Derivative-security

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.

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.

There is no portfolio analysis which ,I think, is basic to any book in financial math.

This is an excellent book which covers many great ideas and potential methodologies applied to derivative pricing. It should have been published much earlier.

This is a great little book. I would put it in my category of 'original' books on quant finance, which includes books written by Paul Wilmott, Mark Joshi, Rick Osband and Neftci.

The reason being that the author uses a more informal style than most quant books and is very hands-on. If you're interested in understanding quant models and eventually applying them in the real world, then this is the kind of book you want. If you're looking for mathematical beauty and formalism, then look elsewhere.

The editors could have done a better job with some of the flow and formatting - maybe next edition (it is sometimes hard to link the text to the figures and tables).

Great book.

Consider first, this book's subtitle, "Tools for Incomplete Markets." A "complete market" (the kind assumed by the Black-Scholes-Merton model) is one in which any derivative product can be dynamically replicated by means of cash and the underlying asset. An incomplete market, then, is one is which the world of derivatives and their underlyings do not match each other in the point-by-point replicable manner implied by that definition of completeness. This failure to match makes for a necessary imperfection in hedging. That, of course, is the real world, where traders practice, as Scholes and Merton famously discovered in Greenwich, CT not long ago!

A variety of illustrations of this practical emphasis might be adduced. In the preface, for example, Dr. Cerný tells us frankly that in his experience "is it hard to understand the Itô calculus, but it is possible to get used to it and to apply it quickly and consistently...." [italics in original.]

This is a well-written textbook for beginners in financial derivatives. It is very comprehensive as it covers various financial products. The main attraction of this book is its exercises. Many problems come from past academic papers. I benefit a lot from doing those drills.

The goal of this book is to disseminate the knowledge of a very technical subject to a very wide range of audience, including finance professionals. The author did a respectable job in that regard. With some improvement in future revisions, this book seems to be one of the best introductionary texts on stochastic calculus.

This is a really lucid and detailed introduction to derivative pricing theory from the pde way of doing things. The author is an applied mathematician, of the fluid mechanics variety, and this should tell you right away what the drift of the presentation is like.

Some will argue that all of Wilmott's books are along exactly the same line, so why do we need another pde book? Given the amazing number of textbooks dedicated to the martingale approach, it is great to have yet another, fresh way of looking at the pde approach.

The derivations come with all the necessary technical details, the style is very down to earth, and to my mind original. There are many details that I personally haven't seen in any other textbook before, and there are plenty of what seem like very useful exercises.

I really like this book, and it was a pleasant surprise to see it in a local library.

Good solid introduction to the subject - but wont leave you as a "master". All of the fundamental concepts are set out - and as you would expect from an introductory text they are all explained well but there is a real lack of depth in terms of pricing, market operations and dealing with real world issues - eg how do you cope with derivatives on dividend paying stocks? How do you model vol smiles etc.

Good as a first reader - or for a person who wants to "blag the interview" - but you will need to buy another book sooner or later.

Tom

This is a good reading for someone with no Futures & Options knowledge. I find it quite useful how the author clearly defines various swaps namely-- Currency, Interest Rates and Energy. However, this book would not cover newer Derivs stuff i.e. Credit Derivatives (though it provides a simple snapshot of CDS and TRS). I commend the author for not taking the GEEK approach.

You may seldom locate a book telling you one of the most practical aspect in recent regime of financial accountng - booking the derivatives. Nevertheless, it spent a few paragraphs together with some examples showing you the booking of three major types of derivatives in the financial market. Other topics also illustrate comprehensively the functioning of the derivatives as well as accompanied with various examples. Had it not been for the limited pages in explaining the booking methodology, it would have been the best derivatives related book that I have met before.

An excellent introduction to options and the over-the- counter foreign exchange markets.Lays out in simple plain English trading strategies and goes about removing some of the mystery that surrounds this subject

I have used this book for two courses in my MSc degree in Financial Maths...well this book is hard to understand at first glance, but, once you are introduced with a good course on stochastic analysis and applied probability, this is an illuminating book...I particularly enjoyed the part on foreing equity derivatives and exotic derivatives.....Harmed with patience this is definitely the book by which you can effectively gain a sound a knowledge on modern mathematical finance theory....reading in conjunction with Bingham-Kiesel book, could help understanding the foundation of the subject.

I've been using this book on and off over the last year. At first I was very impressed with the level of detail in the mathematics, especially as it was the only book at the time focussing on risk-neutral methods and covering BGM. But I've become increasing disillusioned with it of late. It's difficult to explain, but although the whole book is written in traditional theorem-proof style, there are no real proofs! (I have a PhD in math and have done research for 10 years so I should know a little about proofs.) The only "proofs" provided are basically symbol shifting, but the heart of the math is strangely absent. This is especially strange given the Springer series in which it appears.

In short, if you want a catalogue of methods this book does the job, but if you want a deeper understanding try Lars Nielsens book.

This book covers essentially everything needed for a serious financial math study. It captures the spirit of modern financial math. For people with math, physics or engineering background, when you feel comfortable woth John Hull's books, then this book is right one, and a must one.

I also use this book as part of the Masters course in Sydney and I cannot remember the last time I picked it up to read as I have better things to do with my time than try and work through the glaring errors in formulae, graphs and general commentary. The presentation is verbose and circumlocutory and to add to the frustration often wrong. I feel obliged to warn potential buyers not to make the same mistake that I have. Gallitz on Financial Engineering is a far more interesting and accurate text and for the rigours of applied financial maths Mastering financial calculations teaches you more in 200 pages than Smithson could in a lifetime of trying to improve on this first edition. If anyone would like my copy of Smithson I'm happy to give it away for fear further sales may encourage McGraw Hill to continue publishing the book.

The book is written in a complex way. For example, a simple future contract, was explained in long and complex way. It is not able to show the point directly. Anyway, it is not a bad point. It has some quite excellent practical example. It is the most valuable parts of the book.

I bought this book to give myself a thorough education on derivatives. And, I got it. It is very readable, yet it covers all the topics in adequate technical detail, so you can hold your own in the company of derivatives traders and the like. I often refer to this book, to refresh my memory on the different structure of option models, or how to value an interest rate swap. This is the sort of stuff you will not remember unless you use these concepts on a weekly basis. But, with this book, it does not matter, it is easy to refresh your knowledge.