Mathematical Finance

Very Short Introductions #592

by Mark H.A. Davis (Editor)

Recent revolutions in the world of finance have created a need for the expertise of research mathematicians in solving problems. The articles in this volume are based on recent research in methods in mathematical finance.

Genres: Mathematics, Economics, Finance, Nonfiction, Business, Science

148 pages, Hardcover

First published April 13, 1995

Reviews

[Mike Harris · Rating 2 out of 5]

No idea who this book is aimed at. The introduction makes it seem that one does not need much knowledge of probability and statistics to understand the content but in order to understand any of the mathematics covered one needs deep knowledge and experience in stochastic calculus and at times Brownian motion. If either of these terms mean nothing to you, stay away from this book and just read the Wikipedia entries on the topic covered.

The mathematics definition are not really developed and are just sprinkled through the text. This book would be an okay introduction for a graduate statistics student looking to learn more about mathematical finance but I am sure there are much better introduction available.

[امل اعوان · Rating 5 out of 5]

I don't claim to understand everything taught in this Very Short Introduction - which is both praise and criticism. It is praise because I was rather underwhelmed by Atkins's Physical Chemistry VSI: although very well explained (no complaints), it remained too high-level for my liking and did not go far enough into the mathematics. By contrast, Davis's Mathematical Finance is remarkably substantive and does not shy away from the mathematical details. I found it a challenging read largely because I had little to no background in finance or financial mathematics (... although the mathematics from my chemistry degree was certainly helpful).

It's a criticism only in the sense that I would have liked the opening to give a clearer indication of the prerequisites. The book itself is not at fault for being demanding - indeed, I would much prefer VSIs on specialised topics to err on the side of substance rather than oversimplification.

Even without mastering everything, you will come away with a greater appreciation of and hopefully at least a modicum of interest in the world of finance. Observant readers may also notice some intriguing parallels with physics, particularly in ideas such as Brownian motion. I was reminded of a professor mentioning instantons from mathematical physics mysteriously appearing in finance; this book could demystify remarks of that sort as not quite as bizarre as they initially sound - the underlying mathematical structures can exhibit strikingly similar patterns in disparate and seemingly disjoint processes, surprising you with how they may, nonetheless, have more in common than meets the eye.

Moments like that are among those in which the beauty of mathematics begins to dawn on you, which is one of the high points of this introduction in the sense of, 'What does this teach you other than finance?'

[Bernie Gourley · Rating 4 out of 5]

This is Oxford University Press's Very Short Introduction to the field of the "Quants," individuals who apply mathematics to questions of how to value financial assets and assess risks. The book begins by laying out how banking and financial markets work, then discusses how interest rates are determined, and then explores the quantification of various risks faced by lenders. The book finishes by discussing how the 2008 financial crisis impacted the field and how it operates in the wake of that event. (The 2008 crisis was described in an intriguing fashion in the book and movie The Big Short. It basically resulted from deceptive grading of mortgage-backed securities such that investors who thought they had the ultimate default-proof asset in fact had assets that not only could collapse, but -- in fact -- were bound to.)

Even though this book is a concise introduction, it shouldn't be confused for a simple guide. It is not only mathematically intense but also jargon dense. It's not a complete waste for someone without any advanced mathematics and / or economics / finance background to read, but there will be large patches that will likely be lost on one. (And if you're not at all used to reading scholarly writing, it may be excessively daunting.)

If you want a quick guide to the field of quantitative finance, and you have an understanding of the mathematical notation used in calculus and statistics, I'd recommend this book. If you are interested in the topic but aren't at all mathematical, you might start elsewhere (the aforementioned, The Big Short, might be a good place.)

[Alessio Montella · Rating 3 out of 5]

An introduction to the world of mathematical finance. It must be said that without a somewhat good knowledge of maths and some of the terms the book would be difficult to follow.

Topics include the general notion of risk in finance as well as its more specific types, such as credit and interest rate risk. The book also include the concepts of portfolio management and the theory of option pricing.

[Osian Shelley · Rating 4 out of 5]

Concise overview of concepts, but a good mathematical background is needed to follow many sections.

[Tinwerume · Rating 3 out of 5]

Honestly it's *too* short. I was hoping for a very short but still rigorous introduction. Instead it's just kind of messy.

[Yves Verbiest · Rating 2 out of 5]

The math is fine, quite engaging and entertaining but such a waste of human cognitive ability to spend it on financing options.