Derivative-security

I had the pleasure of having Mr. Questa as a guest lecuturer in a Fixed Income class. This book was used as the text, prior to its publication. The book is a great intro-intermediate fixed income book. It also covers the advanced stochastic models well. It is one of few books that also integrates the foreign exchange market into the analysis. In a few areas the book is difficult to follow however after a careful re-reading it sinks in.

Non ho avuto il piacere di leggere il libro ma il nome dell'autore mi piaceva tantissimo...... è il mio (omonimia) Giorgio Questa

This is probably the ideal introductory textbook for advanced undergrad or MBA/MSc Finance majors for their first Financial Engineering or Risk Management courses.

New students of these subjects would benefit more from reading this textbook than from reading the much more celebrated (whether deserving or not is up to debate) and yet much more expensive John Hull's classic 'Options, Futures, and other Derivatives', despite the fact that Hull's book is a favorite among many college professors (Hull's book was, incidentally, the textbook used in my MBA options and derivatives course)

There are many reasons that I feel this book represents good value and provides a smooth introduction into the world of financial engineering:

1. Comprehensive: All the major financial products and derivatives are thoroughly covered. Advanced topics such as Chooser options and real options are included as well.

2. Available computer/spreadsheet models: To supplement the excellent coverage in the textbook, the author have made available codes on his website for students to download and to further their self-study. The spreadsheets are professionally done and I found them very useful, either as learning tools or as template to develop more advanced models.

3. Clarity of exposition: The style is straightforward, avoiding unnecessary jargons. Yet the authors walk you through each step of the way using examples, graphs(plenty of them), fully developed equations, and tables.

4. Math and theoretical Rigor: This book does not lack mathematical rigor. Technical appendices are included as well, e.g. Ito's Lemma. If needed, relevant literature is quoted for the student to further his/her study.

5. Solid Value: this book can be had for less than fifty dollars. A bargain compared to many other finance books of similar caliber. Getting this book is like getting two for the price of one: both the financial engineering section and that of risk management could have been sold as two separate volumes.

With this book the authors have paved the way for the new students of FE and Risk management to explore these fascinating world. You will not regret the purchase.

The text covers quite a broad range of topics. It assumes that the reader has a fairly good grasp of statistics and mathematics (senior undergraduate level). Introductory financial material reads ok. The algorithmic approach is useful and so are the answers to select problems. However, some could find the material too tightly packed.

The term financial engineering is appearing increasingly in the title of various works. What it actually means remains nebulous, for even natural sciences and engineering remain irresolvable at their respective cores. This is evidently addressing another boon of the digital age, where equations and approximations can be done both automatically, and with extreme rapidity. It is only natural for the advantages of this to trickle into research of finance and economics, only now it is becoming a steady stream, and, with the inclusion of this work, a most sound one at that.

It is inferred that the author views this phrase, "financial engineering," as the level of control over precision of computation, and then the resulting accuracy of projected results (with an occasional forecast of unanticipated outcome). His credentials validate this as well.

The tools utilized include the complete discipline of algorithmics, and numerous branches of mathematics, along with tools assisting with and automating graphics and formatting, such as Latex and Mathematica, all channelled into this most profitable and competitive field of finance.

The approach for most sections begins with a brief discussion of motivation, typically condensed to one or a few paragraphs, followed by an equation representing an historical approach to the problem. This is followed by one or more expanded sections building algorithms, expressed in mathematics and pseudocode, as well as plots of typical results. The section then concludes with a broader discussion of how computation and finance become intertwined through this particular application. The author is extremely well versed in both. There are numerous exercises as well.

The book has the look and feel of an adept computer scientist, applying his honed skills to the financial realm. The typesetting is extremely well done, and even for sections initially unfamiliar, the reader feels confident and motivated to become fluent in time. Many of the exercises have solutions provided in an appendix.

At the time of its original publish date the book was unique in the field due to its approach and concise depth of mathematics, all available from a single resource. The author clearly exerted an extraordinary amount of time and energy to producing this work, and each section attests to this meticulous attention detail.

This work is highly-recommended as a reference, for a plethora of well-constructed algorithms in pseudocode are provided; Java examples are also provided via a website. Some considerable level of sophistication in topics typically relegated to computer science and mathematics are required, for which the intrepid reader can find additional resources. When time and motivation are sufficient, there is a wealth of mathematically sound information, providing depth of understanding and a mature foundation to build upon just what financial engineering means.

Our course has bought this book for us, but I can't understant why they chose this book. It's too simple and the explanations of each topic is undetailed. It's not recommended to beginners because its illustration is not clear enough and its explanation is inadequate, it's also unsuitable for advanced because it's too simple. All my classmates agree with me.