Interest Rate Modelling: Financial Engineering

Rating:
Summary: A real must !
Review: As a math grad student who is interested in the term structure modelling, I found that this book is really useful! It just tells you everything about interest rate modelling,not just for the no-arbitrage modelling issue, they even have a chapter about the macroeconomic foundation for interest rate fluctuation! The math used in this book is very concise without too much measure theory twaddle,Everyone who works in this field should have a copy. It's a real must!

Rating:
Summary: Best Book on Interest Rate Models in the Global Markets
Review: I have spent a number of years in building & implementing models for interest-rate-dependent claims, but should admit: I learned more from this book. I view it as an encyclopedia on the subject, in which the authors (never heard their names before - what a shame!) have done an excellent job on reviewing hundreds of publications. The theory of term structure modeling has been grown to a separate subject - thanks to Hull and White, Jamshidian, HJM, BGM, Hughston - among main contributors. You can find all methods in one place and in a very accesible form. For example, HJM is described better and simpler than in the author's original paper. Most models are reviewed with practical implementation in mind.

It is not a "first book" on "introduction" on the subject; it is rather a good desk reference for prepared professionals.

Rating:
Summary: Term Structure Modeling, Narrowly Covered but Well Done
Review: James and Webber summarize the field quite well. I'd say that if you've read Wilmott and want to go to the next level for rates modelling this is the perfect book.

They cover continuous-time techniques and the fin math theory nicely; it's sufficiently in-depth to give the non-specialist a feel for things like the Girsanov theorem and how to start coming up with ANALYTIC solutions to some of the PDE's floating around.

I was also delighted to read their treatment of "economic" term structure models. I was not even aware that such a thing existed before reading the book -- not that they are particularly useful, but it is an interesting concept nonetheless.

Direct implementation of multifactor affine models should have been covered in greater depth and been more idiot-proofed. I am NOT a quant but strive greatly to understand the models I use and how they are constructed. Since almost everyone on the planet uses no-arbitrage affine models, it would have been nice to have that topic covered in far greater depth. In fact, very little of the book was devoted to arbitrage-free models to my disappointment.

I found the chapters devoted to numerical implementation to be relatively weak. Wilmott does a much better job. One part of the numerical implementation methodology that I did like QUITE a bit was their discussion of splining techniques. It is absolutely critical to develop a robust, stable spline before attempting anything other than a nonparametric model.

This book is devoted to term structure models; the reader does not get a treatment of related topics suchs as credit quality or mortgage-backed securities. In fact, very little time is given to derivative pricing or hedging, either.

All in all the book is quite good at what it claims to be, but don't buy it thinking it is a general introduction to all the fun stuff out there.

Rating:
Summary: Extraordinary
Review: There are plenty of books on fixed income mathematics. This one is extraordinary. It is simultaneously practical, theoretically sophisticated and a pleasure to read. The treatment of term-structure models, including HJM, is the most accessible I have seen anywhere. There is a lot of information on yield curve building. This includes both bootstrapping and more recent research in parameterised curves. There are plenty of topics that other books might label "beyond the scope of ...", but James and Webber jump right in, with meaty discussions of the Kalman filter, lattice methods of valuation and GARCH models. Despite all the theory, the authors are always in touch with practical details. They take into account stub dates, and are precise about day counts. These are obviously practitioners!

Rating:
Summary: Most Comprehensive Model Review Available
Review: This complete work is an excellent source of practical term structure modelling. The author's ability to merge academic rigor with the practical application of valuation and hedging with term structure models makes this book supremely readable. Both quant traders and systems vendors will find this an invaluable addition to any refernce library and despite some fairly high-level math an excellent treatise from introduction to detail. In partnership with Rebonato's book Interest Rate Option Models and Clewlow-Strickland's Implementing Derivatives Models, everything a quant would ever like to know but was afraid to ask...

Rating:
Summary: Best Book on Interest Rate Models in the Global Markets
Review: This is the most comprehensive coverage of interest rate models available anywhere in the global markets. If you already have a model, read this book to examine options for additional improvements. If you are developing a model, buy this book for the best state-of-the-art guidance available.

Jessica James's writing is always clear and accessible, and her Ph.D. in physics lends unparalleled quantitative expertise to the state-of-the art analysis of models and their applications.