Derivatives: The Theory and Practice of Financial Engineering [Paperback]

"The longest and most inclusive book ever written about derivatives – a necessary reference for serious derivatives students." – Mark Rubinstein, Paul Stephens Professor of Applied Investment Analysis, University of California at Berkeley.

"Likely to become the bible of financial engineering." – Philippe Jorion, Professor of Finance, Graduate School of Management, University of California–Irvine

"Paul Wilmott is the Carl Sagan of quantitative finance... a brilliant academic and researcher. His latest book is a mammoth undertaking... a book worth writing and a book worth reading... I have no hesitation commending it to a wide spectrum of readers." – Rudi Bogni, Chief Executive, Private Banking, and Member of the Group Executive Board, UBS

"Derivatives is a monumental achievement. Paul Wilmott uses his deep knowledge of key mathematical concepts and his practical Wall Street experience to produce an authoritative book on financial mathematics. This is a stimulating book with many motivating examples and exercises based on real–world data and problems." – Richard Skora, President, Skora & Company Incorporated

"Just what I would have expected from an immensely talented individual. An authoritative, friendly guide to the complex world of derivative analysis." – Edmond Levy, Specialized Derivatives Group, HSBC Midland

"Paul Wilmott′s book provides a refreshing look at option pricing. His views are always interesting, often original, sometimes provocative." – Riccardo Rebonato, Director and Head of Research at Barclays Capital

"As good as Paul Wilmott is as a teacher of accurate pricing methods for finance, he is obviously not a very good student as he has completely under–priced his book! A book of this breadth and depth which is not merely a regurgitation of work published by others but contains truly original research is cheap at double the price." – Keesup Choe, Head of Arbitrage, Nomura International

"Wilmott... knows what it takes to be both comprehensive and pedagogical. Even though he is a mathematician by training he has this rare skill to correctly twist the maths until they confess the underlying economics. Read this book and you′ll be converted!" – Eric Briys, International Fixed Income Research, Lehman Brothers

"I have read with great pleasure this new book by Paul Wilmott who, once again, has produced a ′classic′ in the field!... The style is pedagogical and yet very lively and easygoing. As only great teachers can, Wilmott makes even the most abstruse mathematics seem easy and intuitive. I will gladly recommend this book to graduate students and professionals in the field." – Marco Avellaneda, Professor of Mathematics and Director, Division of Quantitative Finance, Courant Institute of Mathematical Science, New York University.

"...A comprehensive reference for generalists wanting to become specialists..." (Electric Light and Power, 2 July 2002)

"Likely to become the bible of financial engineering." --Philippe Jorion, Professor of Finance, Graduate School of Management, University of California-Irvine

"Paul Wilmott is the Carl Sagan of quantitative finance... a brilliant academic and researcher. His latest book is a mammoth undertaking... a book worth writing and a book worth reading... I have no hesitation commending it to a wide spectrum of readers." --Rudi Bogni, Chief Executive, Private Banking, and Member of the Group Executive Board, UBS

"Derivatives is a monumental achievement. Paul Wilmott uses his deep knowledge of key mathematical concepts and his practical Wall Street experience to produce an authoritative book on financial mathematics. This is a stimulating book with many motivating examples and exercises based on real-world data and problems." --Richard Skora, President, Skora & Company Incorporated

"Just what I would have expected from an immensely talented individual. An authoritative, friendly guide to the complex world of derivative analysis." --Edmond Levy, Specialized Derivatives Group, HSBC Midland

"Paul Wilmott's book provides a refreshing look at option pricing. His views are always interesting, often original, sometimes provocative." --Riccardo Rebonato, Director and Head of Research at Barclays Capital

"As good as Paul Wilmott is as a teacher of accurate pricing methods for finance, he is obviously not a very good student as he has completely under-priced his book! A book of this breadth and depth which is not merely a regurgitation of work published by others but contains truly original research is cheap at double the price." -- Keesup Choe, Head of Arbitrage, Nomura International

"Wilmott... knows what it takes to be both comprehensive and pedagogical. Even though he is a mathematician by training he has this rare skill to correctly twist the maths until they confess the underlying economics. Read this book and you'll be converted!" --Eric Briys, International Fixed Income Research, Lehman Brothers

"I have read with great pleasure this new book by Paul Wilmott who, once again, has produced a 'classic' in the field!... The style is pedagogical and yet very lively and easygoing. As only great teachers can, Wilmott makes even the most abstruse mathematics seem easy and intuitive. I will gladly recommend this book to graduate students and professionals in the field." --Marco Avellaneda, Professor of Mathematics and Director, Division of Quantitative Finance, Courant Institute of Mathematical Science, New York University

"...A comprehensive reference for generalists wanting to become specialists..."

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 parts:

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

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

Part Three: concerns extensions of the Black–Scholes world, both classic and modern.

Part Four: deals with models for fixed–income products.

Part Five: describes models for risk management and measurement.

Part Six: 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.

Every Option Considered
"It is a serious work that takes the reader all the way from the simplest of notions to the most complicated of recent models. In short, it is the most comprehensive and up-to-date textbook on options that I have seen. This book is a splendid achievement and I am already recommending it to students who have a mathematical background." - The Times Higher, 14 May 1999

Derivatives provides everything everyone needs to know about the subject. Approaching the area in his own individualistic style, Paul Wilmott has written a book that delivers essential information for students and practitioners alike. The traditional approach of other books has been overturned. Fundamentals such as readability, openness and a willingness to challenge traditional concepts have been combined with comprehensiveness and sophistication. Paul Wilmott's understanding of the basics of finance and his ability to communicate that in an accessible style forms the foundation of the book. But Derivatives goes much further, steering the reader towards an understanding of highly sophisticated and previously unpublished techniques and models. The theory is coupled with implementation through the reproduction of numerous spreadsheets, Visual Basic program and the addition of a CD comprising a wide variety of resource material.

"The longest and most inclusive book ever written about derivatives - a necessary reference for serious derivatives students." Mark Rubinstein, Paul Stephens Professor of Applied Investment Analysis, University of California at Berkeley

"Likely to become the bible of financial engineering." Philippe Jorion, Professor of Finance, Graduate School of Management, University of California-Irvine

"Paul Wilmott is the Carl Sagan of quantitative finance...a brilliant academic and researcher. His latest book is a mammoth undertaking...a book worth writing and a book worth reading...I have no hesitation commending it to a wide spectrum of readers." Rudi Bogni, Chief Executive, Private Banking, and Member of the Group Executive Board, UBS

"Derivatives is a monumental achievement. Paul Wilmott uses his deep knowledge of key mathematical concepts and his practical Wall Street experience to produce an authoritative book on financial mathematics. This is a stimulating book with many motivating examples and exercises based on real-world data and problems." Richard Skora, President, Skora & Company Incorporated

"Just what I would have expected from an immensely talented individual. An authoritative, friendly guide to the complex world of derivative analysis." Edmond Levy, Specialized Derivatives Group, HSBC Midland

"As good as Paul Wilmott is a teacher of accurate pricing methods of finance, he is obviously not a very good student as he has completely under-priced his book! A book of this breadth and depth which is not merely a regurgitation of work published by others but contains truly original research is cheap at double the price." Keesup Choe, Head of Arbitrage, Normura International

"Wilmott...knows what it takes to be both comprehensive and pedagogical. Even though he is a mathematician by training he has a rare skill to correctly twist the maths until they confess the underlying economics. Read this book and you'll be converted!" Eric Briys, International Fixed Income Research, Lehman Brothers

"I have read with great pleasure this new book by Paul Wimott who, once again, has produced a 'classic' in the field!...The style is pedagogical and yet very lively and easygoing. As only great teachers can, Wilmott makes even the most obtuse mathematics seem easy and intuitive. I will gladly recommend this book to graduate students and professionals in the field." Marco Avellaneda, Professor of Mathematics and Director, Division of Quantitative Finance, Courant Institute of Mathematical Science, New York University --This text refers to an out of print or unavailable edition of this title.

Paul Wilmott is a Royal Society Research Fellow at Oxford University and Imperial College, London. He is the co-author of two highly regarded books, Option Pricing and The Mathematics of Financial Derivatives and has written numerous published research articles on many aspects of mathematical modeling and finance.

He is a founder and Editor-in-Chief of the journal Applied Mathematical Finance and is on the editorial board of a number of other finance journals. He runs a financial software business and an international consultancy firm, Wilmott Associates. He also develops and teaches on professional training courses for financial practitioners in the US and UK. He is married to Ingrid and has two sons. --This text refers to an out of print or unavailable edition of this title.