Book Description
The 2nd edition of this successful book has several new features. The calibration discussion of the basic LIBOR market model has been enriched considerably, with an analysis of the impact of the swaptions interpolation technique and of the exogenous instantaneous correlation on the calibration outputs. A discussion of historical estimation of the instantaneous correlation matrix and of rank reduction has been added, and a LIBOR-model consistent swaption-volatility interpolation technique has been introduced.
The old sections devoted to the smile issue in the LIBOR market model have been enlarged into several new chapters. New sections on local-volatility dynamics, and on stochastic volatility models have been added, with a thorough treatment of the recently developed uncertain-volatility approach. Examples of calibrations to real market data are now considered.
The fast-growing interest for hybrid products has led to new chapters. A special focus here is devoted to the pricing of inflation-linked derivatives.
The three final new chapters of this second edition are devoted to credit. Since Credit Derivatives are increasingly fundamental, and since in the reduced-form modeling framework much of the technique involved is analogous to interest-rate modeling, Credit Derivatives -- mostly Credit Default Swaps (CDS), CDS Options and Constant Maturity CDS - are discussed, building on the basic short rate-models and market models introduced earlier for the default-free market. Counterparty risk in interest rate payoff valuation is also considered, motivated by the recent Basel II framework developments.
Customer Reviews:
Best book on interest rate models.......2002-12-14
This is the best book available on interest rate models. Very detailed. Much more focused and readable than Rebonato's book. More pragmatic and explicit than Musiela and Rutkowski. Not as theoretical as Hunt and Kennedy. James and Webber also looks very good, but I'm not that familiar with it. All other books have only bits and pieces on interest rates.
The best book I have read on the subject.......2002-05-06
With all the due respect to the other authors I would say that if one is interested in a good theoretical book whihc is also good on the implementation side then the book of Brigo and Mercurion is definetly the best book I have ever read on the subject.
Anyone interested in implementing the LMM/BGM/MSS model in practice is well advised to read it.
I would just say that this is certainly a must have in the field.
New stuff and nice overview: hard to beat!.......2002-01-17
In the late nineties I went through Brigo's innovative work on stochastic nonlinear filtering with differential geometry techniques. I was favorably impressed by results and style, particularly in his dissertation and in his 'geometry in present day science' very readable overview. Interesting results are found and nicely told with accurate - but not pointlessly complicated - advanced mathematics for the problems at hand, I reasoned.
I've followed a similar path from control to finance, and having worked with interest rate models, I couldn't help but order this Brigo-Mercurio book. I had high expectations 'cause these two guys are working in a bank on the real thing.
Sure enough I'm not disappointed.
1-factor models are handled with great care, a ton of formulas and recipes are given. I've never seen this kind of analysis of pricing with Gaussian 1-f models. The new upgrade of the CIR model is interesting and accurate. "CIR++" is now my favorite 1-f model. I like the treatment of lognormal 1-f models and the explanation of Monte Carlo and trees -- the flow-chart for Bermudan swaptions is crystal clear! Plots of market implied structures and volatility calibration are useful additions.
The chapter on 2-f extensions has one of the best discussions on volatility, and two tons of useful formulas/recipes. Two dimensional trees!
The HJM chapter size is OK. I agree - the useful models embedded in HJM are short rate models and market models.
Market models - these three chapters alone are worth the book. You'll find yourself nodding as you read the guided tour. They make it look easy all the time. The exposition is focused, clear, intuitive, detailed. There's also new stuff, just check the calibration discussion! Smile modeling begins with a brilliant tour and ends with Brigo-Mercurio's new approach - the mixing dynamics - deserving a whole chapter if expanded.
The detailed explanation on products is a much welcome original addition. Cross currency derivatives!
Quotes - as in Brigo's old work - are a pleasant diversion while reading. The 500 and more pages are a treat given the competitive price.
Still there's room for improvements - more "CIR2++"! Something on 3-f models. Historical estimation of the correlation matrix and low-rank optimized approximations. Expand smile modeling! More hedging. Something on structured products. Cross currency libor model. chapter 9 - other interest rate models - sounds out of place and can be suppressed for other things.
This book rings true and has useful teachings for students, academics and practitioners. Although it requires some background in stochastic calculus, it's hard to beat on the pricing front. Kudos to Brigo and Mercurio! It only harms there aren't enough books like this.
Nicely written overview of interest rate models.......2001-12-15
This recent book, written by two Italian "quants" Mercurio & Brigo, gives a nice and accessible overview of interest rate models which is a compromise between the practitioner viewpoint, expressed for ex. in Rebonato's book "Interet Rate option models"
and the theoretical viewpoint such as the one in Musiela & Rutkowski.
The authors, themselves PhDs in quantitative finance/ applied maths, wrote this book while working as quants in an Italian bank and this first hand contact with the market gave them a
practical view on the subject which markes this book very interesting.
The book contains a "rational" catalogue of models used in practice ( as opposed to models which are impossible to implement!).
In contrast with academic books on interest rate modeling which deal with HJM formulation, there is a lot of emphasis here on LIBOR and Swap market models
(BGM -Jamshidian models) which reflects the current market practice. This is a positive point since there are not many books with details on implementing and using these "market models".
Part II: Interest rate models in practice is particularly useful because it deals with implementation and calibration which, as any practitioner knows, are important and usually delicate issues.
However calibration issues are dealt with somewhat lightly, especially recent developments on modeling cap/swaption smiles
are not included here.
This book can also be used for a graduate level/PhD course on interest rate models.
There are a lot of numerical examples in the book and mathematics is kept to the necessary level while keeping the
approach both rigorous and understandable.
Overall, it is one of the best books written on the subject.
I highly recommend it to PhD students, quants and researchers interested in this field.
Well written and useful book.......2001-11-04
In my humble opinion, this is the best book on Interest Rate modeling out there. The writing style is clear and focused and the appendices are fantastic. The book is rigorous but someone with some background in Stochastic Calculus will find it easy to follow. If you need refresher, dont worry the authors have you covered, see the appendix on Stochastic Calculus. Not an introductory book. Very exciting book.
Book Description
Designed to form the basis of an undergraduate course in mathematical finance, this book builds on mathematical models of bond and stock prices and covers three major areas of mathematical finance that all have an enormous impact on the way modern financial markets operate, namely: Black-Scholes’ arbitrage pricing of options and other derivative securities; Markowitz portfolio optimization theory and the Capital Asset Pricing Model; and interest rates and their term structure. Assuming only a basic knowledge of probability and calculus, it covers the material in a mathematically rigorous and complete way at a level accessible to second or third year undergraduate students. The text is interspersed with a multitude of worked examples and exercises, so it is ideal for self-study and suitable not only for students of mathematics, but also students of business management, finance and economics, and anyone with an interest in finance who needs to understand the underlying theory.
Customer Reviews:
Mathematics for Finance: A useful tool for the unskillled investor.......2007-03-19
I enjoyed reading the book and solving exercises in it. I have a Ph.D.in chemistry and my wife and I did our his and her's MBA in the 1990s. I wanted to learn more concepts in finance and needed an easy entry, something I could enjoy, and without spending much money. The book by Capinski came recommended from a friend who teaches Economics at Cal State. I can speak for myself: I feel reasonably informed and I feel the book gave me concepts I can use to handle my own portfolio.
In the future, this text should be offered with an interactive CD that contains Xls, matrix, calculus, and graphing capabilities so one (I) can visualize the outcomes of proposed solutions.
Incoherent.......2007-01-18
Anyone can scribble a bunch of equations on paper and call it a book. Without sufficient context, they are useless.
Insufficient and disappointing. Not even a good introductury text........2006-05-15
As a graduate student in Financial Engineering I have found this book useless.
The title of the book is "Mathematics for Finance", but can you find in it even an elementary introduction to the stochastic processes? No. Ditto for the Ito's lemma and many other topics. The derivation of the Black Scholes formula is just sketched, and the insight that you can get from it is very limited.
Nevertheless, I wouldn't mind these limitations if this book provided a clear introduction to more advanced topics: unfortunately this book is not good even in that. In comparison to other textbooks the theorems and definitions are convoluted and do not go straight to the point. For example, in Shreve's "Stochastic Calculus for Finance" or Baxter & Rennie "Financial Calculus" the Fundamental Theorem of Asset Pricing is stated in this way: "In a market with risk neutral probability there is no arbitrage". Can you find such a simple and explanatory definition in Capinski's book? Not at all. The theorem at page 83 (you can see it yourself by searching inside the book) basically says the same thing using 8 lines of text and little financial intuition.
The only good thing that I can say about this book is that all exercises are resolved.
Overall, "Mathematics for Finance" has been a big disappointment: it doesn't have either the mathematical depth of Shreve's books or the conciseness in explaining financial concepts of Baxter & Rennie.
Whatever is the level of education that you are pursuing, graduate or undergraduate, I don't see any point in using it.
Great Book for Undergrad Quants.......2005-08-29
Mathematics for Finance (An Introduction to Financial Engineering) is a book intended for undergrad students "IN MATHEMATICS" or other discipline with a relative high mathematical content.
The book assumes some basic notion of Calculus and Probability Theory and it is focused more on the mathematics than in its theory and application of Finance. If you are looking to dwell into the mathematics (Proof of Equations) this is a great book, but if you are looking for a book that is rich in theory and in application then you should consider "Option, Future and Other Derivatives" or "Quantitative Methods for Finance" as an alternative. Both books are "a most" for any finance student and are of great help. Now if you want an introduction into the mathematics behind Finance then this book is a perfect purchase.
Important to state that all the problems presented in this book are solved meaning that it is great for self teaching. Marek Capinsi and Thomas Zastawniak have done a great job on this book.
I gave it four stars, because it has room for impovement.
Joining the chorus.......2005-08-03
I can only echo the other reviewers. As far as I can tell this book has no serious competition. This is an excellent introduction to mathematical finance for those with a solid undergraduate level understanding of higher math but without graduate level exposure. I agree that it is ideal for self study as that is exactly what I am using it for. The price is right especially in contrast with its overpriced brethren. Five stars!
Customer Reviews:
Carry This Book with You.......2007-10-01
If a marketer really wants to be a good business person, then they should carry this book with them. I dislike hearing recent graduates say "Buy One Get One Free" when asked for promotion ideas. If you understand the financial consequences of that type of promotion then it's OK to suggest it. But the point is this book helps you think about the many types of measurements. At one point in my career I had three Product Managers work for me. This book would have been one that I insisted they read.
Is it Really About Metrics..But There's More To it Than That.......2007-09-05
I think this book is an important tool in terms of measuring marketing and trying to ensure that you have the opportunity to understand your marketing outreach.
I also liked the newly released book, "Value Acceleration" by Mitchell Gooze and Ralph Mroz and think it should serve as a companion to this book in terms of truly identifying how marketing and sales can successfully work together and in terms of lean process, keeping the global competitive edge way beyond metrics.Value Acceleration: The Secrets to Building an Unbeatable Competitive Advantage
Looks great.......2007-07-05
It's still early to rate as I just got the book, but it's definitely valuable.
Whatever is most important can, indeed must be measured...accurately and consistently........2007-05-09
Obviously, it is highly desirable to measure what matters and that is especially true of marketing initiatives. Here's the challenge which many (most?) readers will face after they finish reading this volume: Which metrics are the most appropriate for their specific organization? Co-authors Paul W. Farris, Neil T. Bendle, Phillip E. Pfeifer, and David J. Reibstein offer 50+ and in an ideal business world, every executive can - and will - master all of them. That is possible but highly unlikely. Fortunately, the authors offer a wealth of information and observations that can guide and inform the selection of those metrics that will enable executives to "gather and analyze basic market data, measure the core factors that drive their business models, analyze the profitability of individual customer accounts, and optimize resource allocation among increasingly fragmented media.
To the authors' substantial credit, they make effective use of a number of reader-friendly devices which enliven what would be an otherwise dull textbook and they do without compromising the integrity of research-driven insights which so many books on marketing lack. These devices include definitions, formulas, and brief descriptions of various metrics. They also include within individual chapters several sections, such as "Construction" (e.g. metrics issues concerning their formulation, application, interpretation, and strategic ramifications), "Data Sources, "Complications, and Cautions" (i.e. an analysis of the limitations of the metrics under consideration, and their potential inadequacies once executed), and "Related Metrics and Concepts" (briefly surveyed). This is by no means an "easy read" but will generously reward those who absorb and digest its material with appropriate rigor.
Although I believe this volume can be of substantial value to executives in almost all organizations (regardless of size or nature), I think it will be of greatest benefit to those - probably in larger companies -- who have an urgent need for accurate and consistent measurement of, for example, the dynamics behind their market share; the profitability of producing, pricing, selling, distributing, and servicing what they offer; and the ROI of marketing initiatives within the framework of enterprise financial metrics.
Those who share my high regard for this volume are urged to check out Enterprise Architecture As Strategy: Creating a Foundation for Business Execution by Jeanne W. Ross, Peter Weill, and David Robertson as well as Ram Charan's Know-How: The 8 Skills That Separate People Who Perform from Those Who Don't, Lynda Gratton's Hot Spots: Why Some Teams, Workplaces, and Organizations Buzz with Energy - And Others Don't, Robert J. Herbold's Seduced by Success: How the Best Companies Survive the 9 Traps of Winning, Jack Alexander's Performance Dashboards and Analysis for Value Creation, and Michael Useem's The Go Point: When It's Time to Decide--Knowing What to Do and When to Do It.
A must for marketing people.......2007-05-07
The marketing people fails almost all the time, trying to meet the expectations or demands of the financial officers. Today you can not make marketing based in feelings or genialities, this book really helps to fill the gap between the good ideas and the hard facts needed by the high direction.
Book Description
A practical guide to building fully operational financial cash flow models for structured finance transactions
Structured finance and securitization deals are becoming more commonplace on Wall Street. Up until now, however, market participants have had to create their own models to analyze these deals, and new entrants have had to learn as they go. Modeling Structured Finance Cash Flows with Microsoft Excel provides readers with the information they need to build a cash flow model for structured finance and securitization deals. Financial professional Keith Allman explains individual functions and formulas, while also explaining the theory behind the spreadsheets. Each chapter begins with a discussion of theory, followed by a section called "Model Builder," in which Allman translates the theory into functions and formulas. In addition, the companion CD-ROM features all of the modeling exercises, as well as a final version of the model that is created in the text.
Note: CD-ROM/DVD and other supplementary materials are not included as part of eBook file.
Customer Reviews:
Good Intro to Cash Flow Modeling.......2007-09-20
Anyone needing to learn how structured finance cash flow models work will benefit from going through this book and building the spreadsheet-based model it describes. It will be faster if you are already good at using Excel for complex modeling or pricing, but there is a fair amount of Excel advice for those who need it. The book models a single pool of mortgages that can be described by weighted average statistics incorporating both prepayment and default scenarios. Great care is taken to make the model flexible in terms of the kinds of mortgages in the pool. On the liability side the model allows for the creation of a single senior class and a sub class with an interest rate swap and a reserve. While very good for learning the cash flow consequences of sequential and pro rata payment waterfalls, this model cannot describe the structures actually issued in the market. The skills learned, however, should allow the reader to build models capable of modeling issued structures.
The writing is clear and the examples are explained well. The flow of cash into and out of the structure is emphasized by clear inputs, cash flow modeling and summary outputs.
Excellent introduction to MBS modeling.......2007-08-13
Keith's book saved me hours of trial-and-error effort with Excel for modeling structured transactions. This book takes a simple, step-by-step approach to help the reader understand the mechanics of building the cash flow model for Mortgage Backed Securities (MBS).
Once you understand the basics of model creation and cash flow, then it is a matter of refining your skills by revere-engineering more MBS transactions out there. You will find all the basic tools to become proficient in that task by following this book.
Excellent Hands-On Introduction to Structured Finance.......2007-06-03
In structured finance, there is a tremendous discrepancy between academic literature and practice. In purporting a generalizable, scientific approach, many textbooks avoid explaining the intracacies of actual structured finance deals. The fundamental issue is that the implicit value of deal transparency required for issuer and investor tends to be overlooked by authors approaching the field from an academic background. Technical pyrotechnics that suit liquid markets fail when fees, interest rates, and other deal specifics are malleable constructs negotiated among a handful of parties. At the same time, basic bond math on an unsegregated pool of loans cannot accurately describe how assets generate cash flows and the risks faced by investors.
MFSC is the *only* book (afaik) that demonstrates how real structured finance pros bridge the void between these 2 common pitfalls made by other structured finance books. For one, the calculations that belie each component of a structured finance deal is integrated into a single model rather than considered separately. Other books may describe how cash flows pay out in a senior-sub structure, but they won't, for example, take the time to step through how funding costs and triggers affect the cash flows. The primary model also gives the user flexibility to stress the model and enables the user to treat the model as a base for all structured finance deals. Through a neatly organized inputs sheet, each component in the primary model described painstakingly anticipates the gamut of variations common to these types of deals.
All this in a book that's easy to follow and a delight to read. Five stars.
Modeling of CMBS.......2007-06-03
Keith's book does an excellent job at helping both new analysts to MD's in understanding modeling of complex master tapes (models). If you need to know how to structure a fixed or floating rate transaction this book will give you key tools to understand, build and read strats, term sheets, and OC data. Many of the functions and formulas that are explained are used in real working models but in additon to that this book explains key concepts in the structured finance world. Unlike other books this book has a much more active learning style and really gets you involved.
I look forward to the day when Keith writes a book focusing on CMBS, I will defintely buy that one also.
TM
CIB
CMBS
Very Good for Professionals.......2007-05-07
The book explains very well the building and works of a very huge excell worsheet, for professionals it will be a great and interesting reading, and sometimes it will be like a great novel, when you can't stop reading
and always want to go to the next chapter before leaving it.
For begineers it will be a little hard to understand the concepts and the meanings of each chapter, but it will help too.
Book Description
Paul Wilmott on Quantitative Finance, Second Edition provides a thoroughly updated look at derivatives and financial engineering, published in three volumes with additional CD-ROM.
Volume 1: Mathematical and Financial Foundations; Basic Theory of Derivatives; Risk and Return.
The reader is introduced to the fundamental mathematical tools and financial concepts needed to understand quantitative finance, portfolio management and derivatives. Parallels are drawn between the respectable world of investing and the not-so-respectable world of gambling.
Volume 2: Exotic Contracts and Path Dependency; Fixed Income Modeling and Derivatives; Credit Risk
In this volume the reader sees further applications of stochastic mathematics to new financial problems and different markets.
Volume 3: Advanced Topics; Numerical Methods and Programs.
In this volume the reader enters territory rarely seen in textbooks, the cutting-edge research. Numerical methods are also introduced so that the models can now all be accurately and quickly solved.
Throughout the volumes, the author has included numerous Bloomberg screen dumps to illustrate in real terms the points he raises, together with essential Visual Basic code, spreadsheet explanations of the models, the reproduction of term sheets and option classification tables. In addition to the practical orientation of the book the author himself also appears throughout the book—in cartoon form, readers will be relieved to hear—to personally highlight and explain the key sections and issues discussed.
Note: CD-ROM/DVD and other supplementary materials are not included as part of eBook file.
Customer Reviews:
If you plan to work in quant interest rate derivatives, you *must* read it.......2007-09-01
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.
A big disappointment.......2007-07-20
I bought this book following all the good reviews Turned out to be a heartbreaker.
1. Artificially bloated -- too many cartoons, flippant and unnecessary jokes mask the whole purpose of the book. Bloomberg pictures are totally unnecessary.
2. Very complicated equations suddenly pop up from nowhere. Author starts from a sound theory. All on a sudden he jumps to completely esoteric equiation and the whole explanation is completely lost. It would be better to dispense with the whole analysis and just give out the final formula.
One of well written books ever in the field of risk management.......2007-04-23
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!
Good summary, but of no use to a job seeker.......2007-04-01
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.
A must have for anyone interested in finance.......2007-03-08
I'm only through the first book of the set, and already can't wait to start the second one. This is the best book I've read on quantitative finance (and I thought Hull was pretty good). The language is easy, the math is not cumbersome, everything is clear.
If I had to make a suggestion, it would be in text references. They specify the author and publishing year, but often omit the name of the book (e.g. Wilmott refers to Neftci's 1996 book as the best on stochastic calculus for beginners, yet Amazon doesn't show anything by this author from that year)
Customer Reviews:
Justin London did it again.......2007-07-19
I highlight two points:
1. The inclusion of Matlab and Excel code in almost all topics of the book.
2. All the content is new and more advanced, there is no recovered topics of his previous book.
Offers prebuilt code for immediate use.......2007-06-29
This book offers prebuilt, modifiable code that you can use for energy, power, weather and many other derivatives applications. The download process is fast and easy. For those who use Matlab, C++, or Excel, there is no competition. A great book with unique content and code.
Excellent resource for coding derivatives.......2007-06-16
This book was my ultimate go-to resource on several financial engineering projects (on the buy side). It covers many different derivatives and provides example MatLab and C++ code that is easy to modify and extend.
The instructions for setup and downloading the code could be more clear, perhaps on a CD.
State of the art derivative modeling book.......2007-04-10
Great book. But the code downloading process is a bit weird. Don't know why they just attach a CD.
Describes the Modelling Procedure and Gives the Code.......2007-02-08
Derivatives are not simple things. It almost seems that complexity was a design goal when they were being set up. In order to determine their real value either today or in the future you almost have to model them on a computer.
This book covers dozens of different types of derivatives, including the common ones and some of the new even more esoteric ones. It talks about the structure of the derivative, and then presents models of them. The models are presented in the most common modelling 'languages' in use today. There is a lot of code involved, but there is not a CD included with the book. Instead, an access code providing a one time download for the code. Note, a one time download. Be sure and save the code quickly and on several media. This procedure allows the models to be updated as needed without regard to the time it takes for the book to move from being written to being published, but if you have a disk crash....
The biggest things this book provides are: first, you get to see what an expert in the field has done, and second, you get the code to run his models on your system, and of course you can modify them if you find some other aspect suits your needs better.
This is a new book, first printed in December 2006, so it is current with the derivatives being marketing at that time.
Book Description
"This new edition of Active Portfolio Management continues the standard of excellence established in the first edition, with new and clear insights to help investment professionals."
-William E. Jacques, Partner and Chief Investment Officer, Martingale Asset Management.
"Active Portfolio Management offers investors an opportunity to better understand the balance between manager skill and portfolio risk. Both fundamental and quantitative investment managers will benefit from studying this updated edition by Grinold and Kahn."
-Scott Stewart, Portfolio Manager, Fidelity Select Equity ® Discipline
Co-Manager, Fidelity Freedom ® Funds.
"This Second edition will not remain on the shelf, but will be continually referenced by both novice and expert. There is a substantial expansion in both depth and breadth on the original. It clearly and concisely explains all aspects of the foundations and the latest thinking in active portfolio management."
-Eric N. Remole, Managing Director, Head of Global Structured Equity, Credit Suisse Asset Management.
Mathematically rigorous and meticulously organized, Active Portfolio Management broke new ground when it first became available to investment managers in 1994. By outlining an innovative process to uncover raw signals of asset returns, develop them into refined forecasts, then use those forecasts to construct portfolios of exceptional return and minimal risk, i.e., portfolios that consistently beat the market, this hallmark book helped thousands of investment managers. Active Portfolio Management, Second Edition, now sets the bar even higher. Like its predecessor, this volume details how to apply economics, econometrics, and operations research to solving practical investment problems, and uncovering superior profit opportunities. It outlines an active management framework that begins with a benchmark portfolio, then defines exceptional returns as they relate to that benchmark. Beyond the comprehensive treatment of the active management process covered previously, this new edition expands to cover asset allocation, long/short investing, information horizons, and other topics relevant today. It revisits a number of discussions from the first edition, shedding new light on some of today's most pressing issues, including risk, dispersion, market impact, and performance analysis, while providing empirical evidence where appropriate. The result is an updated, comprehensive set of strategic concepts and rules of thumb for guiding the process of-and increasing the profits from-active investment management.
Customer Reviews:
One to add to your reading list.......2007-06-30
I know many have this book and have never read it. Others read this book but never really understand it. However, if you can read it and understand it, it can offer a powerful tool for how to allocate capital. It actually is the basis for most indexing and quantitative methodologies. When applied to fundemental approaches to investment it can be quite powerful.
Sadly, though not enough money managers embrace what this book is trying to say with regards to risk and return.
Practical approach and mathematically rigorous at the same time.......2006-02-01
Excellent book for whom is looking for a practical approach that at the same time is presented through a rigorous mathematical methodology. The book is absolutely superior over the academic textbooks that usually limit themselves to CAPM and efficient market theory. Grinold and Kahn go much forward and at the same time had managed to clearly and meticulously show the CAPM model, its limitations and the more sophisticated tools developed from it. Beside of showing the active way of managing a portfolio, the serious mathematical presentations through which the different theories such as CAPM are described are very convincing of how difficult it could be to beat the market.
Theoretical framework with no practical examples........2005-01-20
There is important information in this book but most of us need to see numerical examples to reinforce theoretical concepts. This book really comes up short in this area. It provides some discussion with the formulas/equations it presents but is very incomplete in terms of worked out examples. Yes, including worked out examples might might mean a book three times as long, but the book would then be many, many times more useful to practitioners.
As it currently stands the book can only benefit the super-genius-theoretical types who do not need to see examples to understand OR someone who ALREADY really understands the concepts.
The book rather frequently presents variables or constants without explicitly defining them for the reader (it assumes we know what they mean from the accompanying discussion).
The book gives exercises, but without answers what good are these?
The one thing the book does is make you realize there is a lot you do not know. You can find ideas in portfolio management that exist by reading this book but if you are at all like me you are going to have to look elsewhere for the answers. I have had better luck with Google searches for stuff like Style Analysis.
The book shows how smart the authors are: they know stuff that must of us do not. Unfortunately this is the feeling I get as I read sections of their book. They intend to keep it this way. Bottom line: the book fails to bridge the gap between theory and practice.
This is the seminal text for Quantitative Finance.......2004-11-11
If you work for one of the top alpha quant shops (Barclays, Goldman, etc.), this text is a the proverbial must read. These are the guys that essentially invented quantitative finance in its modern form, building upon the [only somewhat applicable] concepts of Sharpe and Rosenberg and demonstrating how they can be harnassed to drive alpha. Anybody who has given this text a poor review obviously doesn't work in quantitative finance (chances are they're merely stock-pickers). If you want to understand how to drive alpha and beat the market, this text goes a lot further than explaining the simple concepts of information ratio and tracking error; instead, this book touches on the beauty of multi-factor models and covariance risk management.
Very boring and dry.......2004-10-05
This book is a funny phenomenon in itself: it seems that every portfolio manager keeps a copy on her desk, but nobody I've talked to likes the book, or has even really read it. I read it and had to struggle hard to go from one page to the next. It's one of the WORST books I've ever read in any field. The book attempts to give the reader a comprehensive overview of the portfolio management discipline. Unfortunately, it's extremely dry, to the point of boring the reader to death. A lot of pages are also wasted on topics of dubious value, while important subjects like global management is treated lightly. I highly recommend against this book. It's a waste of money.
Book Description
Praise for The Volatility Surface
"I'm thrilled by the appearance of Jim Gatheral's new book The Volatility Surface. The literature on stochastic volatility is vast, but difficult to penetrate and use. Gatheral's book, by contrast, is accessible and practical. It successfully charts a middle ground between specific examples and general models--achieving remarkable clarity without giving up sophistication, depth, or breadth."
--Robert V. Kohn, Professor of Mathematics and Chair, Mathematical Finance Committee, Courant Institute of Mathematical Sciences, New York University
"Concise yet comprehensive, equally attentive to both theory and phenomena, this book provides an unsurpassed account of the peculiarities of the implied volatility surface, its consequences for pricing and hedging, and the theories that struggle to explain it."
--Emanuel Derman, author of My Life as a Quant
"Jim Gatheral is the wiliest practitioner in the business. This very fine book is an outgrowth of the lecture notes prepared for one of the most popular classes at NYU's esteemed Courant Institute. The topics covered are at the forefront of research in mathematical finance and the author's treatment of them is simply the best available in this form."
--Peter Carr, PhD, head of Quantitative Financial Research, Bloomberg LP Director of the Masters Program in Mathematical Finance, New York University
"Jim Gatheral is an acknowledged master of advanced modeling for derivatives. In The Volatility Surface he reveals the secrets of dealing with the most important but most elusive of financial quantities, volatility."
--Paul Wilmott, author and mathematician
"As a teacher in the field of mathematical finance, I welcome Jim Gatheral's book as a significant development. Written by a Wall Street practitioner with extensive market and teaching experience, The Volatility Surface gives students access to a level of knowledge on derivatives which was not previously available. I strongly recommend it."
--Marco Avellaneda, Director, Division of Mathematical Finance Courant Institute, New York University
"Jim Gatheral could not have written a better book."
--Bruno Dupire, winner of the 2006 Wilmott Cutting Edge Research Award Quantitative Research, Bloomberg LP
Customer Reviews:
thank you Jim Gatheral, excellent job, very helpful and well worth the money.......2007-02-06
Jim Gatheral has done everyone in quant fin a service by gathering and organizing his lectures, practical execution issues, and experience in this welcome volume, The Volatility Surface: A Practitioner's Guide. This is simply an excellent, clear work that defies the logic that good valuable books in finance don't get written because authors make more money elsewhere. Compare Gatheral with the execrable collection of disjointed papers with Jarrow's name slapped on it (Volatility, Jarrow, et al,1998). This is the book they were trying to write, but it took a practitioner who had his hands dirty and worked hard to try to explain what he was doing to write it.
Topics are rolled out extremely well, and Gatheral dives right in to where practitioners swim: volatility isn't a single data point, or a smile, but a surface and needs to be thought of that way. In explicating the volatility surface and the possible explanations for shapes Gatheral raises the level of conversation for everyone in the field: this is the way we must think of volatility now (until something better comes along, but given the curse of dimensionality my guess is we will be here for a very long time).
This is an excellent, necessary book. Full disclosure: I am not an expert in this field and only have friends who are (many of them are editorial and AMAZON reader reviewers cited here). This book assists me in having interesting and comprehensible conversations with them, but if there are any flaws they likely would escape me. So far, my friends who are experts all agree: thank you Jim Gatheral, excellent job. Very helpful and well worth the money.
Traders Enlightment.......2007-01-31
I found this book by Jim Gatheral very useful from a practical standpoint. His insight for trading applications is remarkable. I reccommend this book to any derivative trader to read from cover to cover. Its filled w/ useful tips and concepts that will save you and your firm from the many pitfalls that arise in marketers trying to satisfy their clients at the house's expense.
Managers should make this required reading for all traders.
Simply the best!.......2007-01-04
Too often we see authors unnecessarily overcomplicate mathematics. Jim Gatheral on the other hand does the reverse. By taking a difficult subject and presenting in a wonderfully concise and pedagogic style he shares with the reader his deep knowledge of volatility. Such an important financial quantity which still appears to be shrouded in fear, Jim Gatheral uses his enviable blend of master practitioner and brilliant academic to combine both the real-world finance principles together with the underlying mathematics to demystify volatility.
The working is beautifully laid out, in a manner that is patient, friendly and approachable - and shows that quant finance need not look greek! This is the measure of a true genius!
As a teacher of mathematical finance, I have no hesitation in strongly recommending this book to students, researchers and practitioners in the field of derivatives.
a MUST read!.......2006-12-04
The Volatility Surface is a MUST READ for anyone who desires a deep and practical understanding of the pricing and risk management of derivative claims. Thoughtful enough for academics but accessible to the practicioner. The picture on the back jacket is a masterpiece as well.
Applying models to the real world.......2006-11-13
The book is a great guide to understanding the different models used on Wall Street to capture the intricacies of modeling and pricing derivatives. The books focus of using models as a tool and NOT a solution is a great reminder to both traders and salespeople.
This summarized when the author describes the pricing of a digital cliquet.
"Those sellers using local Vol models will certainly value a digital cliquet at a lower price than sellers using stochastic volatility. Perversely then, those sellers using an inadequate model will almost certainly win the deal and end up short a portfolio of misvalued forward-starting digital options. OR even worse, a dealer could have an appropriate valuation approach but be pushed internally by the salespeople to match (mistaken) competitors' lower prices."
Customer Reviews:
Excellent book.......2004-06-25
This book is definitely very advanced and is very clearly written. The approach will:
- state (and explain) business problems
- explain the rational in choosing the computer tool (despite the title, the book is not entirely focused on Excel).
- walk you step by step through the modeling process
The CD contains some valuable tools for advances topics (monte carlo and discrete event simulation). Frontline Systems were alo kind enough to send free of charge an updated version of the premium solver for education (the version on CD is not compatible with Excel 2003).
I consider the book a great value and recommend it to anyone who is willing to invest the time to learn from it.
Fasten your seatbelts..........2004-01-28
I'll make two separate sets of comments - one for professors and one for students.
Students first... This will be a difficult course no matter which textbook you use. Having said that, I would say that the text is about average in terms of readability in comparison to other texts on the subject. There are plenty of realistic cases to illustrate basic decision/ management science concepts, as well as a very useful CD, with which I recommend that you become well-acquainted as the course moves forward. Not much has changed since the last edition, so you may be able to get by with a previous edition if the textbook (authored by Eppen). Be advised, however, that some of the chapter materials have been re-arranged, including the exercises at the end of each chapter.
For professors... You are probably already aware that this course can be challenging for the professor as well as the student, esp. with respect to how math-intensive you wish the course to be. I think Moore & Weatherford is an excellent text, but it is written as an advanced graduate text. I have been able to "tone it down" for undergraduates by accompanying it with a nice, soft, theory-oriented text on decision/ management science (featuring the teachings of Herbert Simon and some of the early decision science theorists). The text is accompanied with ample instructor resources including a very useful CD with solutions, decision science software. I would engage the students w/ the CD as early as possible. I have also found that the best exams for this course are take-home exams - give the students some moderately challenging decision models to formulate and solve, and focus your evaluation primarily on how well they are able to interpret the results and propose recommendations for decision makers, and secondarily on whether they were able to get the software to spit out the right answers.
Confusing and Poorly Written.......2004-01-22
Had to buy this book for my class. On the surface it looked OK -- plenty to screenshots and examples, but the problems arise when you try to read the long paragraphs. Language could have been clearer.
Book assumes solid knowledge of Excel, which should be expected of students, but still, some things should not be taken for granted :)
Another classic problem -- chapter 4 refers to examples mentioned in chapter 2. I hate this kind of cross-referencing !
Don't buy it if you can live without it.
...
Unnecessarily difficult to understand.......2003-11-08
This book is makes a difficult subject even more difficult. It assumes that you already know alot of the concepts in it. It kin of leaves you stumbling around in the dark. I hate this book and the person who wrote it with a passion. A good author should be able to explain concepts in clear organized language, I do not care how difficult.
Not for the uninitiated.......2003-02-18
I had to buy this book for class. Even the professor stated that the book was heavy going and has to be reread over and over again to understand it. There are examples but they really don't go over them in enough detail. This book is really for someone who already has a good user knowledge of excel and somewhat familiar with solver. Many of my classmates have expressed dissatisfaction with the contents and how it was written. My main complaint is that there are not enough examples to illustrate the many new concepts found in this book. This is a difficult subject and the book doesn't make it easier.
Book Description
The definitive guide on how to manage your company's product portfolio for maximum long-term growth-fully updated and expanded.
In this fully updated edition of Portfolio Management for New Products, the authors present a rigorous and practical approach to managing a company's product portfolio as you would a financial portfolio-investing for maximum long-term growth. With its field-tested, step-by-step framework, the book provides corporations and managers with the strategies they need to assess and realign their current R&D operations; determine which products are most worthy of resource allocation; design and implement a portfolio management process; maximize the value of their portfolios; and recognize and solve challenges as they arise. This book will be an essential resource for any company whose profitability, and very existence, relies on the products it chooses to develop and the speed with which it brings them to the market.
Customer Reviews:
Comprehensive catalog of portfolio management techniques.......2007-08-17
Three professors, Robert G. Cooper, Scott J. Edgett and Elko J. Kleinschmidt, wrote this book. The good news is that they really know their stuff; the less-than-great news is that they write like, well, professors. The book is hampered by academic prose, qualifiers, tangents and a scholarly, if balanced, reluctance to commit completely to most propositions. We find that readers seeking a comprehensive catalog of product portfolio management techniques will benefit from the detailed initial chapters. Meanwhile, readers who are in search of practical, applicable information will find more of what they want in the later chapters.
Portfolio Management.......2007-04-11
Great guide for those with multiple NPD projects in the pipeline. Best when used in conjunction with "The PDMA Handbook of New Product Development, Second Edition."
Actionable approach and excellent reference.......2004-03-30
The purpose of this book is to provide the reader with an actionable approach for implementing a product-oriented project portfolio management process which corporate leaders can use to ensure that the organization's portfolio delivers value, is balanced, and is aligned with strategy.
While the book addresses product-oriented projects, it seems well suited to limited generalization to aid the non-product based project portfolio.
The Thesis
The authors state that a portfolio process is key to success since projects operationalize strategy. To determine how well organizations manage their product project portfolio, they evaluate leader satisfaction with the process the organization uses along six metrics:
* Projects aligned with business's objectives
* Portfolio contains very high value projects
* Spending reflects the business's strategy
* Projects are done on time (no gridlock)
* Portfolio has good balance of projects
* Portfolio has right number of projects
While I think this is a good list for any project portfolio manager to begin using, I note that this survey is simply a ranking of leader satisfaction with leaders in organizations which use portfolio management. The authors did not try to link leader satisfaction with business success. It is difficult to prove that portfolio management led to business success, but one might assert that a measure of portfolio management on business is not fair because what one is really measuring is strategy success. The goal of portfolio management then might be stated as alignment with strategy, not business success. I think an organizational survey asking senior leaders to rank satisfaction along the six metrics might be interesting - how many of the questions can they answer at all? Presumably, knowing the answers and being dissatisfied with them might be better than not knowing the answers.
Actionable Information
This book is well organized and appears well researched. This is not surprising given that it was written by academic professionals. What is a little surprising, given the authors' profession, is that is so thoroughly action-oriented. The authors never seem to loose sight of the fact that if portfolio management is to help an organization it must be implemented. Over and over again, they point out pitfalls, limitations, cautions, and implementation steps for overcoming these. I expect to use this book often to fill in the gaps in other approaches, leaning heavily on the best-practice implementation suggestions they authors recommend in suggestions tailored to specific goals.
Among the useful, researched insights was this one: "Those businesses that use financial models as the dominant portfolio selection method end up with the poorest-performing portfolios!" (p 169). One reason for this (in product portfolios) is that the sophistication of the financial tools exceeds the quality of the predictive value data. Conversely, businesses that rely principally on strategic models outperform the rest. Allocating resources to strategic areas seems to work well, and we are reminded that "strategy begins when you start spending money" (Ibid).
Conclusion
Many books are over-blown magazine articles. This is not one of those books. The authors did a lot of plain hard work bringing this book together and it shows. They authors never forget that someone must sell the notion of portfolio management to senior leaders, then provide them with specific, relevant and actionable information to make difficult and important project decisions with strategic impact. I appreciate the fact that the authors frequently provide suggestions on how to keep thinks simple, starting small and scaling sophistication as processes are prototyped, then refined and adapted in specific organizations.
There is a possible limitation in how appropriately one may generalize these approaches to non-product-oriented project portfolios. This book does such a good job talking about project portfolio management that the reader can forget at times that the book is about product project portfolio management. It may be that some of the research findings do not apply or cannot be generalized with validity to other types of project portfolios. The reader should keep his grain of salt handy. However, there are still too few project portfolio management books available, especially books based on research, so this is a very useful reference. By way of balance, it does not seem too far a stretch to use this book for other, non-product project portfolio management since the aim of the process is to align projects with strategy, obtain high value from projects, and obtain a balanced portfolio of projects. These are good goals for any portfolio, and organizations are free to define and measure dimensions however they wish.
Possibly the highest compliment I can pay the authors is to say that having read the book, my copy is full of underlined passages and pages encumbered with sticky-notes. This book will not gather much dust on my shelf - at least not for quite some time.
No theory behind an incomplete collection of case studies!!.......1999-03-18
Huge disappointment. Chapter 1, page 1 starts with "Those
companies that succeed at new product dvelopment are the future
Mercks, HPs, 3Ms, and Microsofts; those companies that fail to excel
at developing new products will invariably disappear or be gobbed up
by the winners. .....". Despite this quite promising catch
phrase you will not find a single word on how the above mentioned
companies develope new products.
Things actually get worse. What you
will find in this book are random generated case studies on various
portfolio models the authors encountered in the few firms willing to
meet them - no theoretical framework is given on portfolio management,
criteria to be included and best practices in various industries.
As
a major disappointment I found the fact that not a single case/best
practise study came from the pharmaceutical industry and the software
industry, those industries where portfolio management/selection are at
the very heart of the strategic management process. It would have been
a huge (and logical) opportunity to cover in this book how Merck or
Pfizer steer their new product development processes. But don`t look
for clues to this questions in this book. The case studies you will
find in this book are about a small Canadian bank, a small US chemical
company, and about Hoechst US. The last case study offered at least
some ideas useful for improving the portfolio management process (that
is the main reason for the second star).
Somewhat disturbing are
platidudes widely used throughout the book (e.g. " ....Remember:
understanding the problem is the first step to a solution!
.... (p. 184)). If esclamation marks after platitudes make you
nervous, then you will probably throw this book away before reaching
page 100.
The only bright side of this book are the first 20 pages,
where the authors discribe present shortfalls of the portfolio
management process currently used in some firms (i.e. in the firms
they interview, and these firms are underperformers). It helps to get
an idea of what effective portfolio management should do - and these
points are very agreeable indeed (e.g. value creation, balance,
strategic fit). That these questions are inadequeately and only
empirically adressed in this book, is a source of frustration for its
readers. I would give only a very very weak recommendation for this
book....
databaseU
An analysis of current thinking in portfolio management.......1999-03-09
In this text, the authors thoroughly review the methods currently being practiced in companies to make decisions about their investments in new products and technologies, and the success of these various methods. They recognize the difficulties of making such decisions, especially by relying on simple processes without understanding shorfalls of the process and the robustness of the data. They focus on the goals of maximizing value, achieving a balanced portfolio and linking the decisions to business strategy. They tie this process into other key processes in the company, including the product development process and the new product strategy. By far the most valuable aspect of the book, however, is the link between process and real operation provided by the "Points for Management to Ponder" commentary which runs throughout the book. This is a current, encyclopedic and practical guide to this very difficult business process.
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Books Index
Books Home
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General
| Popular Economics
| Business & Investing
| Subjects
| Books
The Volatility Surface: A Practitioner's Guide (Wiley Finance)
Monte Carlo Methods in Financial Engineering (Stochastic Modelling and Applied Probability)
Volatility and Correlation: The Perfect Hedger and the Fox (Wiley Finance)
Stochastic Calculus for Finance II: Continuous-Time Models (Springer Finance)
Modern Pricing of Interest-Rate Derivatives: The LIBOR Market Model and Beyond
Mathematics for Finance: An Introduction to Financial Engineering (Springer Undergraduate Mathematics Series)
