The Mathematics of Financial Derivatives: A Student Introduction

It's great as expected.

Contrary to what many readers believe, this book explains the pricing of derivatives much better than Hull. Hull gives an overview of the mechanics and properties of the derivative pricing industry, along with its pricing methodologies, and this book provides an in depth method to one of the pricing methods.Financial derivatives can be priced by a wide range of methodologies, among some the elegant equivalent martingale measure approach (or risk-neutral pricing), replication, multinomial tree approximation, Monte Carlo simulation, partial differential equations etc etc.This book gives an excellent introduction, and an insight to the PDE approach. Although being a big fan of the Girsanov-change-of-measure method myself, these analytical methods often fail in the valuation of highly complex derivatives like the exotics. Pricing americans prove to be hard and inefficient too, even with simulation and the risk-neutral approach.This is where PDE methods come in. Since most derivatives (or term structures) have a PDE describing its evolution, solving the PDE seems to be a good (or sometimes the best) way, no matter how complex the derivative can get. PDEs on the other hand, have very robust and easy methods for solving. Therefore, this book brings the reader through basic PDE solving methods, analytical solutions, techniques for fast and efficient numerical approximations as well as rigorous technical explanations for some of the mathematics of partial differential equations (which arise in the financial industry).The authors are famous for their research in the field of Industrial and Applied Mathematics, and this book continues to be a classic for undergraduates in mathematics in Oxford. If you want to have an overview of the pde approach to option valuation, without the hassle of learning up Radon-Nikodým and martingales, I highly recommend this book!

Good Book but it lacks lots of basic information to understand the material. In order to solve the problems, you will use more Google that the book if you are new to this area.

I actually returned this book, but I have it now from somewhere else and the book is very helpful with math finance. There are good examples of how to work out each proof. It is just very helpful

I bought this book to learn about financial derivatives by myself. It is very easy to read for a first timer, no prior knowledge is required. It is also very comprehensive in its coverage of the subject. Overall it is a very good first book for the subject.

My professor recommended this book to me as one of the important readings. At first sight, it looked quite challenging, even though I have both economic and engineering background.It took me a while to realize that it requires hands-on and self calculations (even repetition) to really grasp the concepts. Although the reading is difficult, that process is rewarding in two main ways. First, after first few chapters readers will forget the fear of math. Second, when the math and finance treatments converge the understanding will become solid. In so doing, the book has succeeded in "introducing" this world to audience. My suggestion is when reading this, one would need pen, paper, formula table and a running computer. Reading for fun is not the style of this.Since the first reading of this, I bought many others, but still found this extremely clear and well written. Don't be afraid of their math notations as the core remains (replacing one symbol with another should not terrify us). His approach of PDE is clearly well-known and to me most comprehensible. In this sense, the book is mathematically more familiar to people coming out of normal university math.Strongly recommend this book to students and professionals. Besides finance concepts, it also helps refresh math skills of readers. You will share my opinion after reading. Another plus is it is quite inexpensive.

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.

This books is certainly not for anyone. But if a person is interested in learning financial mathematics, it reads like an action novel.What I like about this book in particular is that it does not pound on theories with proofs after proofs. It just presents what one needs to know.Thumbs up!