The Mathematics of Financial Derivatives : A Student Introduction

Rating:
Summary: Poorly written
Review: First this is not an introduction. The book for that is by Neftci. Second, it is not clearly written and Wilmott has invented a whole new symbol designation for the mathematical explanations. I just cannot recommend this book to anyone since it certainly is not an introduction and for those more advanced there numerous books such as Financial Calculus that fit that bill.

Rating:
Summary: Theoretical Derivations, No Practical Examples
Review: I think the authors are full-of-it, trying to present themselves as brilliant. Somewhere, I believe the authors have found papers with theoretical derivations using partial differential equations and matrix multiplication symbols. However, there are no practical examples from derivations that are more complicated then algebra. I suspect the authors may not understand many of the derivations they present in the book.

I am annoyed with the book. It has been a while, but I have had quite a bit of math. I know a good math textbook. Good math textbooks will define the terms well, and the derivations will be followed by good examples to help you understand the derivations. I do not recommend this book to anyone that does not have more than an undergraduate degree in math or engineering. Professors of mathematics will probably understand the derivations and may not examples or a clear definition of all the terms.

The authors do present a lot of good general information. For those who are interested, in addition to American and European options, there are Russian options, perpetual options, compound options, binary options, chooser options, Asian options, lookback options, and "out-of-space" options (just kidding on the last).

Most people wishing to price options, which is quite complicated, need more than the theoretical derivations of this book. Also, they should have more than just a method to follow blindly without understanding that some options programs provide. If after the theoretical derivations, this book had provided specific derivations, followed by practical understandable examples with clearly defined terms, I would recommend it highly.

Rating:
Summary: Read Hull Instead
Review: It seems the examples in this book are clones of those found in Hull. Odd, since the author seems to want to use more sophisticate math. Since the author can't explain calculus or properly define terms, there is doubt there is even that basic understanding. Pass on this and buy Hull instead for better clarity and better examples.

Rating:
Summary: Very good introduction for physicists/applied mathematician
Review: My professor recommended this book to me as one of the important readings. At first sight, it looked quite challenging, even though I have both economic and engineering background.

It took me a while to realize that it requires hands-on and self calculations (even repetition) to really grasp the concepts. Although the reading is difficult, that process is rewarding in two main ways. First, after first few chapters readers will forget the fear of math. Second, when the math and finance treatments converge the understanding will become solid. In so doing, the book has succeeded in "introducing" this world to audience. My suggestion is when reading this, one would need pen, paper, formula table and a running computer. Reading for fun is not the style of this.

Since the first reading of this, I bought many others, but still found this extremely clear and well written. Don't be afraid of their math notations as the core remains (replacing one symbol with another should not terrify us). His approach of PDE is clearly well-known and to me most comprehensible. In this sense, the book is mathematically more familiar to people coming out of normal university math.

Strongly recommend this book to students and professionals. Besides finance concepts, it also helps refresh math skills of readers. You will share my opinion after reading. Another plus is it is quite inexpensive.

Rating:
Summary: A strong book, but not for the novice reader
Review: The statement on the back this book that all the reader needs is some basic calc and a bit of probability is, as when you see it on most other similar books, false. To truly understand what is going on you need a prior knowledge of PDEs as well as some stochastic calculus. If you read this book after you have studies these you will learn a lot from it, but without this prior knowledge the book is too difficult to follow. I would recommend it to a reader who has seen the martingale approach to the subject before, and has at least studied ODEs and has a book on PDEs to refer to when the PDEs become too difficult to follow. The book manages to cover a lot, but you can't read a chapter and expect to have a good understanding from only reading the material. Most derivations, and even formulas, are left as exercises, and you need to complete at least 30% of the end of chapter exercises to firmly understand the material that the authors have covered. If you already have a good grasp of mathematical finance, this book can be a good way to further enhance your understanding, but don't buy this as an introductory book unless you are very strong in PDEs.

Rating:
Summary: Only one snag
Review: There is no portfolio analysis which ,I think, is basic to any book in financial math.

Rating:
Summary: Practical, easy-to-read and useful
Review: This book is an excellent introduction to the use of finite difference and binomial methods to the pricing of equity options - regular and exotic/path-dependent. Requires only undergraduate calculus, and provides some intuition about the finance. Has exercises and solutions for people who want to learn. The "parent" book (Option pricing: mathematical models and pricing by P. Wilmott) has more information (although a little pricey!), is in fact used by financial "quants".

Rating:
Summary: Finance with Differential Equations rather than Martingales
Review: This is definite the best read for those who want a differential equations approach to derivatives rather than martingale methods. A good understanding of the "heat eaquation" is required. The book does the rest.