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The Concepts and Practice of Mathematical Finance (Mathematics, Finance and Risk) Hardcover – 30 Oct 2008

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Product details

  • Hardcover: 558 pages
  • Publisher: Cambridge University Press; 2 edition (30 Oct. 2008)
  • Language: English
  • ISBN-10: 0521514088
  • ISBN-13: 978-0521514088
  • Product Dimensions: 17.4 x 3 x 24.7 cm
  • Average Customer Review: 4.0 out of 5 stars  See all reviews (2 customer reviews)
  • Amazon Bestsellers Rank: 368,184 in Books (See Top 100 in Books)
  • See Complete Table of Contents

More About the Author

Mark Joshi obtained a B.A. in mathematics (top of year) from the University of Oxford in 1990, and a Ph.D. in pure mathematics from the Massachusetts Institute of Technology in 1994. He was an assistant lecturer in the department of pure mathematics and mathematical statistics at Cambridge University from 1994 to 1999. Following which he worked for the Royal Bank of Scotland from 1999 to 2005 as a quantitative analyst at a variety of levels, finishing as the Head of Quantitative Research for Group Risk Management. He joined the Centre for Actuarial Studies at the University of Melbourne in November 2005. He is a professor there.

His latest book "More mathematical finance" was published in September 2011.

Product Description


'The book is intended as an introduction for a numerate person to the discipline of mathematical finance. In this, Mark Joshi succeeds admirably - an excellent starting point for a numerate person in the field of mathematical finance.' Risk Magazine

' … ideal for those who want to learn or deepen their knowledge about Quantitative Finance … The breadth of the book particularly impressed me. It went from theoretical to practical, while covering implementation-related issues. It makes concepts such as Martingales, Measures and Numéraires look so natural and easy. Pricing Quantos or Spread-Options becomes an innate result of these concepts.' Wilmott Magzine

The author allows the reader as often as possible to get an intuition for the models and concepts. Helpful information is given on how to use and implement these models and concepts in practical terms. This practice-orientation makes this book different from others belonging to this category … the text is also well suited as a textbook for a quantitative-oriented introductory course on finance at universities or other academic institutions … one can say that this introductory book in offering a well balanced and up-to-date introduction to the theory and practice of mathematical finance overshadows many other books available on the same subject.' Zentralblatt MATH

'The book has been very nicely produced by Cambridge University Press. I would certainly recommend that anyone teaching an introductory or intermediate course on this topic seriously consider this book as a potential course text.' International Statistical Institute

'Very few books provide a balance between financial theory and practice. This book is one of the few that strikes that balance … certainly a good addition to your collection of financial mathematics books.' SIAM Review

'The set-up of this book certainly meets the needs of the audience for whom this book is written. Moreover, the author brings the material in a very comprehensive way leading to new or better insights in several aspects of the material. An innovation is that besides worked out examples and exercises, a list of computer projects are included which encourage the reader to implement the models. This certainly adds to the learning process.' Kwantitatieve Methoden

Book Description

The second edition of a successful text providing the working knowledge needed to become a good quantitative analyst. An ideal introduction to mathematical finance, readers will gain a clear understanding of the intuition behind derivatives pricing, how models are implemented, and how they are used and adapted in practice.

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4 of 5 people found the following review helpful By SVS on 19 Oct. 2010
Format: Hardcover
For me this book was an invaluable resource during my Master Degree course in Econometrics. The book bridges the gap between stochastic calculus and the practical application of the theory. Thus, the concepts of the risk, risk-neutral measures and no-arbitrage, as well as change of numeraire are explained in the context of real world applications. Pros and cons for different option pricing modes (classical Black-Scholes, stochastic volatility, models with jumps etc) as well as solution methods (PDE, martingale, simulations) are also covered.

However this is not a rigorous financial mathematics handbook (my favourite is "Stochastic Calculus" by Klebaner). Some mathematical concepts are just touched (Feynman-Kac theorem, quadratic variation), others are explained in more details (Ito's formula). Overall, the balance between theory and applications helps to understand how mathematical framework fits into financial applications (e.g. `change of time' linked with share market activity fluctuations etc.). In this regard, Chapter 6 "Risk neutrality and martingale measures" is worth reading by itself.

The only disadvantage I could think of is numerous typos, so check the book' website for corrections. As a bonus for amateur quantitative finance analysts reading the book, there is a forum on the book moderated by the author.
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1 of 3 people found the following review helpful By candlelight on 18 Dec. 2014
Format: Hardcover Verified Purchase
not the best and not the worst. I already studied the course in lectures and then started reading this. I am not very fond of the style of Joshi's writing, he tends to be wordy and too much blah blah... rather then drilling down to the math, which is there, but not as much as I thought. He explains concepts like he is talking it outloud, rather then writing it in a concise academic context. It's not my favorite and I use it as a refresher to my already completed course, which has more math to fill a 5000 page text book. Joshi waffles too much.
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Most Helpful Customer Reviews on (beta) 9 reviews
38 of 39 people found the following review helpful
Great Introduction, should be supplemented 3 July 2010
By Grad Student - Published on
Format: Hardcover Verified Purchase
I am writing this review from the perspective of a physicist (w/ Ph.D.) looking to start a career in finance. Currently, I have spent about a month studying the book, and can say that I have a good grasp of the first half.

Overall, I feel that this is a very good introduction to the field of mathematical finance. The canonical suggestion for people of my background is to start with Hull's book (Options, Futures & Other Derivatives with Derivagem CD Value Package (includes Student Solutions Manual for Options, Futuresd Other Derivatives) (7th Edition)). I disagree---not only is that book too expensive, if you have an advanced degree I feel that you should start with a more advanced textbook. I feel that this book is written at an advanced undergrad/intro grad level text, and should keep the reader interested. Moreover, Joshi does a very good job of explaining things from many different angles, which is very helpful if you're just learning the field. The problems tend to be easy, and you can work through this book in two or three months without much effort, except in Chapters 6 and 8 (see below).

There are a dozen or so longer computer projects in the back, and Joshi recommends his readers complete all of the projects before starting to look for a quant job. I think this is probably a good idea, and one should supplement their C++ coding with Joshi's other book (C++ Design Patterns and Derivatives Pricing (Mathematics, Finance and Risk)). Before attempting either the projects or Mark's other book, you should be familiar with classes and inheritance and all the associated goodies (virtual functions, etc.). This will allow you to get the most out of both of Joshi's books.

Another wonderful resource associated with this book is Mark's discussion forum (see the Preface), where he answers questions personally (or, perhaps, has a graduate student to do his dirty work). Either way, this is an invaluable tool for self study, as Joshi (or his ward) answer questions there regularly, and I've never had to wait more than a day or two for a response.

That being said, I do find the writing style to be too prosaic at times. For me, I feel that the author belabors some points while leaving others unaddressed. Other notational/stylistic issues really bugged me---for example, the author has a habit of writing expressions instead of equations (i.e. writing just the right hand side of an equation). This drove me nuts, as it diminishes the value of the text as a reference because you can't scan through to find an equation. (If you think I'm crazy for mentioning this, I warned you!) I also felt that Chapters 6 and 8 took a lot of work and seemed needlessly complicated, though this may represent my own shortcomings as opposed to the author's. I felt as if I was thrown into the pool, so to speak, in Chapter 6, which didn't provide enough background for understanding what is going on in Chapter 8. Readers who have a solid background in real analysis and probability theory will probably fare better. Chapter 6 is rife with typos, so careful reader should keep the errata from Joshi's website close at hand.

In summary, this book is a cross between a formal mathematical introduction to the subject, and a primer on practical application, tending more towards the former than the latter. It distinguishes itself from other purely mathematical introductions in its style: instead of the ``theorem-proof-corollary-proof-useless example'' format of a math book, Joshi thoughtfully examines the important concepts from complementary angles. And while I feel that it is a very good introduction to the field, you simply cannot learn all there is to learn about the field from one introductory textbook, so I suggest that interested readers supplement their study with a more qualitative/less math-y reference (I'm reading Tim Crack's Basic Black-Scholes: Option Pricing and Trading) and a textbook which focuses more on the mathematical tools (I particularly like Baxter and Rennie's Financial Calculus : An Introduction to Derivative Pricing). By combining this textbook with a few other references, and taking Joshi's Table of Contents as the syllabus, I feel that the interested reader should be able to develop a very full understanding of the rudiments of this interesting field.
8 of 9 people found the following review helpful
Not exactly for a beginner 30 May 2009
By Maximillian - Published on
Format: Hardcover
I had a hard time understanding this book's explanations of financial concepts. Some things are just not crystal clear. I would learn some of this first from a book that has a more cut-and-dried 'textbook' approach like Hull and then read this. Aside from this I think it looks like a solid work worth reading and studying. ...But again, not as the first pick for the absolute beginner. What I do like is that it is heavier on the mathematical "meat" than a book like Hull.
5 of 6 people found the following review helpful
Comprehensive and rigorous 23 May 2011
By jchen - Published on
Format: Hardcover
I am a math finance student who will soon start a summer internship on Wall Street. I want to leave feedback for the best and worst books that I used in my studies so far.

This is a very comprehensive book, written by a former practitioner and covering material the way a practitioner would. For example, it starts by talking about Risk, and not about options like most other books would. It covers a vast number of topics, from numerical methods (trees) to stochastic calculus. It is more of a reference book then a textbook, but an excellent one!
5 of 6 people found the following review helpful
An excellent book 6 Dec. 2009
By David W. Coats - Published on
Format: Hardcover Verified Purchase
I had first read Joshi's "Quant job interview questions and answers," and I kept seeing that more background information for the questions was contained in this textbook. So I had been considering buying this book for a while. But I realized that I needed to start writing some C++ and the projects contained in the back of this books tipped me into buying it.

I have been using it in addition to Shreve's Stochastic Calculus for Finance I and II, and Hull's Options Futures and Other Derivatives.
I like the veiw points from a quant in sell side investment bank 7 April 2013
By S. Dutta - Published on
Format: Hardcover Verified Purchase
This book covers topics which are not new to me but provided a different flavor / explanation / view point / approach.
I also like the coverage in terms of plactical issues involved in implementing some of these models and project works.

I didn't like some of the actual math / techniques skipped in the interest rate derivative pricing section.
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