Book Description

Interest Rate Models Theory and Practice In implementing mathematical models for pricing interest rate derivatives one has to address a number of practical issues such as the choice of a satisfactory model, the calibration to market data, the implementation of efficient routines, and so on. This book aims both at explaining rigorously how models work in theory and at suggesting how to implement them for concrete pricing. This is an area that is rarely covered by books on mathematical finance. The book is meant both to help quantitative analysts and advanced traders price and hedge with a sound theoretical apparatus, and to encourage academics to develop a feeling for the practical problems in the interest rate market that can be solved with the use of relatively advanced tools of mathematics and stochastic calculus in particular. Advanced undergraduate students, graduate students and researchers should benefit from seeing how mathematics can be used in concrete financial problems. ... Read more

Reviews (6)

Best book on interest rate models
This is the best book available on interest rate models. Very detailed. Much more focused and readable than Rebonato's book. More pragmatic and explicit than Musiela and Rutkowski. Not as theoretical as Hunt and Kennedy. James and Webber also looks very good, but I'm not that familiar with it. All other books have only bits and pieces on interest rates.

The best book I have read on the subject
With all the due respect to the other authors I would say that if one is interested in a good theoretical book whihc is also good on the implementation side then the book of Brigo and Mercurion is definetly the best book I have ever read on the subject.

Anyone interested in implementing the LMM/BGM/MSS model in practice is well advised to read it.

I would just say that this is certainly a must have in the field.

New stuff and nice overview: hard to beat!
In the late nineties I went through Brigo's innovative work on stochastic nonlinear filtering with differential geometry techniques. I was favorably impressed by results and style, particularly in his dissertation and in his 'geometry in present day science' very readable overview. Interesting results are found and nicely told with accurate - but not pointlessly complicated - advanced mathematics for the problems at hand, I reasoned.

I've followed a similar path from control to finance, and having worked with interest rate models, I couldn't help but order this Brigo-Mercurio book. I had high expectations 'cause these two guys are working in a bank on the real thing.

Sure enough I'm not disappointed.

1-factor models are handled with great care, a ton of formulas and recipes are given. I've never seen this kind of analysis of pricing with Gaussian 1-f models. The new upgrade of the CIR model is interesting and accurate. "CIR++" is now my favorite 1-f model. I like the treatment of lognormal 1-f models and the explanation of Monte Carlo and trees -- the flow-chart for Bermudan swaptions is crystal clear! Plots of market implied structures and volatility calibration are useful additions.

The chapter on 2-f extensions has one of the best discussions on volatility, and two tons of useful formulas/recipes. Two dimensional trees!

The HJM chapter size is OK. I agree - the useful models embedded in HJM are short rate models and market models.

Market models - these three chapters alone are worth the book. You'll find yourself nodding as you read the guided tour. They make it look easy all the time. The exposition is focused, clear, intuitive, detailed. There's also new stuff, just check the calibration discussion! Smile modeling begins with a brilliant tour and ends with Brigo-Mercurio's new approach - the mixing dynamics - deserving a whole chapter if expanded.

The detailed explanation on products is a much welcome original addition. Cross currency derivatives!

Quotes - as in Brigo's old work - are a pleasant diversion while reading. The 500 and more pages are a treat given the competitive price.

Still there's room for improvements - more "CIR2++"! Something on 3-f models. Historical estimation of the correlation matrix and low-rank optimized approximations. Expand smile modeling! More hedging. Something on structured products. Cross currency libor model. chapter 9 - other interest rate models - sounds out of place and can be suppressed for other things.

This book rings true and has useful teachings for students, academics and practitioners. Although it requires some background in stochastic calculus, it's hard to beat on the pricing front. Kudos to Brigo and Mercurio! It only harms there aren't enough books like this.

Nicely written overview of interest rate models
This recent book, written by two Italian "quants" Mercurio & Brigo, gives a nice and accessible overview of interest rate models which is a compromise between the practitioner viewpoint, expressed for ex. in Rebonato's book "Interet Rate option models"
and the theoretical viewpoint such as the one in Musiela & Rutkowski.
The authors, themselves PhDs in quantitative finance/ applied maths, wrote this book while working as quants in an Italian bank and this first hand contact with the market gave them a
practical view on the subject which markes this book very interesting.

The book contains a "rational" catalogue of models used in practice ( as opposed to models which are impossible to implement!).

In contrast with academic books on interest rate modeling which deal with HJM formulation, there is a lot of emphasis here on LIBOR and Swap market models
(BGM -Jamshidian models) which reflects the current market practice. This is a positive point since there are not many books with details on implementing and using these "market models".

Part II: Interest rate models in practice is particularly useful because it deals with implementation and calibration which, as any practitioner knows, are important and usually delicate issues.
However calibration issues are dealt with somewhat lightly, especially recent developments on modeling cap/swaption smiles
are not included here.

This book can also be used for a graduate level/PhD course on interest rate models.

There are a lot of numerical examples in the book and mathematics is kept to the necessary level while keeping the
approach both rigorous and understandable.

Overall, it is one of the best books written on the subject.
I highly recommend it to PhD students, quants and researchers interested in this field.

Well written and useful book
In my humble opinion, this is the best book on Interest Rate modeling out there. The writing style is clear and focused and the appendices are fantastic. The book is rigorous but someone with some background in Stochastic Calculus will find it easy to follow. If you need refresher, dont worry the authors have you covered, see the appendix on Stochastic Calculus. Not an introductory book. Very exciting book. ... Read more

Book Description

As interest rate markets continue to innovate and expand it is becoming increasingly important to remain up-to-date with the latest practical and theoretical developments. This book covers the latest developments in full, with descriptions and implementation techniques for all the major classes of interest rate models — both those actively used in practice as well as theoretical models still ‘waiting in the wings. Interest rate models, implementation methods and estimation issues are discussed at length by the authors as are important new developments such as kernel estimation techniques, economic based models, implied pricing methods and models on manifolds. Providing balanced coverage of both the practical use of models and the theory that underlies them, Interest Rate Modelling adopts an implementation orientation throughout, making it an ideal resource for both practitioners and researchers. "Interest Rate Modelling is an encyclopedic treatment of interest rates and their related financial derivatives. It combines advanced theory with extensive and down-to-earth data analysis in a way which is truly unique. For practitioners, students and scholars in the field, this impressive work will be the standard reference for years to come." Professor Tomas Björk, Stockholm School of Economics "… an excellent book. I am particularly pleased by its breadth and range of topics… the reader is provided with an informative and readable exposition." Dr Farshid Jamshidian, NetAnalytic "I particularly like the strong emphasis on the practicalities and calibration of interest rate models. This book will be invaluable as a comprehensive reference to students, researchers, and practitioners." Professor Francis Longstaff, The Anderson School at UCLA "This is a carefully written, scholarly but fascinating presentation of the field of Interest Rate Modelling. It combines the best of two worlds: the rigour expected from finance in academia with the relevance expected from finance in practice. James and Webber are truly masters of their market since this book is surely a must-buy for both researchers and practitioners. If only all finance books were written with this care and attention to detail." Dr Neil Johnson, Clarendon Laboratory, Oxford "Today, interest rates are key economic instruments. This is a mammoth treatise and must surely rank as one of the most comprehensive available on the topic. Anyone interested in modelling or simulating the behaviour of interest rates, be they practitioner, economist, mathematician or new entrant to the subject, will find within a wealth of pertinent material." Professor Peter Richmond, Trinity College Dublin ... Read more

Reviews (7)

Best Book on Interest Rate Models in the Global Markets
This is the most comprehensive coverage of interest rate models available anywhere in the global markets. If you already have a model, read this book to examine options for additional improvements. If you are developing a model, buy this book for the best state-of-the-art guidance available.

Jessica James's writing is always clear and accessible, and her Ph.D. in physics lends unparalleled quantitative expertise to the state-of-the art analysis of models and their applications.

A real must !
As a math grad student who is interested in the term structure modelling, I found that this book is really useful! It just tells you everything about interest rate modelling,not just for the no-arbitrage modelling issue, they even have a chapter about the macroeconomic foundation for interest rate fluctuation! The math used in this book is very concise without too much measure theory twaddle,Everyone who works in this field should have a copy. It's a real must!

Best Book on Interest Rate Models in the Global Markets
This is the most comprehensive coverage of interest rate models available anywhere in the global markets. If you already have a model, read this book to examine options for additional improvements. If you are developing a model, buy this book for the best state-of-the-art guidance available.

Jessica James's writing is always clear and accessible, and her Ph.D. in physics lends unparalleled quantitative expertise to the state-of-the art analysis of models and their applications.

A must-have encyclopedia on term structure modeling
I have spent a number of years in building & implementing models for interest-rate-dependent claims, but should admit: I learned more from this book. I view it as an encyclopedia on the subject, in which the authors (never heard their names before - what a shame!) have done an excellent job on reviewing hundreds of publications. The theory of term structure modeling has been grown to a separate subject - thanks to Hull and White, Jamshidian, HJM, BGM, Hughston - among main contributors. You can find all methods in one place and in a very accesible form. For example, HJM is described better and simpler than in the author's original paper. Most models are reviewed with practical implementation in mind.

It is not a "first book" on "introduction" on the subject; it is rather a good desk reference for prepared professionals.

Extraordinary
There are plenty of books on fixed income mathematics. This one is extraordinary. It is simultaneously practical, theoretically sophisticated and a pleasure to read. The treatment of term-structure models, including HJM, is the most accessible I have seen anywhere. There is a lot of information on yield curve building. This includes both bootstrapping and more recent research in parameterised curves. There are plenty of topics that other books might label "beyond the scope of ...", but James and Webber jump right in, with meaty discussions of the Kalman filter, lattice methods of valuation and GARCH models. Despite all the theory, the authors are always in touch with practical details. They take into account stub dates, and are precise about day counts. These are obviously practitioners! ... Read more

Book Description

Leading a meeting? giving a presentation? Heading a workshop? Icebreakers are great for lightening up the atmosphere at the beginning of a meeting or event, and encouraging everyone to participate fully. This collection of 50 icebreakers is organized around common business situations and is designed to help leaders start every session, meeting, presentation, or workshop with a burst of energy and fun. Includes icebreakers for sales meetings, team building, complete strangers, introducing a topic, staff meetings, groups over 20, outdoor settings, and more. this latest book in the popular Big Book of Business Games series is the most fun yet! ... Read more

Reviews (3)

Inventive but is it practical?
My first observation on this book is that it is focused on the large group not the small group. However, the rationale for some of the large group focus seems to flow entirely from a preoccupation with dividing large groups into smaller groups and then applying tasks or games to these subgroups. If you have never thought about working with groups this book may be of some use, but by and large I judged many of the examples were impractical in terms of the time and resources needed to get deploy them.

My key reservation about these icebreaker books is that they are written more to help the presenter break the ice rather than any presumed intra-audience barriers.

reveiw by hands-on trainer
This book is packed with icebreakers, but I personally wouldn't use most of them. They border on the "touchy-feely" side, and will only work if your audience is open to that type of activity.

Hot Icebreakers
There are so many great ways to get a group started with this book. It's perfect for the people who are inactive and very active. From get-to-know-games to every-day-fun. This book covers business meetings, weekly meetings, workshops, and almost every other type of get-together. The groups sizes go from small to huge. I would definitly recommend this book for any coordinator or leader. Enjoy and have fun! ... Read more

Book Description

The book is a thorough treatment of the mathematical theory and practical applications of compound interest, or mathematics of finance. ... Read more

Reviews (14)

A bible to financial mathematical knowledge
Whoever masters this book will love and master any area of finance. However, readers must note that this is not a "light" book. It's rather academic and will require a good knowledge of calculus, statistics (for chapters beyond #9) and even stochastic process. If you are enrolling in an actuarial education program this is THE BOOK

Excellent book...
Kellison's book is an appraisal industry standard. and is highly recommended for use by others who want to know how interest rates are calculated. For students who need supplementary material, I would recommend a good mathematics of finance textbook such as the later editions by Cissell, et al. or Simpson, et al. both titled, amazingly, Mathematics of Finance. Another excellent book of a less academic nature is Carrington, The Book of Interest and Money. For those who would understand both the maths and the calculator keystrokes, try the best book ever written (opinionated, aren't I) on this subject: Greynolds, et al. Financial Analysis Using Calculators: Time Value of Money. This book was published in 1980 by McGraw-Hill, but hasn't been superceded, to my knowledge, by anything better. Also, a must read in connection with this subject is regulation Z of the Truth-in-Lending Act. Study these materials and you will never have the wool pulled over your eyes by your friendly local banker, real estate broker, car finance company, loan shark, or rent-to-own furniture dealer. In fact, you'll know much more than they do and will be able to catch their mistakes (and they make them).

Just Awful
I'm a third-year undergraduate who has loved and excelled at mathematics my whole life. We're talking mostly A's and some B's all through an honors high school program and through advanced multivariable calculus in college.

I've decided to pursue actuarial work, and this fall I enrolled in a course called "Theory Of Interest," which is the introductory course for this subject at my university. The sole textbook for this course was (surprise) Kellison's "Theory Of Interest."

For starters, let's make perfectly clear that the pure math involved here is easy as pie. Anyone at this level should be able to do it in their sleep before they've even cracked open the book; arithmetic, algebra, and a smidge of some very basic and easy calculus. So this subject is all about learning the definitions and procedures and applying them to problem solving.

That said, I have never, ever, EVER had anything close to this much trouble with a mathematics course in my life, simply because I could not understand this textbook. As a highly detailed and analytical person, I rely heavily on the textbook to learn any subject. I expect to be taught the subject in a clear, comprehensive, logically sequenced manner, free of ambiguity and clutter. I expect to be given challenging problems free of ambiguity and confusing language. I expect the preceding chapter to prepare me for those problems.

This is the biggest train wreck of a math book I have ever read. Ambiguities abound. He convolutedly waxes poetic on inconsequential "observations" for PAGES (you can sense him giving himself a huge pat on the back for his scholarly flights of fancy) while leaving you frustrated to tears trying to find and decode basic explanations and definitions. I'd say that at least 40% of the problems have MAJOR ambiguities that make them literally impossible to know what he's asking (a previous reviewer gave a good example). You have to guess what he's asking and proceed from there. The combination of poor, confusing discourse followed by ambiguous, confusing problems is a potent 1-2 punch that will seriously discourage even the best of students.

My college professor actually called this book, and I quote, "revolting." (Why does he continue to use it for his class? You'll have to ask him; I myself have no idea.) Bottom line, don't even think about trying to learn this subject from this textbook unless a college course requires you to do so. Find the Cissell (I tracked down a copy halfway through my course and it helped immensely) and/or the Actex guides instead and/or ANYTHING else you can get your hands on. There's simply got to be a better way to learn the subject than this.

So So
The book sells for astronomical price because SOA chooses it. It's simple and standard material and there's about half a million people in this country who qualifies to write. Unless somebody else pays for you, go for another book, or a simple study notes will do.

Not as helpful as other material
This text is not very helpful at all. I used it in my Interest Theory class and started to use it for Course 2 exam, but both times came out confused. Luckily, in school, I had a great professor who did not bother using it as a teaching tool, rather as a source for homework problems. He used his own material to actually teach us the concepts. As for studying for Course 2, you will do much better using one of the manuals, such as Actex or BPP.

Still, it does provide some good explanations of concepts, if you can just figure out what it's saying. A bit wordy at times.. :-) ... Read more

Book Description

Interest rate swaps--used globally by both corporate finance departments and investment firms to control interest payments, manage debt, and enhance investment portfolios--constitute a growing 1.9 trillion market. Now, financial personnel, swap traders, corporate treasurers, and professional cash managers can turn to this clear, authoritative guide to master all the methodologies used in the international swap market. Written for anyone whose work is touched by swap market activity, the guide uses diagramming techniques to first explain what swaps are, and how and why they are traded. It then addresses more sophisticated financial transactions, such as rate setting, analysis of swap desks, market-to-market, speculating, and financial statements. Readers will find detailed coverage of more than two dozen derivative products, including spreadlocks, swaptions, caps, and flows, and learn how swap trading works in foreign currencies and interest rates. Critical light is also shed on questions regulators are currently raising about the security and future of the swaps markets. ... Read more

Reviews (2)

Me thinks some reviewers protest too much
This book has been damned for being too simplistic, therefore consign it to the trash cart, or so we are expected to do. But given the relative novelty of these financial products simplicity in the best sense of word could be seen as a virtue in any work dealing with this topic. So, why the evident annoyance from some. Could it be that this work dissolves some of the mystery involved, and threatens some closed shop in these markets ?

Outdated and Shallow
The book easily shows its age in its focus on standards and issues which have long ago fallen by the wayside in this dynamic market. Far worse is that the book is preciously short on quantitative and analytic methods, and long on third-grade-teacher types of admonishments. I read the whole book becasue I paid for it, there are better, more up-to-date volumes out there. Could possibly be re-named "Swaps for English Majors", although, English majors as a group might correctly be upset at this association. ... Read more

Book Description

Among the major innovations in the financial markets have been interest rate swaps and swapations, instruments which entail having an arrangement to barter differently structured payment flows for a particular period of time. These instruments have furnished portfolio and risk managers and corporate treasurers with a better tool for controlling interest rate risk. Valuation of Interest Rate Swaps and Swapations explains how interest rate swaps are valued and the factors that affect their value–an ideal way to manage interest or income payments.Various valuations approaches and models are covered, with special end-of-chapter questions and solutions included. ... Read more

Reviews (2)

Educational use only
The book is terrific for a classroom setting. It is far easier to understand the interactions between valuation inputs (term structure, volatility, level of rates, etc) than any other book in the market. The use of the lattice approach is great - and very original. Most students find the lattice approach more easy to understand and therefore more able to better understand these instruments. The book is not designed for a swap dealer by any stretch of the imagination. I have used it in a training program several times with great effect.

Not worth spending money
Like all other Fabozzi books this one also just scratches the surface of the topic (swap and swaptions) with text book style examples which are not seen in real world. He starts with an example where both the fixed and floating leg of a swap is semiannual and actual/360 which is not the case of US Swaps and nowhere through out the book he discusses how to deal with different day counts (30/360 & actual/360) in the fixed and floating legs as well as different payment styles (semianually for fixed and quarterly for floating). Anyone who is trying to build a swap valuation tool will realize the importance of the above meniotned topics which is not covered in this book. Even a slight change in numbers can change the P&L by several hundred thousand dollars as the notional are generally upwards of 100 million. This book may be good for an undergrad student who is taking the first course in finance and trying to understand what a swap is. But even then it will facilitate only an abstract theoretical knowledge which he/she will never be able to relate to in real world swaps. Avoid this book, it's a waste of your hard earned money. ... Read more

Book Description

Loan amounts of $50 to $300,000.Interest rates of 2% to 25.75%.Terms up to 40 years.

Reviews (2)

This Book is a Load of Laughs!
I thoroughly enjoyed this book. I mean, who doesn't like to look at mortgage amortization tables? Me and my family like to sit around and quiz each other by saying stuff like "What is the monthly payment on a 30 year fixed interest mortgage of $135,000 at 8.25%?" We've even set it up in "Who Wants to be a Millionaire" format with lifelines and what have you and we have a real blast!

When we want to take a break, we just pull out the book on the calculation of Pi to 150,000 places and see who can recite the farthest. Then we have a group hug!

All you need to know about loans and payments is here
You may not use it often, but this book will come in very handy when planning to borrow money. I've been an investment professional since 1988, and this is the most borrowed book on my shelf. I also owned the previous edition, and this version has been improved with the inclusion of rates down to 2% and the expansion of loan amounts to $300,000 in the primary table.

The book is conveniently organized in four tables, ordered from most-commonly to least-commonly used (as it happens, largest to smallest). Table 1 (monthly amortization) is where everyone spends the most time. Just turn to the interest rate page, then read across for "loan amount" and down for "years in term," and you've got your monthly payment to the penny. For non-round numbered loan amounts, you can avoid having to interpolate by grabbing a calculator and turning to Table 2 (required payments for monthly, quarterly, etc.), where you can look up the multiplier (per $1000) corresponding to the rate and term of a given loan (yep, that's how your mortgage lender does the math). Less frequently used are loan progress charts and proration data, Tables 3 and 4, respectively.

This book is straightforward, convenient, and travels well. My favorite of its kind. ... Read more

Book Description

This text aims to help readers become “literate” in the vocabulary of finance, insurance, and pensions and be able to utilize the appropriate mathematics for professional and personal use.This book covers a wide range of topics not found in other texts, including complex annuities, complex perpetuities, geometrically varying annuities, and bond duration and volatility.This book is a helpful reference to all professionals in the fields of accounting, finance and financial services, management, marketing services, computer information systems, and economics. It is also ideal for anyone who wants a self-study for personal finances. ... Read more

Book Description

In recent years, interest-rate modeling has developed rapidly in terms of both practice and theory. The academic and practitioners' communities, however, have not always communicated as productively as would have been desirable. As a result, their research programs have often developed with little constructive interference. In this book, Riccardo Rebonato draws on his academic and professional experience, straddling both sides of the divide to bring together and build on what theory and trading have to offer.

Rebonato begins by presenting the conceptual foundations for the application of the LIBOR market model to the pricing of interest-rate derivatives. Next he treats in great detail the calibration of this model to market prices, asking how possible and advisable it is to enforce a simultaneous fitting to several market observables. He does so with an eye not only to mathematical feasibility but also to financial justification, while devoting special scrutiny to the implications of market incompleteness.

Much of the book concerns an original extension of the LIBOR market model, devised to account for implied volatility smiles. This is done by introducing a stochastic-volatility, displaced-diffusion version of the model. The emphasis again is on the financial justification and on the computational feasibility of the proposed solution to the smile problem. This book is must reading for quantitative researchers in financial houses, sophisticated practitioners in the derivatives area, and students of finance.

... Read more

Reviews (5)

Excellent Treatment of Interest Rate Derivatives
I'm an interest rate professional with more than 10 years of successful pricing and trading experience, and I enjoyed and appreciated Riccardo Rebonato's clear presentation of the pricing of these derivatives. I keep this on my desk as one of my key references.

Another great read is "Credit Derivatives" (2nd Edition) by Tavakoli. The products and their uses are clearly explained, and ties in relative value to the interest rate market. I concede that the models for this product may be trickier because of documentation risk and data issues, but Tavakoli brings clarity to this topic so any interest rate professional can grasp the products and why investors - even hedge funds - are so keen to use them.

why bother
It's hard to believe a reviewer with such a myopic view of Derivatives pricing could go through the whole book, understood it and found time to rate it. Mindblowing waste of time !
Few hundreds years ago, he would have recommended burning the Madmen claiming the earth was round.

Anyway, while Derivatives Pricing achieves little for the welfare of mankind, the recent need for assets based on ever complex market scenarios calls for a more refined pricing methodology. There no supply and demand here, only customers who want hedge/trade/tradge assets /liabilities and traders who need to make sure their firms don't go burst when market move.

The author answers that demand by formatting and publishing his papers.

rebonato does it again
My avid reading kept jostling out superb hot ideas from this book. Rebonato carries out a comprehensive survey of the LIBOR market model. He tackles historical background, calibration, and effective implementation. The later chapters also cover extensions to the LIBOR market model to take account of smile and skew. In particular, there is extensive discussion of the cutting-edge Joshi-Rebonato stochastic-vol, displaced-diffusion LIBOR market model.

If you are working on the pricing of exotic interest rate derivatives, this book is a must buy.

Such pearls of wisdom
I am not qualified to write a review of this book, but neither is the above author as his "review" is nothing more than an uninformed assault on modern finance.

In fact, I submit, that said reviewer knows nothing of finance whatsoever.

(Since this book happens to be well regarded, I'll give it a five)

A theoretical substitute for supply and demand
A complicated body of mathematical theory, developed over a period of about 30 years, addresses the question: how should derivative X be valued if we know certain parameters, especially the volatility of the price of its underlying asset?

But why exactly does the question need answering? After all, the price of X, like that of its underlying, is determined by the point at which the demand for X is equal to the supply of X. One doesn't need a computer for that, one just needs a liquid marketplace. I can look up the price of a share of Microsoft's equity in my daily newspaper. I'm not tempted to develop a body of theory to figure it out, when I can flip through a few pages and find it.

Nowadays, I can also look up the price of a standardized option to buy Microsoft in the newspaper. In 1973, when people like Fischer Black began developing this body of theory, that was not yet the case.

This brings us to the point of my little sermon. The purpose of this body of theory is to produce a price figure in cases where there is not a liquid market for X. The theories answer the question a portfolio manager must often ask himself: if I were able to find a buyer for X, how much could I charge for it?

This book has its moments, but in general I believe this body of theory accomplishes less than its adepts believe. The imagery of a God-like Newton on the dust jacket indicates, I submit, some of the pretentiousness that gets into their ivory towers. ... Read more

Reviews (3)

Compact compendium of financial information
In this text, Van Horne combines elements of both finance and economics; this results in an outstanding compendium of financial theory as it relates to financial markets. However, the breadth of the material and the detail to which the reader is exposed necessitates succinct dissemination in such a compact text (300 pages). I've found more information in this paperback than most hardcover texts (800 pages or more) that I've read, and at half the price.

My fellow students and I plowed our way through it in one 400-level course in the finance program at EWU. This is advanced material and not for the faint of heart. As I remember it, there was a sizable number of students with weak hearts about half-way through the quarter.

a great contribute to financial market theory
Professor Van Horne Books are certainly fundamental to approach right the theory of finance. I think we have all to thank him for his studies.

A good reference for fixed income securities
A compact book focusing on fixed-income market, derivatives, and risk management. Highly Recommended for advanced undergraduates ... Read more

Book Description

The field of financial mathematics has developed tremendously over the past thirty years, and the underlying models that have taken shape in interest rate markets and bond markets, being much richer in structure than equity-derivative models, are particularly fascinating and complex. This book introduces the tools required for the arbitrage-free modelling of the dynamics of these markets. Andrew Cairns addresses not only seminal works but also modern developments. Refreshingly broad in scope, covering numerical methods, credit risk, and descriptive models, and with an approachable sequence of opening chapters, Interest Rate Models will make readers--be they graduate students, academics, or practitioners--confident enough to develop their own interest rate models or to price nonstandard derivatives using existing models.

The mathematical chapters begin with the simple binomial model that introduces many core ideas. But the main chapters work their way systematically through all of the main developments in continuous-time interest rate modelling. The book describes fully the broad range of approaches to interest rate modelling: short-rate models, no-arbitrage models, the Heath-Jarrow-Morton framework, multifactor models, forward measures, positive-interest models, and market models. Later chapters cover some related topics, including numerical methods, credit risk, and model calibration. Significantly, the book develops the martingale approach to bond pricing in detail, concentrating on risk-neutral pricing, before later exploring recent advances in interest rate modelling where different pricing measures are important.

... Read more

Reviews (1)

An excellent book!!!
This book provides an excellent reference and point of view of old and new topics in the interest rate modelling field.

From short rate models, HJM model, multifactor models, positive interest models and market models, it gives you a very well explanation all without forget the calibration of them.

You can not find many books about this topic. This one gives a clear and easy to follow chapters in order to increase your knowledge of this not easy field. The formality is a key point in all the book. ... Read more

Book Description

Now updated to reflect the changing environment of business finance, this book includes new material on life insurance, life annuities and more. Students learn how to master effective problem-solving techniques with 1,224 practice problems and questions. The large number and variety of practical applications offer a feel for how to conduct business and financial transactions in the real world. Finally, review problems offer the opportunity for more study or self-testing.

Reviews (1)

Excellent Value
The target audience of this book is people who want to know how to estimate annuities, life insuarance premiums etc. If you are sitting the actuarial exam(SOA) 2 this is what you need for the Theory of Interest part. It also covers parts of exam 3. The book is affordable and way better than any other else. The methodology is crystal clear. ... Read more

Reviews (2)

Finally... a road map to interest rate models!!!
I had a strong background in equity derivative models but found the leap to interest rate models difficult. What are the relationships between short rates, forward rates, and term structure? How do assumptions translate into restrictions on our ability to model the "stylized facts" of interest rates? How are assumption violations "corrected" by practitioners?

This book answers all of these questions in a straightforward yet rigorous manner. Explanations are supplemented with simple examples.

After reading this book, I had the roadmap and analytical context I needed to tackle implementation focused books like Brigo and Mercurio.

As a bonus, this book provides a very nice summary of major valuation tools. (Monte Carlo simulation of martingale processes, development of pricing PDE via Feynman-Kac, development of fundamental solutions, etc.)

Begin your BGM, Libor & Swap market model journey here.
If you want a concise, clearly written and excellently explained introduction to the cutting edge interest rate models used in dealing rooms today. Look no further. With an elementary stochastic calculus background from Rennie & Baxter, this book is very readable, even on a crowded train! For those who want more details & case studies, have Interest Rate Models by Brigo & Mercurio as a companion text. With useful tips on Libor & swap market model implementation, and a whole chapter devoted to convexity correction. One of the best texts on the subject I have read. ... Read more

Reviews (2)

Opening a Window to Fixed Income Securities of Eras Past
This exceptionally written, highly readable volume, written by a true pioneer in bond trading and fixed income research, covers interest rate trends and lending practices spanning over four millennia of economic history. Despite the paucity of data prior to the Industrial Revolution, the book manages to present a highly detailed analysis of money markets and borrowing practices in major economies. A History of Interest Rates seeks to provide a helicopter perspective of interest rate movements, avoiding anecdotal indications if possible and applying analytical tools such as yield curves and decennial averaging of the available data.

Homer asserts that "the free market long-term rates of interest for any industrial nation, properly charted, provide a sort of fever chart of the economic and political health of that nation." Given the unprecedented rise in asset price volatility and the emergence of extraordinary inflation rates during twentieth-century episodes of economic distress--occurrences which were nearly imponderable during the nineteenth century--it would seem that we are now living in times of eschatological excess, which is actually one of the understated themes in this book's third edition.

This book should be part of the library of every investment analyst, together with such finance classics as Graham and Dodd's Security Analysis and Lefevre's Reminiscences of a Stock Operator.

One of the ten books every speculator should read.
Financial assets grow in value with the passage of time. For debt, we call this "interest", and for equity, we call it "yield". Homer's book is the superbly recorded history of this phenomenon. Perhaps its greatest value is that when you hear or read a new theory, you can assess its validity by comparing the theory's implications with the historical evidence. ... Read more

Book Description

McGraw-Hill's Interest Amortization Tables is the versatile, easy-to-use loan-table reference homebuyers, borrowers, and lenders have been looking for. The main tables cover loans up to $300,000 for up to 30 years, and at rates of 5% to 20%. Extensively revised and updated from the previous edition, this edition now adds jumbo loans to the main table, and features timely new sections on adjustable rate mortgages, balloon payment loans, bi-weekly payment loans, and prepaying loans. Plus­­it provides all the necessary data for calculating all amounts and terms not covered in the tables.

Inside you'll find:

• Clear-cut, practical instructions
• A glossary of frequently used terminology
• Illustrative model cases
• New examples not found in the previus edition

McGraw-Hill's Interest Amortization Tables will swiftly guide even the most inexperienced users to quick solutions for their pressing loan questions.

Reviews (1)

A great source of information for anyone buying a car/house.
This book is a great source of information for anyone buying a car or house or applying for a loan. Monthly payments (withing a few dollars) can quickly be determined. This is a must have business/investment reference. I've purchased it as a gift for several family members and friends. ... Read more

Book Description

Credit scoring is one of the most successful application of statistical and management science techniques in finance in the last forty years. This unique collection of recent papers, with comments by experts in the field, provides excellent coverage of recent developments, advances and sims in credit scoring. Aimed at statisticians, economists, operational researchers and mathematicians working in both industry and acedemia, and to all working on credit scoring and data mining, it is an invaluable source of reference. ... Read more

Book Description

The Libor market model is still one of the most popular and advanced tools for modeling interest rates and interest rate derivatives. However, finding a useful procedure for calibrating the model has been a perennial problem. Robust Libor Modelling and Pricing of Derivative Products introduces a new approach and its impact on Libor derivative pricing. Intended for newcomers to financial mathematics and engineering, the book serves as a quick introduction to the area of interest rate modelling and pricing. It alsoprovides an innovative treatment of issues concerning Libor calibration and the pricing of exotic instruments, that will appeal to more experienced practitioners in the field. ... Read more

Book Description

This broad survey of unemployment is a benchmark summary of the authors' position which became hugely influential. This second edition brings the analysis up to date by relating it to recent empirical developments. This book is a major source of reference for both scholars and students. ... Read more