Thursday, April 2, 2009

Option Pricing: Mathematical Models and Computation

This book is excelent. Style is very practical, very readable. Not only formulas are derived, but also mathematical ideas behind are explained. The book is very result-oriented, i.e. after reading it you will know some math methods. Book requires just a minitial knowledge of math, (college level - integrals, partial derivatives), some knowledge of theory of probability, no prior knowledge of stochastic calculus, and no prior knowledge of finance. Good for a physicist learning finance.

This book is a very good textbook for beginers, especially mathematicians or physicists with PDE backgroud. Unfortunately, PDE is not a cure-all. It may be cumbersome in many cases. Like most research papers by the same authors, it lacks diversity.

This book offers very comprehensive review of a wide variety of different types of options and different approaches to evaludate the price. The mathematical side is clearly explained and it does not require extensive knowledge of probability theory. It gives deeper coverage of exotic options compared to other books on the same topic.

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