market developments like dark pools etc. but the way it currently is it's already highly recommended reading. Personally I'm waiting for the next edition of the same book, and surely ...


9

I'd say to read Prof. Shreve's well-known two-volume textbook Stochastic Calculus for Finance I and II.


9

In general, quantitative finance requires mathematics, finance, and numerical programming. The mix of the three and the areas of focus within the three will depend on the particular area you intend to work in. For example, option pricing, risk, and asset management are all related but derivative modeling would draw more on stochastic processes and ...


8

Really you need a degree Reading any one book from the above will not set you up. Furthermore, you will find yourself trapped in a cycle, where really none of the books you suggested can be read in isolation. Taking for example a book on PDEs, you will quickly find you need a lot of knowledge of linear algebra if you want to approximate any of these. For ...


7

First, my notation. $K$ is the strike price, $S$ is the stock price, $r$ is the continuously compounded risk-free rate, $T$ is time at expiration, $t$ is time at issue, $\sigma$ is volatility, $\delta$ is continuously compounded dividend rate. The Black-Scholes formula for a European call is $C = Se^{-\delta (T-t)} N(d_1) - Ke^{-r(T-t)} N(d_2)$ $d_1 = \...


6

I have honestly not come across a good book (or good enough review to make me buy the book) on Fund Transfer Pricing. While it is not my career focus, I had to familiarize myself a bit with the topic because of certain requirements involving funding trading operations and the performance of funding specific operations. Personally I would recommend the ...


5

All the topics you've mentioned are wonderful and shouldn't be eschewed by reading some finance-oriented review book. I recommend these instead. Linear algebra: Hoffman and Kunze and Halmos Set theory: Halmos Measure theory: Rudin and Tao


5

There is a lot of papers on the subject that tend to stay more up to date than the books (since there's new papers coming out all of the time)... of course no 1 paper will give you the depth of concepts you can take from a book like Harris' but, after reading that book, they can be very helpful for updating the concepts. :) arxiv is IMHO the best source ...


5

This thread will inevitably close because it doesn't meet community guidelines, but I respect your passion in this field and my best suggestion for you is that if you're trying to emulate a MFE education, go look up the course listings of any reputable MFE program, and then look into the sites for those (past) classes and see the recommended readings and ...


5

In my opinion there is one modern author on the subject of practical options trading who stands head and shoulders above the rest, and that is Euan Sinclair. His most recent book is Volatility Trading, and he has another book out soon. Sinclair covers actual strategies, along with questions of liquidity and position sizing that I never see in other options ...


4

Many of the strategies are motivated by objective functions (contour integrals) in the complex plane and the elements of complex linear spaces, so I'd recommend at least for an applied understanding: Saff, E. B., and Snider, A. D. Fundamentals of Complex Analysis with Applications to Engineering, Science and Mathematics. In addition to Saff and Snider, I ...


4

All books recommended in previous posts are splendid :-) I would like to add one more book for continuous time financial mathematics: Arbitrage Theory in Continuous Time by Tomas Bjork.


4

I would recommend the books from Steven Shreve. Here is a link to some one of his older online pdf's (1997 but nevertheless true) so you can check if that fits the bill. http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.137.6951&rep=rep1&type=pdf


4

The following paper gives a simple derivation of the BSM (via a simple integration approach instead of the classical PDE approach) and the Greeks plus some intuition for each: Derivation and Comparative Statics of the Black-Scholes Call and Put Option Pricing Formulas by Garven, J. You find the derivation of the Greeks in chapter 4 (called "comparative ...


4

Jorion's book on VAR is a good introduction. Also, if you search this community, there are some very good posts for practical implementation of VAR. For example, in this question, there is a very good step by step description of how to calculate Monte Carlo VAR: Is there a step-by-step guide for calculating portfolio VaR using monte carlo simulations


4

For equities specifically: Quantitative Equity Portfolio Management: Modern Techniques and Applications, Qian, Hua, Sorensen Active Portfolio Management, Grinold and Kahn


4

« Stochastic differential equations » by Oksendal is my best reference on SDE for practionners who want a rigorous statement of all important results in the topic while maintaining a decent size for the book. In addition it comes with solved exercises so this is a must.


4

Finance is a big field. If you have anything specific in mind (corporate finance, asset pricing, risk management) I can give you some more specific references. Some references for basic finance: Investments and Portfolio Management (Bodie, Kanie and Marcus) Modern Portfolio Theory and Investment Analysis (Elton, Gruber, Brown, Goetzmann) Fundamentals of ...


4

The book Stochastic calculus for finance by Steven Shreve gives a good introduction to stochastic calculus applied to finance. A whole chapter is dedicated to the Itô Integral for example. It covers a large spectrum ranging from probability theory to stochastic financial models. I strongly recommend it!


4

Elementary Stochastic Calculus by Thomas Mikosch is an excellent introduction to the topic in a very compact way. Alternatively, Stochastic Calculus for Finance II: Continuous-Time Models by Steven Shreve is a more comprehensive reference which is very much oriented to applications in finance.


4

In addition to @AlexC answer there are 2 additional key points. 1) if the issue is oversubscribed the IB / syndicate team will choose the allocation to each client usually based on their relative importance in terms of future business. 2) There is a specific pricing call that takes place between the issuer and investment banks trading teams. This ...


4

So to answer your point about ML, I would say yes, it is starting to get a foothold in finance. However, this is in the sense that it starting to be more applied in a particular context. What I mean by this is, it is being used to do old things in a new way... A particular example of this, is how ML is being used in Risk analysis and Risk Management. The ...


3

The companion website to the book here has a PDF download ("Monte Carlo Permutation Evaluation of Trading Systems") on pages 18-20 of which there is C++ code for the permutation routine. Code for White's Reality Check test is available from the ttrTests package for R.


3

Jim Gatherals Book deals with the models you mention and gives an intuitive understanding about calibration and issues that arise. Mostly basic stuff, but very useful if you're just starting out. Also very understandable without an extensive math background.


3

I'd go with either Anatoly Schmidt's Financial Markets and Trading or Joel Hasbrouck's Empirical Market Microstructure. Both have plenty of math, and that's pretty much required when talking about market microstructure.


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