An Introduction to the Mathematics of Financial Derivatives 3rd Edition
Use the Amazon App to scan ISBNs and compare prices.
An Introduction to the Mathematics of Financial Derivatives is a popular, intuitive text that eases the transition between basic summaries of financial engineering to more advanced treatments using stochastic calculus. Requiring only a basic knowledge of calculus and probability, it takes readers on a tour of advanced financial engineering. This classic title has been revised by Ali Hirsa, who accentuates its well-known strengths while introducing new subjects, updating others, and bringing new continuity to the whole. Popular with readers because it emphasizes intuition and common sense, An Introduction to the Mathematics of Financial Derivatives remains the only "introductory" text that can appeal to people outside the mathematics and physics communities as it explains the hows and whys of practical finance problems.
Books with Buzz
Discover the latest buzz-worthy books, from mysteries and romance to humor and nonfiction. Explore more
"This text introduces quantitative tools used in pricing financial derivatives to those with basic knowledge of calculus and probability. It reviews basic derivative instruments, the arbitrage theorem, and deterministic calculus, and describes models and notation in pricing derivatives, tools in probability theory, martingales and martingale representations, differentiation in stochastic environments, the Wiener and Lévy processes and rare events in financial markets…" --ProtoView.com, February 2014
"Ali Hirsa has done a superb job with this third edition of the very popular Neftci's An Introduction to the Mathematics of Financial Derivatives. New chapters and sections have been added covering in particular credit derivatives (Chapter 23) and jump processes and the associated partial integro-differential equations. The new material on numerical methods, in particular on Fourier techniques (Chapter 22) and calibration (Chapter 25), and added examples and exercises are very welcome. Overall, this new edition offers substantially more that the previous one in all of its chapters. This is a unique sophisticated introduction to financial mathematics accessible to a wide audience. Truly remarkable!" --Jean-Pierre Fouque, University of California, Santa Barbara
"The publication of this expansive and erudite text in a new edition by one of the most highly respected scholars in the field should be a welcome event for practitioners and academics alike." --Lars Tyge Nielsen, Columbia University
#"There are many books on mathematics, probability, and stochastic calculus, but relatively few focus entirely on the pricing and hedging of financial derivatives. I have used the second edition for finance and financial engineering classes for years, and will continue with the third edition; the book will no doubt remain a valuable reference for industry practitioners as well." --Robert L. Kimmel, National University of Singapore
"An excellent introduction to a wide range of topics in pricing financial derivatives with highly accessible mathematical treatment. Its heuristic style in explaining basic mathematical concepts relevant to financial markets greatly facilitates understanding the fundamentals of derivative pricing." --Seppo Pynnonen, Unversity of Vaasa
"What makes this introductory text unique for students or practitioners without a major in mathematics or physics is that it provides the most helpful heuristics while clearly stating how or why the concepts are useful for practical problems in finance. The timely additions on credit derivatives and PDEs provide considerable value-added in comparison to the second edition." --Mishael Milakovic, University of Bamberg
This readable, informal overview of advanced financial engineering emphasizes intuition and supports it with common-sense mathematics.
- Publisher : Academic Press; 3rd edition (December 26, 2013)
- Language : English
- Hardcover : 454 pages
- ISBN-10 : 012384682X
- ISBN-13 : 978-0123846822
- Item Weight : 2.05 pounds
- Dimensions : 7.73 x 1.13 x 9.48 inches
- Best Sellers Rank: #1,316,529 in Books (See Top 100 in Books)
- Customer Reviews:
About the author
Top reviews from the United States
There was a problem filtering reviews right now. Please try again later.
The new chapters 22 (Pricing Derivatives via Fourier Transform Technique), 23 (Credit Spread and Credit Derivatives) and 25 (Overviews of Calibration and Estimation Techniques) are great addition to the previous (second) edition. Chapters 22 and 25 introduce more advanced methods and models for pricing and predicting future prices for derivative products. Chapter 23 gives an in-depth introduction to credit derivative.
But the third edition just adds some modern topics, but adds only a little more material to a few existing chapters in the 2nd edition to make the book slightly more useful as an INTRODUCTION to the Mathematics of Financial Derivatives.
Also this new edition modernizes some notation in one paragraph , however the editors do a half donkey job... because, in a subsequent paragraph the old notation was not replaced... making the 3rd edition less readable than the second edition.
If the author/editor doesn't provide a errata sheet then you have to stick with the 2nd edition written just by the original author, Salih N. Neftci.
But since there is some new useful information in the 3rd and I have the 2nd edition without the new typos, that the 3rd edition introduces on the old material, I found this edition useful to have.
I did not read beyond the first two chapters because authors end of chapter problems are not supported
by the preceding text. In other words, I can not be certain that I did the problems correctly because
the chapter 2 material was explained in such abstract terms that I can not say that the problem questions
posed were correctly stated or included typos. Who is the editor and has he or she even read this book?
More importantly, the web is filled with criticism that it is hard to access Neftci and that he's behind on communication and the web site. Frankly, I lay this on the publisher, not the author, and to be fair, these derivative guys make 7 figures so I'm personally grateful he even took the time to get this done, including the updates that are here!
I teach dynamical systems online, and this is one of the finest texts you'll ever find for intermediate entry. ALL the others are show off pieces that are really postgrad level. Both the second and third use clear explanations and the solutions manual goes to great lengths to make the material intuitive. This field, since Liebniz, has been characterized by four techniques: analytical, qualitative (eg graphs and topology) and numeric (algorithms). The recently added pesky little sister is stochastics-- using distributions in deterministic, zero sum systems was unheard of historically in dynamical systems.
To be very frank, not much has changed between 2000 (2E) and now (3 edition) in the field of partial differential equations for betting itself. The two things that have evolved are mathcad and mathematica modeling (which aren't covered in either due to SAS clones, GNU Octave, and expensive derivative models, often proprietary to the bank) and the probability side. Stochastics are covered in both, but again honestly, the new edition doesn't have a lot more of the most recent developments in Martingales, for example, including a lot of Taleb black swan and distribution research and options.
The key point is that this book is a unique black swan itself-- an outlier, and rare by math standards. The models used in this field are every bit as robust as Hamitonians and Lagrangians in Quantum Physics and Engineering (my fields), so a text that takes the time to work on the intuitive detail side is indeed a find. Still, undergrad calculus is not enough unless it was taken in an Engineering or Physics track-- the assumption is that you are comfortable with PDEs, matrices, vectors, etc. As I'm sure you know, many of the solutions in this field are not generalizable, if you've seen one, you've seen one. More and more, proprietary numerical methods are merging with stochastics to model these products. Even as simple a concept of doubling down vs. various utility functions gets into "airfoil design" level modeling, which themselves don't have analytic solutions!
Highly recommended as one of the few that aren't a torment, by an author who is more interested in your comprehension than showing off his stuff.
Top reviews from other countries
BUT and its a big but I'm afraid , the editing of this book has gone completely awry. Lots of misprints and mistakes In formulas.
Can get around it if you really really concentrate but its supposed to teach not require correction.
The answer book is the same , questions left out and mistakes . In the main text book , P219 has the Black and Scholes formula wrong !! That's fairly poor.
That said the the way the topics are presented is very good. Don't think the author is at fault here but maybe the publisher >]>?