Customer Reviews

Paul Wilmott on Quantitative Finance 3 Volume Set (2nd Edition)

5 star:		(11)
4 star:		(1)
3 star:		(0)
2 star:		(1)
1 star:		(2)

 

 

Paul Wilmott has made quantitative finance his life's work, and this (now three volume) collection of his explications of his own fundamental work and the aggregation of the dispersed work of others is a welcome reference library in a field of increasing density.

Here is the bad news; it doesn't contain everything.

Here is the good news: it doesn't contain everything.

And thank God, because if Wilmott had gone through each topic in the rigorous theorem-proof of yellow-spine Springer books we'd be old men before we got finished.

Wilmott's critics usually center around three areas: tone, incompleteness (or sloppiness), and emphasis.

On emphasis, Wilmott's strengths is his own material in partial differential equations (PDE approach), which makes sense as his earliest background was in the mathematics of fluid dynamics. Some readers, therefore, may detect that there is a heavier hand on PDEs over other analytic or numeric approaches, etc. But like any novel, any collection and textbook must have a "spine" on which to build and reference other topics in extension and contrast.

On incompleteness, readers should consult the "Look Inside" feature for a list of topics, and recognize that quantitative finance is now a field so vast that no one volume can circumscribe the subject. Nevertheless, if there is one collection that covers the most interesting and common topics, it is this one (Hull's 6th edition leaves out some helpful chapters contained in the 5th edition, for example).

On tone, colleagues complain Wilmott glosses over important dimensions and has a flippant engagement with the material. My view is this criticism is simply one of preference. Each author chooses how to express his subject, often injecting themselves into the explanation: this is an effective literary technique hollowed by time and results. Reading Hull is like reading a report from an audit committee: Hull's tone is lean and exact. Wilmott, on the other hand, holds that quantitative finance need not be pompous, needlessly abstract, self-important or dull. In fact, it should be fun. Hull isn't funny nor lively, while Wilmott tries to be both. Neither is wrong, just different approaches to the same goal: trying to get the reader to understand the material.

The term "encyclopedia" (which Wilmott wisely does not use) may have as its root meaning "all knowledge" but even Voltaire's original encyclopediaists were aware of the hubris contained in the phrase. Anyone who whines "it doesn't cover (x)" or "it only glosses over (y)" or "the math isn't rigorous enough" is never going to be satisfied and misses entirely the purpose of this work. If you want to collect all these formulas and topics in the expression of academic journals and enjoy reading about them that way you are but a Google-Scholar search and three years of spare time away from satisfying your unique utility curve. Perhaps it is only for meatheads like me, but so be it. Wilmott's hefty contribution merits widespread use as a reference work, but like anything it is a condensed collection that for any single topic needs additional work by the reader.

I totally agree with the review of James Ward below. It really doesn't make sense to complain that a SUMMARY of any kind "doesn't cover x" or "glosses over y" because that's unavoidable.

However, I'd like to shed some light of how large the "non-coverage" can be. For instance, you may think that if you have read what Wilmott has to say on Fixed Income Securities, you are at least familiar with the basics, but that's not the case. If you are an entry-level quant looking for a job who claimed to "know the fixed income" you are likely to answer the first 2-3 fixed income interview questions, but fail the rest - unless you add, like, 500 or more pages of fixed income material to what is given in Wilmott.

So if your goal is to be able to claim (even a basic) knowledge of a certain QF topic in your resume, it's necessary to purchase a few good books dedicated entirely to that topic. And to find out what books are good, you don't really need Wilmott's references - using Amazon search and customer reviews should do the job.

I have used this book to teach a quantitative course on Fixed Income and Interest Rate Derivatives to those Master-of-Science students who are ready to enter the job market. Several of them got jobs in the quant finance industry as a result of this course. They told me what kind of questions they had on interviews, e.g., "derive the risk-neutral drift of the general HJM model." This interview question may sound intimidating to the uninitiated. But thanks to the extraordinarily simple exposition given in Wilmott, my students were able to answer this and many other such questions.

The math in this book is not complicated, if you read the book carefully. With some modest effort, you can figure out where the equations come from. Wilmott does a great job of showing only the relevant equations and hiding the less-important intermediate steps. Of course, if a reader bounces from section to section and expects to see everything clearly at the first glance, then he/she has unrealistic expectations of a quant book.

As for the comment by one of the reviewers about Wilmott's cartoons and jokes. There are quite a few of those. But you are free to ignore them if you think they distract you. It's always up to you what to read and what not to.

This book was a big disappointment for three reasons: 1) it doesn't have a proper focus. Author wanted to cover everything and that's why the book is making sloppy impression, i.e. too wide and not too deep when it is necessary; 2) it doesn't help you as a quant in the everyday quant life. It doesn't show you how to backtest models, it doesn't tell you how to use all this knowledge in the practical way, it doesn't even tell about the robustness and out of sample testing; 3) it is an arbitrary collection of known theories with some unexplained extracts from the different fields which are not connected with each other in the logical way.

As the final accord: why the "quant bible" is based on the "normal" distribution. How long are we going to use all this useless in practice old concepts like Black-Scholes models etc?

As the student of the Msc in Mathematical Finance programme organized by the University of Oxford, I found that this book is indeed an excellent reference. Paul, as the founder of the captioned programme, write this book as a completion collection on all-you-have-to-know in quantitative finance. Most of the books for this topics are really expensive and Paul's work summarizes all the essential as well as the recent theories. For the 'Quants' who could able to derive models by themselves, or the semi-professionals in derivatives finance, it serves as 'budget' quick reference. As a cult writer, Paul's presentation is very funny indeed. All in all, it is a must buy for all students in this subject.

This book is a wonderful mix of mathematics and practical wisdom. More focused on numerical than analytic methods, there are lots of other books available on the analytic methods anyway.

It is the best book I've read on the practical and numerical side of quantitative finance. For proving things about financial models or deriving them in a rigorous way, you'll need other books, but this book has 1500 pages full of material that is difficult to find elsewhere.

I found this book quite interesting. Yes it may lack rigor in math but it gave me intuitions other books lack. As an engineer who has gone through rigorous derivations in graduate school and entered the work place finding that all these math isn't very useful and is easy to forget. The intuitions and deep understanding of the reasoning are the things that people remember forever. This is what this book is good at.

a good set of books. Clear , broad coverage and easy to understand but you may need some background in stochastic calculas / Ito lemma....but these concepts are all explained in the first book. One drawback is that you may find the mathematics are not rigorous enough ....but you can definite follow the suggested book list to deepen your knowledge...highly recommend to someone who need general intro to quant finance.

Wilmott compendium is nothing more but a summary of all the other books that he managed to publish thus far. This, however, is not the problem. The real problem is that his books continue to lack depth and applicability. None of the chapters will help you to solve real problems nor will it give you guidance of how to implement the models (which some few exceptions). If you are looking to buy a real comprehensive compendium on quantitative finance, which is full of state-of-the-arte examples, problems (problems that really count) and explanations go for the new Carol Alexander books on quantitative finance (part I-IV). She has set the industry standards.

I bought tons of books before this set. This is the place to start. It is written with style and humor coupled with a pace that is simple to adjust to. I judge a book by how many equations it has - more is BETTER! This set strikes a balance. The exposition is solid. It covers many specialized topics like Energy Derivatives (just a taste, mind you, but it is there to get us thinking). I guess the bottom line is this book allowed me to start thinking like a Financial Quant and less like a mathematical physicist. I have gotten much more out of the other more mathematical works because I understand how the Quants think. I still like The Physics of Finance by Ilinsky. This is more than the past Derivatives book (that makes up the first 65% of volume 1) and sets a real tone to understanding - this is just what I was looking for as I re-tool. Buy this FIRST. Read the TOC, and Get moving!