Derivatives: The Theory and Practice of Financial Engineering

by Paul Wilmott

Derivatives by Paul Wilmott provides the most comprehensive and accessible analysis of the art of science in financial modeling available. Wilmott explains and challenges many of the tried and tested models while at the same time offering the reader many new and previously unpublished ideas and techniques. Paul Wilmott has produced a compelling and essential new work in this field.

The basics of the established theories-such as stochastic calculus, Black-Scholes, binomial trees and interest-rate models-are covered in clear and precise detail, but Derivatives goes much further. Complex models-such as path dependency, non-probabilistic models, static hedging and quasi-Monte Carlo methods-are introduced and explained to a highly sophisticated level. But theory in itself is not enough, an understanding of the role the techniques play in the daily world of finance is also examined through the use of spreadsheets, examples and the inclusion of Visual Basic programs.

The book is divided into six

Part acts as an introduction and explanation of the fundamentals of derivatives theory and practice, dealing with the equity, commodity and currency worlds.

Part takes the mathematics of Part One to a more complex level, introducing the concept of path dependency.

Part concerns extensions of the Black-Scholes world, both classic and modern.

Part deals with models for fixed-income products.

Part describes models for risk management and measurement.

Part delivers the numerical methods required for implementing the models described in the rest of the book.

Derivatives also includes a CD containing a wide variety of implementation material related to the book in the form of spreadsheets and executable programs together with resource material such as demonstration software and relevant contributed articles.

At all times the style remains readable and compelling making Derivatives the essential book on every finance shelf.

Genres: Finance, Economics

768 pages, Paperback

First published November 1, 1998

About the author

Paul Wilmott is a researcher, consultant and lecturer in quantitative finance. He is best known as the author of various academic and practitioner texts on risk and derivatives, and for Wilmott magazine and Wilmott.com , a quantitative finance portal.
He is the co-owner and Course Director for the Certificate in Quantitative Finance (CQF), a half year distance learning course on mathematical finance at 7City Learning, a London-based company providing training for the financial services industry. He is a founding partner of Caissa Capital, a volatility arbitrage hedge fund. He is on the editorial board of the academic journal International Journal of Theoretical and Applied Finance. He founded the Diploma in Mathematical Finance at Oxford University and the journal Applied Mathematical Finance. He is a director of Wilmott Electronic Media, which manages Wilmott.com, a website for the quantitative analyst community, and is a director of Paul & Dominic Quant Recruitment.
He studied mathematics at St Catherine’s College, Oxford University, where he received his D.Phil in Applied mathematics in 1985.

Reviews

[Chris McRobbie · Rating 4 out of 5]

desk reference. derivatives should be used as design for controlling, mitigating risk as best ad possible. however even the complacent risk managers blow up. i.e. LTCM. know the math and have an understanding how the instruments are priced; use derivatives as leveraged speculation vehicles and poof! game over. financial markets are a long game. a marathon, not a sprint.

[Don · Rating 4 out of 5]

Nice book, could be improved with examples in C++