This is an excellent book for anyone who want an intuitive understanding of the use of stochastic calculus in financial engineering.

Ito calculus, martingales and Brownian motion all come to life without the formality of measure theory or the technical mathematics required by more formal texts. If you have heard of risk-neutral valuation, changes of measure or the martingale representation theorem—but don't know what they are all about—this is an excellent intuitive introduction. Baxter and Rennie strike a nice balance between intuitive discussions and mathematical formality. This allows you to learn the material rapidly without trivializing concepts. The book fills a similar niche as Neftci (2000). It is mathematically more precise than Neftci, but not as easy to read. It builds more of a foundation for further study, but it does not cover as broad a range of topics. For risk managers, sophisticated traders or fledgling financial engineers, Baxter and Rennie is an excellent book.