Top 10 Financial Mathematics Books
The Financial sector revolves around numbers and one definitely has to have knowledge of mathematics to resolve financial and risk management problems. Mathematical Finance, also known as quantitative finance, is a field of applied mathematics where analysts solve real-life cases and problems by creating models, taking observed market prices as input.
This article brings to you a list of top 10 best books on Mathematical Finance. Add these books to your reading list and learn advanced quantitative techniques in derivative pricing and Risk and portfolio management.
#1 – The Concepts and Practice of Mathematical Finance
Author: Mark S. Joshi
Financial Mathematics Book Review:
An excellent book by an Indian writer, Joshi produces an introductory study material on the pricing of financial instruments like derivatives and underlying securities. He also explains the methods to implement financial models along with their usage.
Key Takeaways For This Best Financial Mathematics Book:
- The book covers important concepts of Black Scholes, stochastic volatility, jump diffusion, variance and many more.
- The theoretical concepts are backed by practical examples.
- Challenges your mind and motivates to learn quantitative finance.
#2 – Method of Mathematical Finance
Author: Loannis Karatzas
Financial Mathematics Book Review:
The book is an extraordinarily intelligent work of Loannis about mathematical finance. He mainly targets the mathematically sounded crowd that knows probability and stochastic concepts but is not familiar with its application in finance.
Key Takeaways For This Top Financial Mathematics Book:
- The book includes theorems and proofs of modern mathematical methods.
- It includes two financial revolutions of the late 20th century.
- Learn to create portfolios with the largest mean return (subjective of risk)
#3 – Mathematical Finance
A Very Short Introduction
Author: Mark H.A. Davis
Financial Mathematics Book Review:
The book is a comprehensive overview of the use of applied mathematics in the finance industry. The finance industry has evolved as the most important branch of modern economics and thus it creates limitless opportunities for quantitative analysts.
Key Takeaways For This Best Financial Mathematics Book:
- Introduction and usage of arbitrage theory in pricing financial contracts.
- Explore the development of mathematics in finance.
- People even with little knowledge about statistics and calculus can benefit from this book.
#4 – An Introduction to Mathematical Finance With Applications
Understating and Building Financial Intuition
Author: Arlie O. Petters
Financial Mathematics Book Review:
The book is an all in one complete learning set that offers the theoretical methods along with their proper derivation and tons of examples and problems to get practical understanding. The book is an introductory source that targets undergraduate students of finance. Develop a foundation in applied mathematics applicable in finance.
Key Takeaways For This Top Financial Mathematics Book:
- Learn fundamental financial concepts and tools to build real models.
- The book mainly focuses on financial derivative market.
- The book is systematically distributed between theory and its applications.
#5 – Probability for Finance
Author: Ekkehard Kopp
Financial Mathematics Book Review:
A comprehensive guide that offers rigorous and unfussy content to both students and professionals. Kopp mainly focuses on the concepts of Probability necessary for understanding the financial markets.
Key Takeaways For This Best Financial Mathematics Book:
- Book offers essential material to study modern finance.
- It is loaded with examples and exercises for self-evaluation.
- Free from jargon text provides simplified learning course.
#6 – Problems and Solutions in Mathematical Finance
Author: Eric Chin
Financial Mathematics Book Review:
The book covers the application of advanced mathematical techniques. Eric says the existence of quantitative finance is based on concepts and theories of applied mathematics like probability, statistics, stochastic process, etc.
Key Takeaways For This Top Financial Mathematics Book:
- The book is a set of four volumes covering various areas of mathematical finance.
- Learn stochastic calculus in vol1, Equity Derivative in vol2, Interest Rates, and Inflation in vol3, and Commodity in vol4.
- Complete reference for quantitative practitioners and students.
- Explore real problems and cases of the finance industry and their solutions.
#7 – The Model Thinker
What You Need to Know to make Data Work for You
Author: Scott E. Page
Financial Mathematics Book Review:
Data is the basic requirement for growth and existence of every industry. Whether it is stock market or E-commerce industry or census figures, data plays a key role. Now data analyst has to extract the required and meaningful out of the raw data and produce verifiable results. The book shows you how to do this.
Key Takeaways For This Best Mathematical Finance Book:
- Enhance your analytical reach with quantitative finance.
- Learn mathematical, statistical and computational models.
- Learn to analyze data and make accurate predictions.
#8 – An Introduction To The Mathematics Of Finance
Author: Stephen Garret
Financial Mathematics Book Review:
Book follows a deterministic approach (i.e. development of future states of the system excluding randomness) and produces a complete introductory guide about mathematical finance. The book especially focuses on interest rates and its calculations.
Key Takeaways For This Best Financial Mathematics Book:
- Learn theories of compound interest also known as deterministic financial mathematics
- The book follows topics covered in CTI exams of the Institute and Faculty of Actuaries.
- Comprehensive text loaded with examples and exercises.
#9 – Elementary Probability Theory
With Stochastic Processes and an Introduction to Mathematical Finance
Author: Koi Lai Chung
Financial Mathematics Book Review:
The book discusses the theories of probabilities. Chung says probabilities have always been one of the most important topics of mathematics. The topic has evolved into a discipline and now has direct interaction over fields of data analysis and quantitative mathematics.
Key Takeaways For This Top Financial Mathematics Book:
- Book targets the students of mathematics. Learn probability and its application in the finance industry.
- The latest edition includes two additional chapters on applied mathematics.
#10 – Maths for Finance
An Introduction to Financial Engineering
Author: Marek Capinski and Tomas Zastawniak
Financial Mathematics Book Review:
The book offers fundamental and introductory knowledge about calculus and probability. It covers three important areas of finance and its mathematical applications which include option pricing, Markowitz portfolio optimization, and Capital Asset Pricing Model.
Key Takeaways For This Top Financial Mathematics Book:
- Excellent reference to acquire introductory mathematical knowledge.
- Learn stochastic interest rate models.
- Book offers various financial concepts along with practical examples.
Recommended Articles
Here is the list of Top 10 Financial Mathematics Books. These books bring a fresh and innovative approach to the concepts of Mathematical Finance. You may refer to the following books to learn more –
- Business Analytics and Intelligence Books
- Top 10 Finance Certifications
- Business Mathematics Books
- Finance Books
- Derivatives Books
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