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 25 of october Profiting from U.S. presidential elections might just be the ultimate form of democratic capitalism. So when the media spin surrounding the 2004 elections started gaining momentum, I decided to join the politically inspired pollsters and bumper sticker peddlers in finding and exploiting the inefficiencies resulting from predicting election results. I suppose it should not have been surprising that the time tested Arbitrage Pricing Theorem was equally applicable in the political arena...
Learn more about Presidential Arbitrage and how you can profit from it.
- 4 of november
Quantitative finance is a challenging subject. However, financial practitioners don't exactly go out of their way to make the topic more accessible to outsiders. One problem is the language barrier, separating quants from the rest of the world. The following article makes light of a profession that has a tendency to take itself too seriously.
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Introductory Finance Textbooks
This section focuses on textbooks that are frequently used in MSc or MBA programs to introduce quantitative finance. All of the books in this category are very popular among students and they provide a good foundation for further study. From personal experience, it is often helpful to have access to more than one book on the same subject because each approach has its strength and weaknesses. For example, Baxter focuses on martingales, Hull uses partial differencial equations, and Tavella may prefer finite difference methods to illustrate a concept.
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Financial Calculus (Martin Baxter et al) -- Excellent introduction to martingales and pricing derivatives instruments. The authors succeed in presenting the subject in a crystal clear manner and without sacrifying accuracy. Great for beginners. |
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A Course in Financial Calculus (Alison Etheridge) -- This text represents the logical next step after Baxter. The format is very similar but the author decided to use a more rigorous approach with more detailed examples and exercises. |
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Options, Futures, and Other Derivatives (John C. Hull) -- Probably the most known and celebrated introduction to quantitative finance. I first got intrigued by this subject after borrowing a copy of this book from a close friend. However, the selection of introductory textbooks has become more competitive in recent years and other books have started to erode Hull's lead. |
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Paul Wilmott Introduces Quantitative Finance (Paul Wilmott) -- Gentle introduction to quantitative finance with cartoons, Excel spread-sheets, Bloomberg screens, and lots of illustrations. Humorous, yet educational. |
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The Mathematics of Financial Derivatives (Paul Wilmott et al) -- Very good book. Definitely one of the top three introductions and probably one of the fiercest competitors to Hull's book. The approach is a bit more conservative than in Wilmott's first text but the content is readable and informative. |
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Introduction to the Mathematics of Financial Derivatives (Salih N. Neftci) -- Another frequently used introduction. The second edition fixes many of the issues with the earlier edition and the book is now competitive with other titles in the field. |
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The Concepts and Practice of Mathematical Finance (Mark S. Joshi et al) -- Together with Joshi's other book C++ Design Patterns and Derivatives Pricing, these books cover the mathematics of finance, as well as the real-world implementation issues of the proposed models. This goes a step beyond the other books in this category. |
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Quantitative Methods in Derivatives Pricing: An Introduction to Computational Finance (Domingo Tavella) -- I recommend Tavella's other book on finite difference methods but it is difficult for this introduction to compete in such a strong field. |
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