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The Concepts and Practice of Mathematical Finance (Mathematics, Finance and Risk)
The Concepts and Practice of Mathematical Finance (Mathematics, Finance and Risk)
by Mark S. Joshi
Edition: Hardcover

34 of 38 people found the following review helpful
5.0 out of 5 stars Math Finance for grown ups, 18 Jun. 2005
What was once a cross-over subfield of finance with a veneer of mathematics is now a field unto itself, and hence, in the past decade there have been an explosion of books which often replicate or restate what has been said before with little new to add. Also, there remains an unforgiving gap between introductory texts that are too superficial and specialists' mathematics books that are rigorous and difficult works beyond the commitment for mastery of the busy, intelligent, practical front-line quant. In addition, works that were once adequate are now simplistic and under serve their readers by lulling them into false confidence. Into this fray Dr. Mark S. Joshi's "The Concepts and Practice of Mathematical Finance" enters with a modern voice and delivers what previous texts have only promised and failed to. The work lives up to its title by presenting both concepts and practicalities, and makes other works that do neither well obsolete. Those familiar with my other reviews on quantitative finance texts know that I place a premium on clarity, and on this front Joshi deserves six stars, for he is a master of what William Strunk called "the plain style." I am always sensitive to the fact that many of the world's best quants come from nations where English is not the first language. Readers from China, France, Germany, Greece, Italy, Norway, Sweden, Russia and eastern Europe will enjoy Joshi's clarity and find his English easy to follow. It would be impossible to cover everything in quanfin in a single volume, however there is nothing horribly glossed over here and neither is there a single wasted word or equation.
I recommend Amazon review readers refer to the table of contents in the "Look Inside" feature, but my own highlight is how welcome it is that Joshi focuses on risk from the very first word. Since Louis Bachelier risk measurement is what separates quantitative finance from "finance." Other books, including some quantitative finance works, introduce cash flows and value, and add risk as an antecedent. Joshi correctly emphasizes risk first, last, and always, and for that elevation alone his work deserves five stars. From this foundation Joshi then covers very well pricing methods and arbitrage, simple and high dimensional trees, and the useful shortcuts of Ito calculus that makes tractable Zeno's paradox. Joshi also covers risk neutral and martingale methods, continuous barrier options, multi-look exotic options and incomplete markets and jump processes with an aim of showing these as typical problems for the working quant. Joshi's own references, index, and footnotes testify that by no means is he offering the first, nor the last, word on these knotty subjects, but his treatment is welcome just the same.
The target audience for this text is four-fold. The primary audience is for first semester students in a graduate financial engineering program, for Joshi's "Concepts and Practice" will be handy throughout his or her studies and career. For those students unsure of their skills and with a limited budget considering between this and an introductory quantitative finance text I recommend Joshi over, say, Wilmott, for this work is more rigorous and in the long run will provide the better value as a practical companion. Within this audience I include professors looking for a high level foundational text for teaching practical risk management and derivatives pricing: this is the book to adopt, yes, even over Hull.
The second audience is those trained in other science fields: pure mathematics, statistics, physics, etc. who are moving to finance jobs. This volume is an easy "one-stop shop" for you to re-tool your own background towards those topics and techniques used on a quant desk. While by no means covering everything, Joshi speaks your language and after digesting this work all else will fall into place and be understood and used with greater efficiency.
The third and broadest audience is the already trained and practical "quant." Why? My observation is that between reading (for example) Hull and Wilmott, Joshi's "Concepts" unavoidably covers many of the same topics, but also some things they do not and in ways they never could. Joshi is an expert practitioner at the top of his art, and that practical spirit is in every single page. For example, while Hull and Wilmott cover the concept and mathematics of stochastic volatility, Joshi writes from the point of view of the coding quant and discusses the issues of implementation. Joshi's "Concepts and Practice" serves a two fold purpose: it provides an additional voice and explanation of inescapably fundamental material, while bridging the gap of technical deployment for front line practitioners. This is not to say Joshi offers us up a cookbook, for by no means is this such. Anyone who thinks they can simply buy this book and in a sleepy afternoon plug away code and technique and be done is missing the point: for this is a teaching text. Moreover, each house and set of problems and instruments and structured products to offer are different, to say nothing of the platforms one will be working on. That is why they call it "work." Therefore the practical quant should look to this text as a reference guidebook in a tool box.
As a fourth audience I cautiously recommend this book for those oing into exotic product sales, but only those who have grounding in upper level calc, linear and matrix algebra, time series analysis, and trees. Why? Simply put, you will be offering products built by quants who simply assume the knowledge in this book is a given. In addition, your better clients will (or should) have quants speaking this language, and the greater your own understanding of the concerns of your team and your clients the better your sales. If this work is too rigorous, then Wilmott's "Introduction to Quantitative Finance" quickly followed by Joshi's "Concepts and Techniques" is the course to follow.
Who is this work not for? Here are some tests. If you are a quant who can type at five lines of code a minute and can read Shreve and Karatzas drinking beer, then this work is too redundant for you. On my desk is a paper on a stochastic process with drift and viscosity under regime switching. If you are reading the same journal, then this work is too simple for you. If you have no idea what I've written about in the past three sentences, then this work is too hard for you.
In summary, Dr. Mark Joshi advances his excellent reputation as an intelligent, practical, and generous quant in offering "The Concepts and Practice of Mathematical Finance" and I recommend this book's wide adoption in graduate programs and its addition to reference libraries.


Principles of Financial Engineering (Academic Press Advanced Finance)
Principles of Financial Engineering (Academic Press Advanced Finance)
by Salih N. Neftci
Edition: Hardcover

16 of 16 people found the following review helpful
5.0 out of 5 stars A triumph of clarity, 7 Sept. 2004
In a word: Salih N. Neftci's 'Principles of Financial Engineering' is a triumph. Neftci's 'Principles' joins Mason and Merton's "Cases in Financial Engineering" as the field's premier fundamental texts, most especially for students, but of practical use for practitioners as well. Neftci's chief strength in this work is the same that has made his "An Introduction to the Mathematics of Financial Derivatives" deservedly famous: clarity. Where other authors get bogged down in dark obscurantism, such as Beaumont's unsatisfying and inadequate "Financial Engineering Principles," or Galitz's risk management book, inappropriately titled "Financial Engineering: Tools and Techniques to Manage Financial Risk," Neftci sheds clear sunlight on the field of constructing structured products with the building blocks of financial instruments. He is the most gifted writer in practical financial mathematics, and his legions of fans are not wrong: there is no one better than Neftci at breaking down complex concepts in clear, digestible bites and then reassembling the whole. Neftci's 'Principles' improves upon, and indeed replaces, Cuthbertson and Nitzsche's "Financial Engineering: Derivatives and Risk Management" for applicability, and lucidity, and replaces Mashall's "Financial Engineering: A Complete Guide to Financial Innovation" in scope. But Neftci does not sacrifice addressing difficult or complex structures through useless over simplicity, as sadly is the case with Eales's "Financial Engineering," rather he builds his explanations smoothly and logically, shedding light on the topics at hand by continually clearly demonstrating a replicating portfolio that mimics the instrument using other asset classes. For example, he begins by addressing the construction of cash flows with forward contracts, and then moves on to interest rate derivatives, swaps, repos, and then puts them all together for dynamic replication methods and the construction of synthetics. Each chapter builds and sheds light on the next instrument and technique. By the time Neftci addresses options and applications to bond convexity strategies and credit derivatives, we are in a position of strength. Most notable is Chapter 14, which clearly reviews volatility trading and discusses both the strengths and pitfalls, before turning to the nearly endless problem and opportunities of volatility smiles. He does not turn away from the problem of pricing in the presence of smiles, and uses the example of trading in the FX markets to shed light on strategies. For those working on synthetic and structured products desks, this will be the premier text. For those working on credit derivatives and other derivatives desks, this work assists in clarifying basic financial engineering concepts that then are more appropriately addressed in specialized texts, Schönbucher's "Credit Derivatives Pricing Models," for example. For those seeking a more rigorous mathematical foundation to financial engineering, Capinski & Zastawniak's "Mathematics for Finance: An Introduction to Financial Engineering" or the works of Steven Shreve and Ioannis Karatzas are the volumes to turn to. But for a solid work for a student who wishes to be a practitioner, Neftci is always the first choice. For the instructor, this book, coupled with the above-mentioned 'Cases' will provide the exact balance between techne and arte that provides students with the best education for engineering structured products. There is a single caveat to my otherwise wholehearted praise for this book: those already deeply familiar with these topics will find little new here: this is not a groundbreaking work announcing new techniques or research. Rather, the strength of Neftci's 'Principles' again is clarity clarity clarity. This is a most welcome volume, the one I wish I had had as a graduate student, which leaves this reviewer envious of those who will benefit and have stronger careers due to its current availability. We owe Neftci our thanks.


Financial Risk Manager Handbook 2001-2002 (Wiley Finance)
Financial Risk Manager Handbook 2001-2002 (Wiley Finance)
by Philippe Jorion
Edition: Paperback

17 of 17 people found the following review helpful
1.0 out of 5 stars replete with errors, 20 Dec. 2001
...The book's demerits are price; horrible, inexcusable, typographical errors; disorganization; and did I mention steep price?... Perhaps competition from Kaplan and other professional test preparation concerns will spur GARP and Jorion to improve their product
Jorion's style is repetitive and his attempts at clarity succeeds only in further obscuring already murky subjects. AMAZON would do well to put a hot link here to Strunk & White's The Elements of Style, in case Jorion drops in to look at his reviews. He certainly needs a copy. I sympathize with those readers whose first language is not English and purchased this book as a study aid for passing the FRM. Having just taken the exam, I can safely say they would have been better served to study the source materials rather than purchase this book.
Goodness knows what he was thinking in making thirty-two disjointed chapters when twenty lucid ones would have done. Bloated is not the word, bloviated is more like it...
As another reviewer notes above, this book smacks of lecture notes strung together. I will go further than that assessment: I think this is an amalgamation, and a poor one, of academic notes from an undergraduate course, a graduate course, and the occasional consulting lecture, all squished together in a drunken muddle of a first draft.
It would be unfair to criticize without citing examples, of which there are dozens if not hundreds, so I will point out a few egregious ones that are inexcusable. Sadly, this medium is too constrained to list them all, however, I am compiling them for a forthcoming letter to Jorion, so those of you who also have purchased the book and have noted errors kindly e-mail me at the above address for your notation's inclusion in my letter (full credit given, and cc to you).
On page 162, Jorion offers answers for questions he previously has proposed in Chapter 6. Lord help the poor soul who is trying to make sense of them (whose first language is not English and does not know the subject matter). For those who have purchased the book, I provide here the correct order of the answers: Answer "Example 6-3" answers the question on page 138 and should be Answer "Example 6-1." "Example 6-4" should be "Example 6-2" and answers the question on page 139; "Example 6-5" should be answer "Example 6-3" for that question on page 142; "Example 6-6" should be the answer to "Example 6-4." On page 163 "Example 6-7" should be "Example 6-5" and answers that question on page 142. Whew, I am tired. There is more, but frankly I paid a lot for this book so I should not have to do this, this is editor's work that clearly we paid for and clearly was not done. Shame on Wiley, Jorion, and GARP.
Perhaps worse, on page 162, Jorion provides the answer, "Example 6-4" [should be "Example 6-2"] to a complex question found on page 139. Jorion's answer reads "d) By put-call parity, p = c - (S - Ke[^]-rt) = 30 - (100 - 120exp(-0.5[sic] x 0.5) = 30 + 17.04 = 47.04." Well, his answer is wrong, his formula has a crucial error in it, "-0.5" should be "-0.05" and if any of his students on an exam had calculated the answer the way Jorion has in this example they would have failed. Worse, if anyone had programmed an option pricing model with such an error embedded in it, or heaven-forefend traded on such an error, needless to say that FRM candidate would have been seeking McJobs in due order. It would be inexcusable for anyone buying this book to make such an error, for an authority like Jorion to make it, with GARP's imprimatur no less, discredits the profession...
With all that said, why do I give it a "C-" instead of an "F"? I suppose for that student who pours over this text with such diligence that they correct Jorion's errors, are so befuddled by his work they seek the better instruction of the original sources of this material, and generally have reviewed his work so well they know how bad it really is, it has done them some good, and may help them pass the FRM; primarily by providing negative convexity.
It grieves me to write such a negative review. I recognize it is much more difficult to build something up than it is to tear something down, and it is easy to trash a book that clearly was a lot of hard work. However... customers should demand and get high quality, careful editing, organization, and value. These are clearly lacking in this edition...


'O Horrable Murder': Trial, Execution and Burial of King Charles I
'O Horrable Murder': Trial, Execution and Burial of King Charles I
by Robert B. Partridge
Edition: Hardcover

6 of 8 people found the following review helpful
5.0 out of 5 stars Splendid treatment of the Royal Martyr's Death & Burial, 5 Nov. 2001
In this splendid volume historian Robert B. Partridge has done a wonderful service for students of the life of King Charles, martyr; particularly for those who continue to lament the impropriety of the dearth of appropriate memorials to Charles's memory. 'O Horrable Murder' serves to refresh the memory of experts, and provides useful background and context for those beginning to study his life and martyrdom.
Partridge begins with an accurate and compressed recounting of King Charles's life, then focuses on his imprisonment, last days, trial, execution, and burial. He is adept at synthesizing familiar material from secondary sources, but goes the extra mile correcting errors that have crept into the record by consulting primary sources. For those efforts alone Partridge is to be commended. But this book's primary strengths are the organization of familiar and new details about Charles's final resting place, and the stunning examples of the neglect he has suffered in death. This book provides valuable information for those who argue today for a more appropriate and larger shrine to his memory.
Partridge throughout keeps his sympathies well in check: his factual work is scrupulously accurate and fair. Not every detail selected or featured will please Royalists, and some of Partridge's historical analysis might be discussed with alternate views, but by and large he is an author that defends the martyr case and the cause of Charles's memory because he doesn't argue: he presents the facts.
Partridge's writing style is brief, clear, and clean, but most commendably he is a master of selecting details that give focus to the argument of the neglect of King Charles. Yet, the argument is not made explicitly, but rather by allusion. Partridge carefully details the initial actions of the interested parties in Charles's day that had neither the resources, nor the power, to provide him with a more suitable burial. He continues to recount the processes and delays for a Restoration memorial through the reigns of Charles II and James II. He then provides the most ironic section of the book, "1649 to 1813," detailing the long period of ignoring Charles. Partridge furthers the unstated argument by providing details of Charles's relics being displayed without piety but as a "curiosity." He then carefully and fully describes the standard treatment dead English Royalty ordinarily would be served. The contrast with Charles's treatment cries out from the vault of Saint George's Chapel at Windsor castle.
Partridge's strengths as a historian are evident throughout, but his work with neglected primary sources is the volume's real contribution. Chapter twelve for example is a transcription and comments on Sir Henry Halford's account of the exhumation of Charles in 1813, unearthed when workmen accidentally broke through the unmarked vault in St George's Chapel. The exhumation revealed how the body of the King had been prepared for burial, which enables a comparison to be made between his and other royal burials of this period and furthers the case for Charles's neglect. Halford discusses medical evidence from the king's body, and strikes a fine balance on including thorough pathological detail without descending to the ghoulish, however, this chapter safely can be skipped by those whose piety or other proclivities would prevent review.
Chapter thirteen contains perhaps the one disappointment of this book: Partridge provides information of how the martyred King's resting place finally came to be marked with a slab of black granite in 1837 by King William IV. The information, but not the story; as Partridge notes "Exactly why William IV decided to have the site marked may never be known." Well, readers want to know the story, and Partridge has done such an excellent job teasing out the telling detail, correcting the misleading error, and synthesizing the available information so far the reader is left curious as to why he stops on this subject.
'O Horrable Murder' includes for the first time in print a transcription of the Tuesday, December 13th, 1888 account "REPLACING OF RELICS in THE GRAVE OF CHARLES I."
In a sadly annoying conclusion he lauds as a fitting epitaph for the Martyr King the Puritan poet Andrew Marvell's well-known lines about Charles, in a poem otherwise glorifying Oliver Cromwell. Well it is not a fitting epitaph, not nearly adequate enough, as Partridge's whole own book makes all too clear.
Partridge includes several excellent additions to his main subject matter that further illuminate his focus and provide useful guides. "Principal Players" for example, is a collection of sketches of the figures involved in Charles's life, imprisonment, trial, execution and burial. "The Banqueting House and the Window Leading to the Scaffold" is the best treatment ever regarding the specific window Charles's used to ascend the scaffold and meet his maker. "Signatories to The Death Warrant of King Charles I" collects all the usual suspects in one quick reference, but sadly does not come as a perforated detachable page for use as a darts target.
"The Death of A Monarch" provides detail on English royal burial customs that preceded and followed the death of King Charles, martyr, and serves to accentuate the level of neglect and impropriety he suffered. Those who wish to avoid technical, medical, and clinical treatments of the dead would be advised to skip the first 23 paragraphs (until the middle of page 162) of this appendix, and then continue on with the fascinating details about coffin ornamentation for royalty, the construction of life-like funeral effigies, and elaborate temporary monuments.
Appendix IV provides an introduction to the activities of The Sealed Knot, of which Partridge is a leading member. "The Society stages a wide variety of seventeenth century historical military reenactments, throughout the length and breadth of Great Britain." Partridge notes that the modern society of The Sealed Knot is "non-political...and includes both Royalists and Parliamentarians within its ranks." Of course the members of the original society of The Sealed Knot were loyal Royalists who eventually succeeded in restoring Charles II to the throne, although not without their own martyrs along the way.
The book includes 58 rare and seldom available illustrations that contribute helpful detail, many the author's own competently executed pen and ink sketches made to amplify historical points in the text. Most startling is the cover, which on first glance appears to be a close up photograph of the face of King Charles. It isn't of course, but rather a "soft-focus" photograph of his wax likeness at the famous Madame Tussaud's of London.
The Bibliography contains the usual secondary sources familiar to students of the English Civil Wars, however he also includes primary source surprises such as King Charles I, his Death, his Funeral, his Relics, by Edmund H. Fellows (Windsor Castle, 1950), and Essays and Orations, including An account of the opening of the Tomb of King Charles I, by Sir Henry Halford (John Murray, 1831). The index is quite good, but not exhaustive, and further editions would need improvement as it covers proper names only and excludes topics and subjects.
'O Horrable Murder' is printed by a very small London-based press, which no doubt accounts for its rather dear price. However, the material Partridge has sifted through, the detail he provides, and his particular focus makes it worthwhile to acquire.


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