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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
1.0 out of 5 stars Insufficient Nov. 23 2003
By A Customer
This is not as good as Wilmott's earlier work, and even that could have benefited from better definition of terms. Wilmott needs to brush up on the latest techniques and talk to some practitioners to learn how to apply math to real world examples. It seems there is a lack of depth of understanding evidenced by the writing. The sections of self-expose are an embarrassment.
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5.0 out of 5 stars The first resource Nov. 22 2003
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 on something, this is the first reference. Very often the other books don't get a look in.
Luckily I work from home. They aren't the sort of books you would take home from the office for bedtime reading, unless you did weightlifting as a hobby.
Pity the martingale approach is missing. Ignore the ridiculous comment by another reviewer who dismisses the martingale approach as useless. The approach is hard, that's all. It would be great to see it boiled down in further volumes.
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1.0 out of 5 stars Old Material Nov. 22 2003
By A Customer
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. His personal anecdotes demonstrate a low emotional IQ. It is as if Wilmott thinks that if readers agree with the finance they must agree with his incessant and juvenile self-regard. My reaction to the inappropriate self-expose was: "Who cares? Get some friends, they might help on the financial aspects of this book".
Wilmott's financial IQ is only average, if this book is to be the evidence. It seems Wilmott isn't up on the latest techniques, or can't be bothered to research them. Stochastic calculus for example. Lack of real world practical examples demonstrates lack of knowledge of how financial instruments work in practice.
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1.0 out of 5 stars Not practical or academic enough Nov. 15 2003
By A Customer
The finance market is flooded with paper, but much is redundant and some isn't even very useful. This book manages to be both. "Market Models" by Carol Alexander is a fabulous resource. There are a lot of books and articles on quantitative finance and if you want only that, look through the literature and choose, but this book won't give enough comprehensive coverage to make it a buy.
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5.0 out of 5 stars Easy to understand May 2 2003
By A Customer
It makes difficult material easy to understand.
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5.0 out of 5 stars A great book that combines theory and practice April 9 2003
By A Customer
A great book that combines theory and practice. Wilmott is a practitioner who clearly harbors great doubts about classical theories. If you read this book thoroughly you will get a knowledge on which you can really build. Wilmott also has the most amazing website.
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5.0 out of 5 stars Well thought out and easy to follow April 9 2003
By A Customer
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. If you don't believe me, then read this book. There are many models that a probability theorist wouldn't even understand never mind be able to solve but Wilmott takes them in his stride.
The material is well thought out, and easy to digest. At every step Wilmott likes to share his worries about popular models. This is a result of his practitioner experience.
(BTW His website rocks!)
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5.0 out of 5 stars Depends on What You Want: Nov. 11 2002
By A Customer
If you are looking for a "you can do this in your own home" guide, then this book is not for you. If you already know how to find the answers but don't know what questions to ask, then you will value Wilmott's high-level discussions.
To get the best use from this book you need to know the hard math (stochastic calculus, PDEs, etc.) and be familiar with valuation in general (models, assumptions, and analytical methods). Wilmott includes crash-courses on these topics but I'm not sure who would find them useful.
With these tools under your belt, Wilmott's discussions of discrete-time dynamic hedging, the behaviour of path-dependent securities, etc. are invaluable for developing intuition and guiding your own research. After all, if the book just gave out answers to the hard questions, you couldn't buy it for a few hundred dollars!
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