Financial Engineering: Basic

Derivatives: Models on Models

Haug is known for his (1997) compilation of standard option pricing formulas. His latest book is a less serious compilation of other derivatives "stuff"—comic strips with Haug as some sort of derivatives superhero, artwork, papers written with or by others, and interviews, several with people recently interviewed in Lindsey and Schachter (2007)—Taleb, Wilmott, Carr, Jackel. There is also a photo of Haug in business suit and dark glasses, posing in front of a Mig-21 jet fighter. The book is entertaining in a bizarre sort of way ...

Frequently Asked Questions in
Quantitative Finance

Paul Wilmott
		2007

This small paperback is full of random information relating to quantitative finance. There is a FAQ answering questions like "why do quants like closed-form solutions?" or "what is cointegration?" Another section gives various option pricing formulas. Another offers ten derivations of the Black-Scholes formula. A section of brain teasers asks "where should armor be placed on a bomber?" Without an index or any attempt to be comprehensive, the book is strictly for browsing ...

Futures, Options and Swaps

Robert W. Kolb
		2007

Kolb is a standard introduction to derivatives and financial engineering in the capital markets. It covers financial futures, swaps, options and exotics in depth. Compared to a book such as Hull (2005), it is ... Read more

Complete Guide to
Option Pricing Formulas

Espen G. Haug
		2006

This reference is a treasure trove of derivatives pricing formulas. Coverage is expansive with analytic and numerical solutions detailed for vanillas, ratchets, choosers, extendible options, rainbows, lookbacks, barriers, Asians, interest rate options, ... Read more

Understanding Arbitrage
An Intuitive Approach to Financial Analysis

You have heard of pre-calculus? Think of this book as like pre-financial engineering for readers who plan to go no further. It focuses on the concept of arbitrage conditions—cost-of-carry, put-call parity, interest rate parity—leading up to a simplistic discussion of options pricing with binomial trees ...

Paul Wilmott on Quantitative Finance

Paul Wilmott
		2006

Early in his career, Paul Wilmott was a university professor. He made a name for himself when he teamed up with Dewynne and Howison to publish a (1993) book on derivatives pricing that took the financial engineering world by storm. That book didn't present new theories so much as describe in practical but rigorous terms how the emerging theories of financial engineering should be used on a trading floor to price exotic derivatives ... Read more

Options, Futures and Other Derivatives

John C. Hull
		2005

Hull has long been the standard introduction to financial engineering. I doubt there is a trading floor in the world that doesn't have a copy, worn and dog-eared, passed from one trading station to the next ... Read more

Principles of
Financial Engineering

Salih N. Neftci
		2004

Author Neftci is well known for his earlier (2000) book Introduction to the Mathematics of Financial Derivatives. He is now back with another book ostensibly about the same topic. What has changed? The answer is mathematics. The earlier book is an intuitive, non-rigorous introduction to the sophisticated mathematics of financial engineering ... Read more

The Oxford Guide to
Financial Modeling

Thomas Ho and Sang Bin Lee
		2004

Professors Ho and Lee are authors of the famous Ho and Lee interest rate model. Both have had long and illustrative careers as academics and practitioners. As one might expect, they have much to say about finance, and that is evident in the physical heft of this book. Weighing 3.3 pounds, it is packed with information. Targeting primarily a university audience, the book is positioned as an alternative to Hull's (2002) aging classic ... Read more

Stochastic Calculus for Finance
Volume 1

Steven Shreve
		2004

Steven Shreve is a mathematics professor at Carnegie-Mellon University who has a reputation for co-authoring impenetrable texts on stochastic calculus and financial engineering. This is his most penetrable effort to date, so it may be worth checking out. The book is the first in a two-volume introduction to financial engineering that ... Read more

Mathematical Techniques In Finance
Tools for Incomplete Markets

Ales Cerny
		2004

A focus of considerable financial engineering research during the 2000s is incomplete markets. The notion that markets are complete was a convenient lie that facilitated much of financial engineering during decades past. It allowed financial engineers to ... Read more

Derivatives Markets

Robert L. McDonald
		2003

McDonald is a competitor for Hull's (2005) classic introductory text on financial engineering. It is similar to Hull in that it emphasizes financial engineering theory over practicalities of actual markets ... Read more

Mathematics for Finance
An Introduction to Financial Engineering

M. Capinski and T. Zastawniak
		2003

This is a formal introduction to financial engineering that uses a definition-theorem-proof format. Interestingly, the book uses only elementary mathematics, making it accessible to second or third year university students. For the most part, the authors employ just pre-calculus and basic probability theory ... Read more

Black-Scholes and Beyond:
Option Pricing Models

Neil A. Chriss
		1997

Chriss is the definitive non-technical introduction to option pricing theory and financial engineering. While other elementary books may oversimplify to achieve accessible explanations, Chriss does not. He uses mathematics as necessary, but stops short of using any calculus. Also, he is careful to explain basic concepts such ... Read more