Books and Study Paths for Quantitative Finance Mathematics
Summary
The document responds to a mathematically trained reader seeking an efficient introduction to quantitative finance, especially derivatives. It recommends introductory texts on derivative pricing and quantitative finance, more advanced material on stochastic calculus and financial calculus, and references on quantitative risk management and interest rate models. It also points to an introductory online course.
The recommendations distinguish pricing under the risk neutral measure from topics approached under the real world measure, such as volatility trading, interest rates, cash products, risk management, numerical methods, and data driven techniques. The answers do not prescribe a single sequence or compare books in detail, and they offer no evidence about which route is fastest. The best starting point therefore depends on the reader’s intended area of work and the balance sought between theory and practical methods.
Key ideas
- Several textbooks cover derivatives pricing, quantitative finance, and financial calculus at introductory levels.
- Stochastic calculus texts offer a more mathematical route into finance.
- Quantitative risk management and interest rate modeling are distinct areas with specialized references.
- The appropriate reading path depends on the intended topic, including pricing, volatility, rates, or risk management.
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Full text
# Starting mathematics reading for quants
# Starting mathematics reading for quants
What book should I start with in order to learn about the mathematics behind financial (derivatives I think!) trading that would be used in HF's & IB's (Not sure whether there would be a difference).
I have a strong background in mathematics particularly with regard to measure theory, probability theory and stochastic calculus having studied Rana, Kai-Lee Chung & Oksendals famous texts on these subjects. I also have a strong knowledge of partial differential equations. (Not sure what other areas of mathematics would be useful?)
I am looking for the most concise and quickest way to teach myself about the core mathematics and ideas behind quantative finance.
## Answer by madilyn (score 4, accepted)
https://quant.stackexchange.com/a/14298
I would consider:
- Wilmott, P., Paul Wilmott on Quantitative Finance 3 Volume Set
- Hull, J. C., Options, Futures and Other Derivatives
- Baxter, M. & Rennie, A., Financial Calculus: An Introduction to Derivative Pricing
- McNeil, A. et al, Quantitative Risk Management: Concepts, Techniques and Tools
- Brigo, D. & Mercurio, F., Interest Rate Models - Theory and Practice
for $\mathbb{Q}$-type introductory reading. On the $\mathbb{P}$-side, it depends what you're looking for - volatility trading, interest rates, $\Delta1$, cash products, risk management, market models, numerical techniques, data-driven techniques etc.
## Answer by jupiter (score 5)
https://quant.stackexchange.com/a/14304
Introductory: "Introduction to the Mathematics of Financial Derivatives"; Salih Neftci
More mathematical: "Stochastic Calculus for Finance I and II"; Steven Shreve
## Answer by skapadia (score 3)
https://quant.stackexchange.com/a/14306
I would suggest to start with one of the coursera course, Mathematical Methods for Quantitative Finance. It's an introductory course on mathematical concepts that can be applied in finance.
Books: 1) A Primer for Mathematics of Financial Engineering. 2) Paul Wilmott on Quantitative Finance.
Also, check out this article on Quantnet: Master Reading list for Financial Engineering Students
I hope this helps you.Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.