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This reading list for quants is a combination of:
1. The well-know 'path to enlightment' in wilmott's website, which is a collection of book-reading suggestions from experienced quants' for newbies. The basic frame of the list is kept.
2.
The financial engineering book recommendation from Quantlib.org.
3.
My personal reading experience: not only in quantitative finance but also in general finance and some other interview-related interests for future quants.
It is really not enough for a quant to finish just the 'interview books' and states that he can do every job in front of him. Quants need to learn a lot of things: stochastic, finance, programming. At each stage, you will find more new things are waiting for you to learn. It is a journey both exciting and hardworking. New quants, take a look at the book list and get an idea of what is lying ahead of you. |
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( in updating .......)
| First steps - general |
A. Black-Scholes and Beyond: Option Pricing Models , N A Chriss
Many people like this book simply because it treats Black-Scholes so well that you have no difficulty learning the ins-and-outs of the Nobel-Prize winning formula. |
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B. Derivative Securities , R Jarrow, S Turnbull
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C. Introduction to Mathematical Finance: Discrete Time Models , S R Pliska
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First steps - Interest rates
A. Fixed Income Analytics , K Garbade
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First steps - Stochastic Calculus
A.---Introduction to the Mathematics of Financial Derivatives S N Neftci
As introduced in the 'interview books for quants' section, this book is rather superfacial. It skims through the stochastic calculus quickly, gives you a feel about it and then leave you there without a solid holding of what really stochastic calculus means. However, it DOES do a good job in leading a newbie into the world of stochastic calculus and finance. If you don't feel comfortable reading other stochastic calculus books, read this one first.
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First steps - Honourable mention
A. Option Market Making : Trading and Risk Analysis for the Financial and Commodity Option Markets (Wiley Finance) , A J Baird |
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1.0. Introductory - General
A. Options Markets , J C Cox, M Rubinstein (classic!!!)
This is a classic book written by two great researchers in finance. Once you started working as quant, you will find how many times their works have been cited in the literature you are reading. This book is out of print now, but you can always order second hand book from amazon.com.
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B. Options, Futures and Other Derivatives (6th Edition) , J C Hull
Everyone on wall street has a copy, be it US version or international, hardcopy or soft.
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C. An Introduction to Mathematical Finance : Options and Other Topics , S M Ross
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D. Paul Wilmott Introduces Quantitative Finance , P Wilmott
Dr. Wilmott's simple, plain introduction to quantitative finance. If you don't want to buy his expensive two-volume book (listed below), this is also a good one for you to start thinking what are quants doing.
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E. The Mathematics of Financial Derivatives : A Student Introduction , P Wilmott, S Howison, J Dewynne
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1.1 Introductory - Interest rates
A. Modelling Fixed Income Securities and Interest Rate Options (2nd Edition) , R A Jarrow
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1.2 Introductory - Exotics
A.Structured Equity Derivatives: The Definitive Guide to Exotic Options and Structured Notes , H M Kat |
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1.3 Introductory - Stochastic Calculus
A. Elementary Stochastic Calculus With Finance in View (Advanced Series on Statistical Science & Applied Probability, Vol 6) , T Mikosch
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1.4 Introductory - Computational
A. Pricing Derivative Securities: An Interactive, Dynamic Environment with Maple V and Matlab , E Z Prisman
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1.5 Introductory - Honourable mention
A. Investment under Uncertainty , A K Dixit, R S Pindyck
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B. The Complete Guide to Option Pricing Formulas , E G Haug
This isn't really a complete guide, since there have been many new, more exotic options come out in recent years which are not covered in the book. But the book gives a reasonable coverage of the formulas for options with codes in each section.
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C. Real Options: Managerial Flexibility and Strategy in Resource Allocation , L Trigeorgis |
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2.0 Halfway technical - General
A. Quantitative Modeling of Derivative Securities: From Theory To Practice , M Avellaneda, P Laurence
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B. Financial Calculus : An Introduction to Derivative Pricing , M Baxter, A Rennie
This is a really good book, interviewers will like to see it on your resume.
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C. Arbitrage Theory in Continuous Time (Oxford Finance S.) , T Bjork
Another nice book, clearly written and explained, strongly recommended!
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D. Theory of Financial Decision Making , J E Ingersoll
This book is used as textbook at the finance Ph.D. program at Yale University. Prof. Ingersoll did a great job in explaining financial theory.
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E. Risk-Neutral Valuation : Pricing and Hedging of Financial Derivatives (Springer Finance) , R Kiesel, N H Bingham
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F. Mathematical Models of Financial Derivatives (Springer Finance) , Y K Kwok
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G. Continuous-Time Finance , R C Merton
Merton is the third guy in the Nobel Prize winning formula Black-Scholes-Merton.
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H. Paul Wilmott on Quantitative Finance, 2 Volume Set , 2 Volume Set, P Wilmott (Complete coverage of quantitative finance, good as reference ) |
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2.2. Halfway technical - Stochastic Calculus
A. Introduction to Stochastic Calculus with Applications , F C Klebaner
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2.4. Halfway technical - Computational
A. Implementing Derivative Models (Wiley Series in Financial Engineering) , L Clewlow, Chr Strickland
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B. Pricing Financial Instruments: The Finite Difference Method , D Tavella, C Randall
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2.5. Halfway technical - Honourable mention
A. The Treasury Bond Basis (Mcgraw-Hill Library of Investment and Finance) , G D Burghardt, T M Belton, M Lane, J Papa
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B. Dynamic Hedging : Managing Vanilla and Exotic Options (Wiley Finance) , N Taleb (N. Taleb is both a practioner and professor, he disbelives in models and this book treats hedge very well. He is the author of the famous book: Fooled by Randomness : The Hidden Role of Chance in Life and in the Markets )
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3.0 Technical - General
A. Options, Futures and Exotic Derivatives: Theory, Application and Practice (Wiley Frontiers in Finance) , E Briys, M Bellalah, H M Mai, F de Varenne
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B. Modelling And Hedging Equity Derivatives , O Brockhaus, A Ferraris, Ch Gallus, D Long, R Martin, M Overhaus
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C. Dynamic Asset Pricing Theory, Third Edition. , D Duffie (well known professor at standford university, his many students are on wall street.)
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D. Derivatives in Financial Markets with Stochastic Volatility , J-P Fouque, G Papanicolaou, K R Sircar
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E. Mathematics of Financial Markets (Springer Finance) , P E Kopp, R J Elliott
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F. Introduction to Stochastic Calculus Applied to Finance , D Lamberton, B Lapeyre, N Rabeau
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G. Martingale Methods in Financial Modelling (Stochastic Modelling and Applied Probability) , M Musiela, M Rutkowski
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H. Pricing and Hedging of Derivative Securities , L T Nielsen
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I. Essentials of Stochastic Finance: Facts, Models, Theory , A N Shiryaev
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3.1 Technical - Interest rates
A. Interest Rate Models - Theory and Practice : With Smile, Inflation and Credit (Springer Finance) , D Brigo, Fabio Mercurio
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B. Efficient Methods for Valuing Interest Rate Derivatives , A Pelsser
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C. Modern Pricing of Interest-Rate Derivatives : The LIBOR Market Model and Beyond , R Rebonato
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D. Interest Rate Modelling: Financial Engineering , N Webber, J James
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3.2 Technical - Stochastic Calculus
A. Brownian Motion and Stochastic Calculus (Graduate Texts in Mathematics) , I Karatzas, S E Shreve (These two are long time collaborators)
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B. Stochastic Differential Equations , B Oksendal (Excellet book, probably the ultimate book on stochastic a quant needs)
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C. Stochastic Calculus and Financial Applications , J M Steele |
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3.5 Technical - Honourable mention
A. Optimal Portfolios: Stochastic Models for Optimal Investment and Risk Management in Continuous Time , R Korn
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B. Option Valuation Under Stochastic Volatility: With Mathematica Code , A L Lewis |
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4.0 Hard core - General
A. Security Markets : Stochastic Models (Economic Theory, Econometrics, and Mathematical Economics) , D Duffie |
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B. Financial Derivatives in Theory and Practice (Wiley Series in Probability and Statistics) , P J Hunt, J Kennedy |
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C. Introduction to Option Pricing Theory , R L Karandikar, G Kallianpur |
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D. Methods of Mathematical Finance , I Karatzas, S E Shreve |
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4.3 Hard core - Stochastic Calculus
A. Continuous Martingales and Brownian Motion (Grundlehren der mathematischen Wissenschaften) , D Revuz, M Yor |
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B. Diffusions, Markov Processes, and Martingales (Cambridge Mathematical Library) Volume 1  , Rogers, Williams |
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Diffusions, Markov Processes and Martingales (Cambridge Mathematical Library) Volume 2  , Rogers, Williams |
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