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Literature and References

This links below point to a number of references, (public) articles, and books that ARTSchool cites in its presentation, and that you may find useful.  We have included a few short comments on certain of the titles (e.g. if its a particularly good reference, or if its a particularly "hard" reference etc.).  Some "titles" are repeated in several sections as they apply to several subject matters.

Please note that  literature reviews are now a component of the TG2 Books Series and all updates and new reviews will only appear there.

 

General Derivatives Monte Carlo Methods
General Derivatives Maths  
Options Risk Management
Exotic Options and Advanced Derivatives "Coffee Table"

 

General Derivatives

Hull, J.C., Options, Futures, and Other Derivative Instruments, 2nd Ed., Prentice Hall, 1989

Miron, P, and Swannell, P., Pricing and Hedging Swaps, Euromoney Books, 1996 probably the single best Swaps book for traders (although you should compare this to the soon to be released ART's Trader's Guide to Swap Pricing)

Fabozzi, F.J., The Handbook of Fixed Income Securities, 3rd Ed, Business One Irwin, 1991. if you are only to buy one book on IR securities and derivatives, this is the one

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Exotic Options and Advanced Derivatives

Alexander, C., Ed., The Handbook of Risk Management and Analysis, J. Wiley, 1996

Drezner, Z., On the Computation of the Bivariate Normal Integral, Stats. Comp. Sim. Vol. 35, 1990.

Geske R, The Valuation of Compound Options, J of Fin. Economics, March 1979

From Black-Holes to Black-Scholes, RISK/Finex, 1992

Goldman, B., Sosin, H., and Gatto, M.A., Path Dependent Options: Buy at the Low Sell at the High, J of Finance, Dec 1979.

Hull, J.C., Options, Futures, and Other Derivative InstrumentsHull, J.C., Options, Futures, and Other Derivative Instruments, 2nd Ed., Prentice Hall, 1989

Jarrow, R. Ed., Over the Rainbow: Developments in Exotic Options and Complex Swaps, RISK Publications, 1995.

Kemna, A.G.Z., Vorst, A.C.F., Options on Average Asset Values, Faculty of Economics, Erasmus University, Rotterdam, Netherlands, 1987.

Kemna, A.G.Z., Vorst, A.C.F., Options on Average Asset Values, Faculty of Economics, Erasmus University, Rotterdam, Netherlands, 1987.  

Levy, E. , The Valuation of Average Rate Currency Options, Midland Montagu, 1991.

Margrabe, W., The Value of an Option to Exchange One Asset for Another, J. of Finance, March 1978.

Nelken, I., Ed., The Handbook of Exotic Options: Instruments, Analysis, and Applications, Irwin 1996.

Rebonato, R., Interest Rate Option Models: understanding, analysing and using models for exotic interest rate options, John Wiley and Sons, 1996

Rubinstien, M., Exotic Options, U. of California at Berkley, (Preliminary Version), May 1991.

Turnbull, S.M.,  Wakeman, L.M., A Quick Algorithm for Pricing European Average Rate Options, J of Finance and Quantitative Analysis, Vol. 26, 377-89.

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General and Derivative Mathematics

Wilmott, P., Howison, S, and Dewynne, J., The Mathematics of Financial Derivatives: a student introduction, Cambridge University Press, 1996.

Gardiner, C.W., Handbook of Stochastic Methods for physics, chemistry and the natural sciences, 2nd Ed, Springer-Verlag, 1990 a little "quanty" for non-specialists, but thorough

Papoulis, A. Probability, Random Variables, and Stochastic Processes, 2nd Ed, McGraw-Hill, 1984

Shimko, D.,C., Finance in Continuous Time: a primer, Kolb Publishing Co., 1992.

Baxter, M., and Rennie, A., Financial Calculus: an introduction to derivative pricing, Cambridge University Press, 1997. a little "quanty" for non-specialists, and somewhat academic but its a good start for stochastic calculus

Drezner, Z., On the Computation of the Bivariate Normal Integral, Stats. Comp. Sim. Vol. 35, 1990.

Press, W.H., et al, Numerical Recipes in FORTRAN, The art of scientific computing, 2nd Ed, Cambridge University Press, 1992. if you are only going to buy one book on numerical methods, this is a good starting point, but remember  ... numerical methods can be tricky and no one book will keep novices from "blowing up".  Also available in C, Pascal, and Basic.

For an introduction to Partial Differential Equations, start with

Farlow, Stanley J. Partial Differential Equations for Scientists and Engineers. New York: Dover, 1993. 414 p. Very good starter book to provide the "basic" description of many useful methods.

Gustafson, Karl E. Introduction to Partial Differential Equations and Hilbert Space Methods, New York, NY: John Wiley, 1980, 1987. Second Edition. Excellent first for a deeper look at the "usual" method for PDEs.

 

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Monte Carlo Methods

Law, A., M., and Kelton, W., D., Simulation Modeling and Analysis, 2nd Ed., McGraw-Hill, 1991. not specifically for the investment and trading business but a good reference anyway

Barraquand, J and D. Martineau (1994) Numerical Valuation of High Dimensional Multivariate American Securities,  Digital Paris Research Report

Broadi M and P Glasserman (1995) Pricing American Style Securities Using Simulation, Working Paper Columbia University

Dennis P and R J Rendleman (1995) Pricing Financial Claims Subject to Interest Rate Risk and Default Risk, Working Paper University of North Carolina.

Grane D., D. Vora and D Weeks (1993) Path Dependent Options: Extending the Monte Carlo Approach, Working Paper University of New Mexico.

Tilley J A (1993) Valuing American options in a Path Simulation Model, Transactions of the Society of Actuaries XLV p 499-520

Curran, M. Strata Gems, in Over the Rainbow clever bit of insight on a method for efficiently generating "Greeks" via MC

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Risk Management

Alexander, C., Ed., The Handbook of Risk Management and Analysis, J. Wiley, 1996  

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Last modified: July 25, 2011