Customer Reviews:
 Good book May 9, 2007
1 out of 2 found this review helpful
As title states this is a good Introduction to the mathematics of derivatives.
If you're looking for some book with C/C++/C#/Java code samples this isn't the book. Indeed a good mathematical introduction; its pre-requirements are a good mathematical and statistical ones.
 Very thoughtful and clear explanation of financial math February 5, 2007
2 out of 2 found this review helpful
I turn to this book after I get frustrated with Tomas Bojork's book "Arbitrage Theory in Continuous Time." As I am not from a strict math background, this Neftci's book makes much more sense to me. What I particularly like about this book is explanation in plain English of why the mathematical formulae are so, and how they are connected to the bigger picture. Also Neftci has a good grasp of how many real-life examples included in this book so that it doesn't lose its focus on the real math in finance.
sophisticated maths June 16, 2006
1 out of 1 found this review helpful
Neftci takes us on a mathematically sophisticated tour of financial derivatives. The treatment is on a level akin to a senior-level undergrad text on physics or engineering. Indeed, to a reader who might come from that background, there will be a lot of similarities and familiar ideas.
For example, partial differential equations arise naturally in the pricing of derivative assets. But unlike many places in physics, here it is not sufficient to assume smoothly varying variables. The inherently discrete nature of most financial variables means that derivatives have to be approximated numerically.
Neftci also describes the various types of options, like basket, knock-out, multi-asset and so on. Each has a slightly different modelling. Another key idea involves the time aspect of pricing. So Wiener processes naturally arise, and the text shows how to handle these.
Much more is covered in the book. Perhaps just as importantly, it gives you enough maths preparation that you should be able to analyse other new types of financial instruments. Maybe even ones that you create yourself.
Remarkable Introduction to Serious Math, Serious Finance, and Real-World Applications June 14, 2006
7 out of 7 found this review helpful
Neftci's book is easily grouped into a large number of texts that provide graduate level (considerable more rigorous than the MBA version) introductions to mathematical finance. Some are written for MBA with want to be exposed to as little math as possible without short changing the financial and valuation aspects and with considerable attention to a broad range of financial products and applications (Hull's classic comes to mind). Others are extremely implementation driven and are more a hybrid of finance and computer programming (Duffy, London, Wilmont). Still others are math books that speak above the heads of almost all practitioners and cover the finance topics poorly (or not at all).
Netfci's book is a rare gem in this field. Excellent coverage of financial topics and fundamentals (Arbitrage Theorem, Forwards Futures, Equity Derivatives, Interest Rate Derivatives), serious graduate level review of financial math and mathematical techniques (Probability, Numeric Processes, Binomial Methods, Stochastic Calculus, Finite Difference, Martingales, Monte Carlo methods), and applications (Bond Pricing, Term Structure Modeling, Exotic Options, Rare Event Modeling).
Best of all, it start assuming very little, builds aggressively, and progresses logically.
The biggest drawbacks are a lack of coverage for credit modeling and credit derivatives, Merton-model and contingent claim models for distressed equity, and more common financial engineering applications (hedging, rebalancing).
It is also remarkable well-written.
 Not a useful book May 8, 2006
7 out of 9 found this review helpful
The author tried to circumvent the difficulty associated with the math behind derivative pricing by explaining the sujbect in a simple way that requires the minimum knowledge of math. Unfortunately it was overdone in this respect and therefore led to non-straightforward overelaboration that made simple things even more complicated. There are both typo and non-typo errors in the book, whick could make a fairly long erratum. For example, on p.281, Eq.(28) missed the last term from the previous equation. As mentioned by other readers, the notations were used inconsistently in this book. Again on p.281, the volatility sigma was switched to the one mupltiplied by the asset price without giving a notice. The subscript t was abused for both partial derivative with respect to time t and the function depending on t. English doesn't seem to be the author's first language. One of evidences of this is on p.336, in the second paragraph after Eq.(112), where "the value in current dollars" obviously should be "the current value in dollars". In addition, the author really needs to change his sloppy writing style. Footnotes were definitely abused, many of which are unnecessary. Many equations were unnecessarily written and numbered again and again. For example, Eq.(4) on p.276 is written and numbered again on p.277, and again on p.280.
The book may have limited use for those people who have a weak background in math and want to know a little bit about derivative price. It is of little use to those people who have a good knowledge of calculus and a basic knowledge of statistics but do not know much about stochastic calculus since for them the two chapters on the model of behavior of stock price and martingales in Hull's book are not that hard to read yet give a straightforward and better description.
I seriously doubt if Hull and Duffie had read the book carefully before they wrote down their nice comments on the back cover of the book.
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