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Paul Wilmott on Quantitative Finance, 2 Volume Set [Hardcover]

Paul Wilmott
3.7 out of 5 stars  See all reviews (28 customer reviews)

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Book Description

June 6 2000 Wiley Frontiers in Finance
The only comprehensive reference encompassing both traditional and new derivatives and financial engineering techniquesBased on the author's hugely successful Derivatives: The Theory and Practice of Financial Engineering, Paul Wilmott on Quantitative Finance is the definitive guide to derivatives and related financial products. In addition to fully updated and expanded coverage of all the topics covered in the first book, this two-volume set also includes sixteen entirely new chapters covering such crucial areas as stochastic control and derivatives, utility theory, stochastic volatility and utility, mortgages, real options, power derivatives, weather derivatives, insurance derivatives, and more. Wilmott has also added clear, detailed explanations of all the mathematical procedures readers need to know in order to use the techniques he describes.Paul Wilmott, Dphil (Oxford, UK), is one of Europe's leading writers and consultants in the area of financial mathematics. He is also head of Wilmott Associates, a leading international financial consulting firm whose clients include Citibank, IBM, Bank of Montreal, Momura, Daiwa, Maxima, Dresdner Klienwort Benson, Origenes, and Siembra.

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"Wilmott is even amusing. If you have training in the field, it is for you. Buy." -- Shares, 21st December 2000

From the Back Cover

In this two-volume work Paul Wilmott, described by the Financial Times as a "cult derivatives lecturer", updates and extends - with 18 new chapters - his earlier classic Derivatives: The Theory and Practice of Financial Engineering (also published by John Wiley). The new material includes chapters on technical trading, volatility modeling, utility theory, trader options, modeling dividends, real options, energy derivatives and analysis of recent derivatives-led fiascos.

Throughout the book's incredibly wide breadth, the author presents to the reader all current financial theories in a manner designed to make them easy to understand and implement. The reader will discover what the author thinks of certain theories, and where an existing concept is dismissed as impractical or unworkable it is always replaced with one of the author's own, alternative theories. Reviews of Derivatives: The Theory and Practice of Financial Engineering

"It is a serious work that takes the reader all the way from the simplest of notions to the most complicated of recent models. In short, it is the most comprehensive and up-to-date textbook on options that I have seen ... The style is jocular, but the content heavyweight. The aim is to use a mathematical approach at all times but to motivate the development of models with intuition and to use diagrams and spreadsheet solutions whenever possible. It sounds like an impossible mission. Whoever heard of a mathematician who could convey the intuition of a result to those with a less complete training in the subject? Wilmott is an exception: he knows when a result is hard to understand and treats the reader in a sympathetic manner. ... I cannot imagine any derivatives specialist in an investment bank who would not want to have the book available." The Times Higher Educational Supplement

"...this book has all the qualities necessary to attract impulse buyers expecting the novel which does for/to high finance what Malcolm Bradbury's 'The History Man' does for/to literary academia. ...What the reader gets is a text which will probably come to rank alongside Fabozzi's collected works of Leibowitz as a comprehensive practical reference source for finance theory." Futures and OTC World "Paul Wilmott has succeeded in simplifying the mathematics of financial engineering and he deserves praise for that. Unlike any other mathematical texts, the book uses a crisp and accessible language, relying on plain calculus and avoiding unnecessary formalism of topology and measure theory. It is rich in illustrations and graphs, making it easy for someone with limited maths to understand." Risk Magazine

"Paul Wilmott has produced one of the most exciting and classic reference volumes on derivatives which is a must for both students, practitioners, risk managers and the misunderstood." Global Trading

Volume 1: This first volume of Paul Wilmott on Quantitative Finance incorporates Parts I-III of this two-volume, seven-part publication. This new book by Paul Wilmott is an extensively updated and expanded edition of the bestselling Derivatives: The Theory and Practice of Financial Engineering. The first third of this volume (introducing the classic financial and mathematical concepts) remains largely the same as in Derivatives, with the remaining two-thirds incorporating the majority of the updating and expansion, plus the addition of a number of completely new chapters, including: Technical methods for predicting market movement Utility theory Derivatives and stochastic control The exercise of American options at non-optimal times Stochastic volatility and mean-variance analysis Dividend modeling

The author has included numerous Bloomberg screen dumps to illustrate in real terms the points he raises, together with essential Visual Basic code, spreadsheet explanations of the models, the reproduction of termsheets and option classification tables. In addition to the practical orientation of his new publication the author himself also appears throughout the text - in cartoon form only, many readers will be relieved to hear - to personally highlight and explain the key sections and issues discussed. And if that wasn't enough, there is also a movie quiz hidden within the pages...

Volume 2 This second volume of Paul Wilmott on Quantitative Finance incorporates Parts IV-VII of this two-volume publication. Throughout this volume, many of the chapters which also appeared in the first edition - Derivatives: The Theory and Practice of Financial Engineering - have been extensively expanded and updated and in addition there are 11 completely new chapters, including: Mortgage-backed securities Pricing and optimal hedging of derivatives Increased uses of non-probabilistic interest-rate models Valuing a firm and the risk of default An analysis of financial crashes The modeling of bonus compensation for traders Real options Energy derivatives

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Customer Reviews

Most helpful customer reviews
By A Customer
This book doesn't explain any "hard stff" very well.
A goal of Wilmott's book is to "gently" introduce Quantitative finance, derivatives and their pricing, to non-math majors.
Wilmott puts cute drawings to help the reader feel the subject matter is not so scary, but I need the simplest clearest
writting possible and many simple(as possible) examples, not just cute pictures.
In his chapter that introduces PDE's , Wilmott starts talking "engineer ease" within the first few sentences, and I
assume Wilmott thinks he is being clear to the non-quant reader. Wrong! The chapter has too much jargon.
The book doesn't go too deep into math, but it's still not
clear on the material it attempts to explain.
However, the CD has some nice Excel examples on pricing,
provided you are already familiar with the pricing models used.
Wilmott, has several books on Finance, but many of them are
just repeats of his earlier books but with some chapters taken out!...
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5.0 out of 5 stars Great companion text Oct. 28 2001
By Defcon
After reading the reviews by various readers, I bought the text. After reading it, I must commend Paul Wilmott for his work. The text reads well and the icons are particularly interesting, and yes, helpful in identifying critical matter. Some reviewers found his entertaining writing style to be distracting; I didn't. I believe it's okay to chuckle from time to time. Others found his use of different symbology confusing. Learning and applying derivatives is not about a particular symbol, rather it's about the equation form and meaning. The use of different symbols from that of other authors served to reinforce meaning and form to me. And still, others found the lack of examples to be unacceptable. I agree to some degree, but referring to texts and examples by other authors (e.g., Hull, Prisman, Kolb) helped me to appreciate the application as well as meaning and form. The text is designed for serious study and was not a "quick read" for me.
Hope this helps you decide to buy this text. I think it is worth the investment...only if you have additional texts on your bookshelf.
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4.0 out of 5 stars Good set of books...but needs exercises April 18 2001
This book is a lengthy overview of some modern techniques in financial engineering. If viewed from the standpoint of applications of partial differential equations to finance, then this book is a reasonably complete treatment. The author does spend a great deal of time on the more bread-and-butter topics of financial modeling and less on more specialized topics, as for example weather and energy derivatives, where the use of partial differential equations is of upmost importance. There are of course alternative approaches to financial modeling from the mathematical perspective, such as techniques from the theory of stochastic processes and martingales, but a consideration of such techniques would swell the book to over twice the size, and there are other good books that cover thses approaches in detail.
The author uses Visual Basic and Excel spreadsheets to compute the relevant financial quantities, and given the popularity of spreadsheets in finance, this is appropriate. The numerical solution of partial differential equations is most efficiently done using C (or Fortran) and no doubt the author does recognize this, for he does mention translating existing code in C to Visual Basic.
My only major objection to the book is the lack of exercises, which were a major selling point to me in the author's earlier book on derivatives. Having such exercises is indispensable in understanding results of this nature.
The first few chapters of Volume 1 give an elementary introduction to the theory of derivatives and stochastic calculus. The author does remain concrete in his explanations, and he gives a fairly straightforward derivation of the Black-Scholes equation. This is followed by a very quick discussion of Green's function solutions of the equation and introduction to the Greeks.
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2.0 out of 5 stars rather limited July 26 2000
By A Customer
The theory of derivatives pricing is the observation by Black and Scholes that the randomness in the value of an option can be balanced by the randomness of the underlying stock. This leads to a partial differential equation for the price of the option known as the Black-Scholes equation. Following on from this, mathematical finance has developed into a burgeoning field. The PDE approach has however been largely superceded by the more advanced martingale-based risk-neutral evaluation approach.
This book is an extended edition of Wilmott's previous book Derivatives and suffers from similar defects. It is a good basic introduction to the PDE approach to pricing but is limited in scope and viewpoint. Trees, risk-neutral pricing and martingales barely rate a mention. Every problem is fitted into the PDE approach whether it makes sense or not.
If you want to spend a lot of money learning Wilmott's view on finance then this is the book for you. But if you want a good overview of modern financial techniques then save your pennies.
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5.0 out of 5 stars Wilmott strikes again July 6 2000
By A Customer
I have been an appreciative reader of the previous books by Paul Wilmott, and I eagerly bought this updated edition of Derivatives right away. There was no surprise: this is possibly the most comprehensive book on mathematical finance up to date. Several new chapters have been added, some of them addressing very interesting subjects such as stochastic control (one of my favourites), and many others have been expanded. For instance, American options are explained more thoroughly in this edition. You won't need a PhD in math to read the book: it takes little mathematical knowledge to understand the models to a good level of accuracy (strange as it may sound, the author succeeds in demonstrating it is so), and the derivation of more subtle quantitative subjects is straightforward. Wilmott as usual includes some funny lines throughout the text that make the reading light and enjoyable. The drawing boxes depicting the author himself providing concise advice on what issues to focus on may certainly look childish, yet I think they are of some help to the reader. Actually, I think it's impossible to conceive a topic in derivatives theory (and practice, as the author reminds) not covered in these volumes. Do not expect Paul Wilmott on quantitative finance to provide a useful quick reference for formulas and basic ideas, though. The thick and heavy two volumes are a nightmare to carry around (despite the stylish box that accomodates them) and you won't like to browse through the index jumping from one book to the other. Overall, I think this book is a must for all those interested in financial mathematics. Read more ›
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Most recent customer reviews
1.0 out of 5 stars Insufficient
This is not as good as Wilmott's earlier work, and even that could have benefited from better definition of terms. Read more
Published on Nov. 23 2003
1.0 out of 5 stars Old Material
This is recycled Wilmott, but not even as good as earlier work. His first book was better, probably because his co-authors talked some sense into him. Read more
Published on Nov. 22 2003
5.0 out of 5 stars The first resource
I own 'most' of the standard texts, oddly enough, this was one of my most recent purchases. Now, whenenver I need to find out about some concept I am unfamiliar with, or brush up... Read more
Published on Nov. 22 2003 by GP West FMA
1.0 out of 5 stars Not practical or academic enough
The finance market is flooded with paper, but much is redundant and some isn't even very useful. This book manages to be both. Read more
Published on Nov. 15 2003
5.0 out of 5 stars Easy to understand
It makes difficult material easy to understand.
Published on May 2 2003
5.0 out of 5 stars Well thought out and easy to follow
This book is for those who like their finance applied. The pde approach to finance is far more powerful than the relatively useless martingale idea. Read more
Published on April 9 2003
5.0 out of 5 stars A great book that combines theory and practice
A great book that combines theory and practice. Wilmott is a practitioner who clearly harbors great doubts about classical theories. Read more
Published on April 9 2003
5.0 out of 5 stars Depends on What You Want:
If you are looking for a "you can do this in your own home" guide, then this book is not for you. Read more
Published on Nov. 11 2002
1.0 out of 5 stars Superficial coverage...
Wilmotts book is an incomplete treatment of a wide variety of financial problems.
And most of problems are based on the PDE approach,
instead of the more powerful... Read more
Published on Aug. 29 2002
1.0 out of 5 stars Don't Bother
The author has made a career out of writing the same book on derivatives over and over again. His best remains the original effort which he co-authored with Dewynne and Howison. Read more
Published on March 20 2001 by Jane Marsh
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