Mathematical Techniques in Finance: Tools for Incomplete Markets (Paperback)

by Ales Cerny (Author)

Editorial Reviews

Review
Ales Cerný's new edition of Mathematical Techniques in Finance is an excellent master's-level treatment of mathematical methods used in financial asset pricing. By updating the original edition with methods used in recent research, Cerný has once again given us an up-to-date first-class textbook treatment of the subject.
(Darrell Duffie, Stanford University ) --This text refers to the Paperback edition.

Product Description
Modern finance overlaps with many fields of mathematics, and for students this can represent considerable strain. Mathematical Techniques in Finance is an ideal textbook for Masters finance courses with a significant quantitative element while also being suitable for finance Ph.D. students. Developed for the highly acclaimed Master of Science in Finance program at Imperial College London, it offers a carefully crafted blend of numerical applications and theoretical grounding in economics, finance, and mathematics. In the best engineering tradition, Ales Cern&yacute mixes tools from calculus, linear algebra, probability theory, numerical mathematics, and programming to analyze in an accessible way some of the most intriguing problems in financial economics. Eighty figures, over 70 worked examples, 25 simple ready-to-run computer programs, and several spreadsheets further enhance the learning experience. Each chapter is followed by a number of classroom-tested exercises with solutions available on the book's web site.

Applied mathematics is a craft that requires practice--this textbook provides plenty of opportunities to practice it and teaches cutting-edge finance into the bargain. Asset pricing is a common theme throughout the book; and readers can follow the development from discrete one-period models to continuous time stochastic processes. This textbook sets itself apart by the comprehensive treatment of pricing and risk measurement in incomplete markets, an area of current research that represents the future in risk management and investment performance evaluation.

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Product Details

• Paperback: 352 pages
• Publisher: Princeton University Press; illustrated edition edition (November 3, 2003)
• Language: English
• ISBN-10: 0691088071
• ISBN-13: 978-0691088075
• Product Dimensions: 9.1 x 6.1 x 1.3 inches
• Shipping Weight: 1.3 pounds (View shipping rates and policies)
• Average Customer Review: 4.8 out of 5 stars See all reviews (4 customer reviews)
• Amazon.com Sales Rank: #792,840 in Books (See Bestsellers in Books)

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Customer Reviews

Most Helpful Customer Reviews

11 of 11 people found the following review helpful:

5.0 out of 5 stars The Best Option Pricing book I've read!,, October 14, 2004

By	CGS (London, UK) - See all my reviews

After reading million books on derivative pricing, this one is the only one which defenitely combines a practical approach to it. You'll start learning about all the maths you need and all the building blocks, all by examples. And suddenly on Chapter 11, it puts it all together and effortless you can price any option with any payoff you can imagine, I got impress withmyself. I work at Credit Suisse First Boston and we have it in all the Quant's desks.

13 of 14 people found the following review helpful:

4.0 out of 5 stars Hands-on & easy to read, May 24, 2004

By	Bernard VdS - See all my reviews

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.

18 of 24 people found the following review helpful:

5.0 out of 5 stars Very good coverage, practical orientation, January 8, 2004

By A Customer

This review is from: Mathematical Techniques in Finance: Tools for Incomplete Markets (Hardcover)

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.]