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Modelling Financial Derivatives with MATHEMATICA ® First Edition Edition
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Top Customer Reviews
The first is to show how Mathematica can be used as a derivatives modelling tool. Technically he does show how Mathematica can be used for derivatives modelling, but with virtually no insight about what makes Mathematica special. The code he writes could trivially be ported to FORTAN, Visual Basic or C. In fact, based on his experience as a practioner, one suspects these models were hastily converted to Mathematica from C. In so doing, Shaw shows that he entirely misses the point of Mathematica.
In Gray's excellent book, "Mastering Mathematica" he proposes a fundamental dictum of Mathematica programming: "Treat mathematical structures as wholes. Never tear them apart and rebuild them again." Yet Shaw does precisely that repeatedly throughout this muddle with his "Mathematica implemenations". Shaw devotes a number of chapters to implementing PDE algorithms in Mathematica with no mention of Mathematica's own PDE solvers. By ignoring them, we are left wondering if Shaw found them inappropriate, inadequate, or just didn't know about them. Shaw devotes half a chapter to comparing the relative speeds different methods for obtaining normally distributed random numbers, while just mentioning the included Mathematica function "NormalDistribution" as just another candidate. While this discussion might be interesting for some, it is irrelevant to his stated purpose. The whole point of Mathematica is to do mathematics, without low level programming, and Shaw just doesn't seem to get it.
His second purpose is to present a complete if concise development of the mathematical approach to the valuation of a large class of derivative securities.Read more ›
As derivative securities are the apparent "hip thing in finance" every publisher seems to want part of this market. Instead of offering anything of value, there is this mentality of "Wow, here is something new. "Derivatives and xxxx" and they rush to publish. This is where this book fits in, rather like most of the books on C programming.
The first chapter is simply an advertisement for Wolfram's Mathematica. Entirely useless. The second chapter gives you an introduction to Mathematica. Oh boy, it teaches you how to plot a sine curve! It is nothing more than a watered down version of chpt 1 of the mathematica book. The remaining chapters are covered better and in more detail in other books. As far as Mathematica Programming, the author writes "... the use of 'Evaluate' is not strictly necessary; however, it is a good habit to get into using it..." (pg. 154), bad grammar, but more importantly he never gives a good reason as to why 'Evaluate' should be used. But who cares? He showed us how to plot a sine curve.
If you have any type of a marginally sophisticated knowledge of derivative securities this book is an utter bore. It will tell you nothing more than you know already. Really, half the book is just redundant nonsense. Writing the code for a call OR a put in the book is nice. Doing it for both is stupid. Print one and just throw the other on the CD. What does Shaw do? He prints not only both, but also the code for ALL of the Greeks of BOTH calls and puts. Was someone trying to reach a page quota?Read more ›
The book requires too much background to work well as a textbook. As other reviewers have noted, it is insufficient as a text on its own. If you have another textbook, this one would not add a whole lot of value, since the Mathematica-specific formulas substitute in many places for more traditional pedagogy.
As a reference, the book concentrates too much on topics that are either marginally relevant or better treated elsewhere. For example, there is a long discussion of multiple implied volatilities arising from non-vanilla equity options prices. True enough, but who computes implied vols from exotics?
Much of the book discusses various exotic equity options. As an industry, these are no longer a topic of much research interest, and they are covered in other texts (such as Wilmott's large but mediocre tome, Derivatives). Most firms who need these payoffs have already modeled them. Those who haven't will end up wanting them in C++ or maybe Java anyway, since the licensing and distribution of Mathematica would be impractical for an outfit intending on a heavy expansion of its exotics trading.
As is all too typical in derivatives books, the book includes a latter few sections on interest rates, seemingly as an afterthought (I think Hull is guilty of starting this trend, though his later editions mollify it). The models included are outmoded basics, and so would be useful only for exposition.Read more ›
Most Recent Customer Reviews
Despite the coments of heavy practionesrs I must say I like this book. As pointed by author the book is focused on the understanding of what you are doing in Mathematica. Read morePublished on April 27, 2013 by Dusan S.
I found William Shaw's book fascinating when I first bought it back in 1999 and have recently gone back to it for some further insight on some complex problems in finance. Read morePublished on June 6, 2002
My comments are confined to the chapters on trees and finite difference methods, because that was my primary interest in buying the book. Read morePublished on August 12, 2001
It is highly recommended for its broad base of knowledge. People who want to do research in the field of finance must be equipped with this book.Published on July 13, 2001 by Dicken
This is fascinating work, probably Shaw'a best. A real page turner, it keeps a reader glued until the last page. Read morePublished on May 1, 2001
Some recent comments seem to require response.
1. The Parkville, Aus reader seems to be confused about the use of Monte Carlo simulation. Read more
The last review (below) made a peculiar point about the manner of treating PDE solutions. I very deliberately wrote low-level code so that people could see exactly how each... Read morePublished on October 17, 2000 by William Shaw
I like having Shaw's book around. It definitely contains a large amount of information. Shaw definitely knows how to code in Mathematica, though other reviewers -- who know... Read morePublished on October 16, 2000
This book assumes you already have a strong mathematical background and in finance as well. And unfortunately this book doesnt cover programming i Mathematica in a good way, but... Read morePublished on May 7, 2000