The Mathematics of Financial Derivatives: A Student Introduction by Paul Wilmott

Product Description

Finance is one of the fastest growing areas in the modern banking and corporate world. This, together with the sophistication of modern financial products, provides a rapidly growing impetus for new mathematical models and modern mathematical methods. Indeed, the area is an expanding source for novel and relevant "real-world" mathematics. In this book, the authors describe the modeling of financial derivative products from an applied mathematician's viewpoint, from modeling to analysis to elementary computation. The authors present a unified approach to modeling derivative products as partial differential equations, using numerical solutions where appropriate. The authors assume some mathematical background, but provide clear explanations for material beyond elementary calculus, probability, and algebra. This volume will become the standard introduction for advanced undergraduate students to this exciting new field.
Product Details
Amazon Sales Rank: #78594 in Books
Published on: 1995-09-29
Number of items: 1
Binding: Paperback
333 pages
Editorial Reviews

Review
'The layout is good and clear, so is the style of notation ... overall this is an excellent tool for both mathematicians interested in the world of finance as well as finance practitioners keen to rebuild the foundations of their knowledge.' Rudi Bogni, Times Higher Education Supplement

'The book is pleasantly readable and gives a good introduction.' C. Praagman, ITW Nieuws
Customer Reviews

can' classify this book
This book is awkwardly written. Quite summarised, the approach used for discussing the PDEs is not familiar - see other reviews. The book as a whole doesn't fill any gab, e.g. it is not a mathematical finance book, definitely not., see Shereve or Neftcie for an example. On the other hand it is not a tools or recipes book for pricing derivatives. It doesn't do any function for me, just a waste of space. For every book I have - many, I can pick something useful from time to time, apart from that book, total waste. I am surprised of the book name, and who would be the target reader!!

Easy to read, very comprehensive.
I bought this book to learn about financial derivatives by myself. It is very easy to read for a first timer, no prior knowledge is required. It is also very comprehensive in its coverage of the subject. Overall it is a very good first book for the subject.

Not bad... but there is much better out there
Wilmott's book was one of the first to tackle options pricing from a PDE point of view. The original book (now out of print) was a little more detailed and later superseded by this cheaper "Student Edition" overview on one hand and the "Wilmott on Quantative Finance" 3-volume set on the other hand. A per its title, this is an applied mathematics book, and therefore a minimal level of math is expected from the reader (so please, do not compare with Hull...).

Taking a PDE approach, the book aims at presenting various methods for pricing financial options. While the first few chapters are pretty good at skimming the surface of the theory and laying down the key principles of options pricing, the book, in general, lacks depth. Many results (prices of barrier, lookback, asian, etc...) are given without real development or simply with a little "hand-waving". As soon as things get a little complicated, Wilmott just outlines the way forward and drops buzz-words.

In that sense, the book, while attempting go beyond introductory level topics in some details, does not provide great insight into the more difficult areas of option pricing and, lacking courage, simply goes through what has become the standard presentation without adding much value. Not for beginers, but not for more advanced readers either !

It is nonetheless an acceptable quick overview if you are looking for a refresher of key concepts. For a more thorough mathematical introduction to options pricing, You-Lan Zhu's book (for example) does a much better job at covering the PDE approach rigorously (proving for example some of the convergence criterias for the finite difference method, covering the linear complementarity approach as well as presenting other numerical techniques) without being overly formal.