 "Financial Calculus: An Into to Derivative Pricing" | 2009-02-12 |
| - Reviewed By User: A1OO6KKGR61FBA |
| This book has a good coverage of Financial Calculus and Stochastic Calculus, however, there should be more mathematical steps involved in solving problems and creating theorems in their examples. |
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 "Modern And Up-To-Date" | 2008-07-11 |
| - Reviewed By ahtun |
"Martin Baxter
Works at Nomura International in London.
He was a Fellow for four years at Pembroke College, Cambridge, has held a one-year visiting position at the University of British Columbia, and has been an invited speaker to both academic and financial audiences in Europe and North America.
Andrew Rennie
Studied mathematics at Cambridge.
He is presently Head of Financial Engineering at Rabo Bank in London, a position he reached via philosophy, chemistry and graphic design."
[from the book of the front flap]
"The book is the First published 1996
Reprinted with corrections 1997
Reprinted 1998 (twice), 2000 (twice), 2001 (twice)
Printed in the United Kingdom at the University Press, Cambridge."
[from the book]
".....This unique, MODERN AND UP-TO-DATE book will be an essential purchase for market practitioners, quantitative analysts, and derivatives traders, whether existing or trainees, in investment banks in the major financial centres throughout the world."
[from the book of the back jacket] |
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| "Excellent introduction" | 2007-11-07 |
| - Reviewed By kabrekke |
I think this is one of the best introductions to mathematical finance around. Unfortunately, the book was out of print when I taught the subject, so I never got to test it as a textbook.
In particular I really like chapter 2, where the authors introduce the key concepts in discrete time binomial processes. This allow them to introduce deep concepts like information and filtration in an understandable manner, while few students really understand measurability. (If you think that is a trivial idea from stochastic analysis, you may want to go for another textbook.) The binomial representation theorem is almost trivial, but show what the general version, the martingale representation theorem is all about, and why it is so useful. Similarly, the Cameron Martin Girsanov is heavy stuff in continuous time, but the idea is simple for binomial processes. I guess a lot of students will understand what the theorem i all about for the first time when they se the binomial version.
The book then goes on to generalize all these ideas to continuous time and space, but with somewhat less mathematical formalism than many other books. |
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| "Second edition please !!!" | 2007-10-09 |
| - Reviewed By User: A3FJOOK0EI8ZP5 |
This is a great book, no doubt about it...
The basic ideas and tools of mathematical finance (Arbitrage Pricing Theory, Stochastic Calculus, Martingale Measure) are presented in a VERY conceptual way, allowing one to gain solid intuition in a field often obscured by abstraction and formalism. The description of the impact of change of measure on Brownian Motion, among others, is a little gem!
Although the level of mathematics is not overly complex, some sections still require a fair amount of "fiddling" with pen and paper to fill in the gaps and make sure the concepts are clearly grasped. That definitely demands a little mathematical maturity and assertiveness. The section on the Binomial Representation Theorem, for example, could be expended a little, with more concrete examples. But if one spends the time, goes through the book over and over looking at everything in ever finer details (...it is only 200 pages and a pretty quick read), it is immensely rewarding and provides a solid basis to tackle more complex monographs.
The only reservation is about the quick and much rougher presentation of Interest Rates Models. While the first sections on the Black-Scholes framework, Arbitrage Pricing and replication strategies for Vanilla options are very detailed, the Heat-Jarrow-Morton model could definitely be expanded (some of the results presented are not easy to derive given the material presented) and LIBOR models should be covered.
Given the success of the book, one however wonders why a second edition polishing a few sections (see Martin Baxter's website for extra material) and addressing newer developments has not been issued... |
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| "Stochastic Calculus" | 2007-08-13 |
| - Reviewed By ssfsumit |
Baxter/Renie's book makes it easier to understand Shreve's texts on stochastic calculus (vol.1,2). In particular, ch 2 (discrete) & ch. 3
(continuous) gives nice and simple descriptions of the essential concepts: filtration, measure, numeraire, drift, Ito formula. (These concepts can be difficult without a more detailed description of a stochastic process). The chapters 4,5,6 can be considered applying the concepts to SDE's in a number of cases, say, forex., equities, interest rates and multi-dimensional problems. These applications provide a good grasp of the mechanics to better understand the more detailed description of the same concepts in Shreve's texts.
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| "One of the best written books on the foundational mathematics, weaker on implementation and applied techniques" | 2006-12-06 |
| - Reviewed By jonathanfelch |
Baxter starts off with a formula familiar to anyone who has read even one text on mathematical finance. Set up the basic terminology and core mathematical expectations, introduce discret time times, evolve the discret time models to now-classic continuous time models, and then adapt for the continuous time models for specific products and situations (American option expiration, interest rate models, jump diffusion, etc...).
What I liked best about the book was the skillful narrative and witty presentation of the foundational concepts. Chapter 3 -- the introduction to continuous time models and Black Scholes -- is by far the best introduction that I have read -- to why stochastic models do not follow the classic rules of Newtonian calculus and heuristic proof that explain the "why" behind the basics of stochatsic integration, Ito's lemma, and Brownian motion. Although I was familiar with the material before reading it, the clarity and insight of his presentation fundementally changed by view of the craft of quantitative finance and simplified the manner in which these topics were organized in my mind.
This is not a Paul Willmott book -- full of pseudo-code and real-code implementations, sweeping in its coverage of the many topical specifics that practitioners reply on day-to-day. It does not replace the need for these other approaches. Like Willmott, though, it is geared for the new student of computational finance.
The lack of implementations is disappointing because his pedagolical style is so basic that the final expressions evolve right up to the edge of practical use but then stops. Yet the discipline is this evolution keeps the book moving at a fast pace from start to finish and keeps the entirity of the book very short.
Additionally, there is a lack of applications and material relevant to the credit markets and fixed income worlds that would have been nice to have covered with the same style. Perhaps he will follow up with a second book that explores a larger universe of financial markets and products. |
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