Derivatives-pricing

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.]

I ordered this book even before publication since I am very interested in the topic and use have been involved in using and implementing option pricing models based on Levy processes.
I am quite disappointed since the book gives details neither on the financial side (incomplete markets, approximate hedging, exotic options...) which is not really the expertise of the author nor on the mathematical side (Wiener Hopf factorization, integrodifferential equations) which is superficially treated, the reader being constantly referred to other books.
The statistics/ econometrics aspect is totally absent and given
only a slight treatment.
For practitioners it is even more disappointing because a crucial aspect, namely NUMERICAL METHODS, is completely absent
and references to recent work on this topic is omitted.
For example, the author does not explain how the models were calibrated to the option prices in the examples he gives and his results are not easy to reproduce.
The only positive point of the book is to give a unified list of different models based on Levy processes which are spread out in the literature.

This book is a valuable reference source for not only academics but certainly for people from the banking industry. It is the best introduction to the application in finance of Levy processes. Modellers from a wide range of financial products will benifit greatly from the numerous real world examples. The chapter on simulation of Levy processes is covering just what one needs in a very comprehensive style.

Moreover, I found it very strange that people recommended the Cont-Tankov book before it was out instead of this book. Looking at the Cont-Tankov contents, I do not see anything useful that is not in the Schoutens book.

This book was just what I needed. Theory is nicely explain: not too difficult not too simple. I recommend it.

This book explains and illustrates (with real world examples) how to estimate the value of financial instruments that are traded on listed securitues exchanges, as well as some that are not actively traded. The book provides valuable demonstrations of how wide range practical sources of information can be used to compute prices for commercial mortgages, private-placement bonds, mortgage-backed securities, derivatives, joint ventures, and other financial instruments. Casabona and Traficanti also provide 340 slides that expedite learning...

A useful guide for both the accounting and financial professionals who must tackle valuation on a regular basis. Casabona and Traficanti explain the basics of pricing various types of fixed income securities, equity securities, and the whole gamut of derivatives. I was particularly impressed by the fact that Casabona and Traficanti do not limit themselves to publicly traded instruments; instead, they consider both the public and the nonpublic (i.e., private) markets for securities. The book is well thought out, well organized, and easy to follow . . . I can easily see it becoming a primary resource for the accounting profession and for Boards of Directors of both issuing institutions and of the investment companies that represent the target investment market for many of the instruments discussed.

This book draws on the PhD course that Prof. Chacko teaches at Harvard Business School and the substantial real-world experience with derivatives of both authors to offer a solid package that is useful for both theory and practice. There are other books with clear and rigorous mathematics (e.g. Wilmott), variety of methodologies for pricing (e.g. Neftci) and guides to practical hedging (e.g. Taleb), but this one presents all three components and is therefore a must-have for any serious derivatives shop. Highly recommended.

I'm not so sure that Baxter and Rennie's is an ideal first introduction to financial mathematics. But for those with a basic working knowledge of Black Scholes option pricing theory, or even an acquaintance with the basic concepts of replication and hedging, I believe that it could serve as an excellent way to get the reader as smoothly but as fast as possible to the more advanced aspects of derivatives theory, such interest rate theory. Even HJM and BGM are there, near the end.

I must say, though, that the book starts with "the parable of the bookmaker" that always put me off, because I found the point that the authors wish to make quite unclear. Now that I understand it, I'm not even so sure that it's really a good analogy of the use of the martingale measure vs the "objective" measure. Also, expressions such as "shortening the odds" are obscure to those of us who don't bet on horses, and it was never clear to me whether "shortening the odds" was analogous to anything in financial mathematics and thereby part of the discussion and the point that the authors wish to make -- I guess it's not. All in all, that was a far lessr than ideal way to start the book. However, once you get over that hurdle, the book is indeed very well written, though very concise.

As a new person on the Wall Street, I picked this book after reading all reviews instead of Hull as my first book.

Reviews said undergraduates can handle this book. Wrong. Despite solid engineering background (IIT), I found this to be rather dry book. Certaily not the first book.

I have started Hull. And found that much more accessible and practically useful. Gets you into solving problems and getting answers.

Having been a student of this subject for a short 18 months now, and having looked at many books on the same subject, this is by far THE BEST. What this book does is simple. It lays the groundwork for pricing derivative securities using stochastic calculus. It helps build the intuition behind the stochastics. Then, from this intuition and foundation, you are equipped to read more advanced treatments of the subject.

This is not a book on solving partial differential equations, nor is it supposed to be. If you are looking for a book on solving and creating financial PDE's, then buy Wilmott's books. Rather, this book uses discounted expectations under the risk neutral measure to price securities. What does that mean? Well, all I can say is "READ THE BOOK".

The first three chapters of this book are so fundamental and necessary to building a firm and solid intuition that I have read them over three or four times now. The reason I have read it so many times is because it is so well written and new things pop out at you every time. It really is a delight to read.

Moreover, the section on fixed income models is extremely well written as well.

I can't stress enough how great this text is.

You should buy it even if you already know the material.