An Introduction to the Mathematics of Financial Derivatives, Second Edition (Academic Press Advanced Finance) [Hardcover]

Salih N. Neftci (Author)

Book Description

ISBN-10: 0125153929 | ISBN-13: 978-0125153928 | Publication Date: June 2, 2000 | Edition: 2

This popular text, publishing Spring 1999 in its Second Edition, introduces the mathematics underlying the pricing of derivatives. The increase of interest in dynamic pricing models stems from their applicability to practical situations: with the freeing of exchange, interest rates, and capital controls, the market for derivative products has matured and pricing models have become more accurate. Professor Neftci's book answers the need for a resource targeting professionals, Ph.D. students, and advanced MBA students who are specifically interested in these financial products. The Second Edition is designed to make the book the main text in first year masters and Ph.D. programs for certain courses, and will continue to be an important manual for market professionals.

Editorial Reviews

Review

PRAISE FOR THE FIRST EDITION:
"An excellent treatment of the mathematics underlying the pricing of derivatives."
—JOHN HULL, University of Toronto

"This book will be a major convenience to derivatives traders, risk managers, and other users and developers of derivatives models. It greatly reduces the cost of entry into the mathematical world of valuation, hedging, and risk measurement for derivatives positions."
—J. DARRELL DUFFIE, Stanford University

PRAISE FOR THE SECOND EDITION:
"As an introduction to the mathematics underlying the pricing of derivatives, the book succeeds admirably."
—JOURNAL OF ECONOMIC LITERATURE

"This book is a self-contained first step into mathematical finance, and it covers the fundamentals of the topic beautifully. The conclusions and references at the end of each chapter are very useful. The former provides a broad picture of each chapter's content. The latter offer invaluable links for those who would like a more detailed discussion..."
—SIAM Review (Society for Industrial and Applied Mathematics)

Book Description

Includes 6 new chapters!

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Product Details

• Hardcover: 527 pages
• Publisher: Academic Press; 2 edition (June 2, 2000)
• Language: English
• ISBN-10: 0125153929
• ISBN-13: 978-0125153928
• Product Dimensions: 9.3 x 6.2 x 1.2 inches
• Shipping Weight: 2.8 pounds (View shipping rates and policies)
• Average Customer Review: 4.0 out of 5 stars  See all reviews (72 customer reviews)
• Amazon Best Sellers Rank: #176,781 in Books (See Top 100 in Books)

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Customer Reviews

Most Helpful Customer Reviews

114 of 125 people found the following review helpful:

3.0 out of 5 stars Good explanations, with serious hand-waving, October 12, 1999

By A Customer

This review is from: An Introduction to the Mathematics of Financial Derivatives (Hardcover)

I used this book to teach a Financial Mathematics course, and found its explanations to be generally clear and good. However, part of the reason the text seems so clear is that it doesn't explain much of what's really going on. It covers the right material, but not really in such a way that the reader can then go on to apply the knowledge gained.This is evidenced by the complete (and almost unforgiveable) lack of exercises in the book. It is very easy to feel you understand this sort of material, only to be completely lost when you actually have to solve a problem. Neftci will not help in this regard. I understand that it is difficult to create good exercises, but their absence almost makes me wonder if Neftci realized he was not explaining things in enough detail to let the student actually work with the knowledge. Exercises are the only way to really learn this subject.A basic problem with all these texts is that, try as they might, they cannot impart true understanding unless the student can grasp real analysis at, say, an undergraduate level typically reached by students at a good engineering school. This text tries to avoid the problem by failing to mention any of the analysis...that's not likely to work.

68 of 75 people found the following review helpful:

5.0 out of 5 stars The best intro book ever!, July 14, 1999

By 

G. Pritsch (USA, New York) - See all my reviews
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This review is from: An Introduction to the Mathematics of Financial Derivatives, Second Edition (Academic Press Advanced Finance) (Hardcover)

Students of derivative pricing techniques are often in a dilemma: Coming from their MBA or undergrad course, they have just build a "brealy-myers" type of intuition on options. Moving towards Hull then allows a deeper understanding. But any serious (eg PhD, Wall Street Analyst) student of derivatives needs to undertstand the math behind modern derivatives pricing. Essentially, this research divides into two streams: Solving Partial differential equations and developing equivalent Martingales. Without a rigorous pre-education (Maths, Physics), most students fail to understand (let alone learn to use) these methods. Nefci is the only book that does not assume lots of prior knowledge, as compared to Merton (1992) or Duffie (who is so bold to write "for mathematical preparation little beyong undergraduate analysis...is assumed" -ask PhD Students how easy this book reads! The answer is its tough!!). In Short, Neftci's book is a true blessing for all "normal" people. Can't wait to get the second edition!

10 of 10 people found the following review helpful:

4.0 out of 5 stars I have found this book very helpful, May 21, 2002

By 

Craig Matteson (Saline, MI) - See all my reviews
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This review is from: An Introduction to the Mathematics of Financial Derivatives, Second Edition (Academic Press Advanced Finance) (Hardcover)

While most MBAs are already separated into those strong in math who gravitate towards the mathematically more intense areas such as finance and those who head towards areas less mathematically intense such as marketing and organizational behavior, there are many of us who know we need to strengthen our mathematical understanding. For us, this book by Prof. Neftci is a gift!

Now, I am NOT bashing marketing and organizational behavior. In fact, math can be used to great advantage in those fields, but you do find many who feel very uncomfortable with much beyond algebra and that is ok, too. And it is very possible to work in finance without understanding the math behind the tools and principles taught in the basic courses. However, if you want to go deeper than the basic courses this book can be a great next step.

The truly mathematical seem to feel that this book doesn't go far enough and that may be true if you want to get to the very bottom of the subjects reviewed here. If you think of this book as an intermediate step that gives you more than the simple treatment you get in most MBA courses and not as intense as you would get in "Continuous Stochastic Calculus with Applications to Finance" and that is what you want then this book is for you (and for me).

Plus there is a nice bibliography that can help you dive even deeper.