Review 'A Primer for the Mathematics of Financial Engineering' Second Edition

[Joy Pathak]

As many of you know Dr. Dan Stefanica released the second edition of his best seller book, ‘The Primer for the Mathematics of Financial Engineering’. When I heard that Dr. Stefanica would be personally signing every copy of the first set of shipments I went ahead and got myself the book and a copy of the solutions manual. Two weeks later, I see it only fitting that I write a review about it.

As many readers of the first edition will notice the book has gone through a bit of an overhaul. There is a significant amount of material added. The size of the book is bigger and the font is smaller. Dr. Dan Stefanica has found a way to literally combine a whole introductory course in Financial Engineering in a 324 page book. As I have mentioned before, this book is a MUST HAVE for ANY financial engineering student. If you have an admission for MFE, pick up this book right away. You will not regret it. The book is not only a great preparation for MFE programs but also an excellent primer for quant interviews.

As the book states some of the new things added in the second edition are Dollar duration, dollar convexity, DV01, Lagrange multipliers (extensive), maximal return portfolios, numerical precision of finite difference approximations of Greeks, parallel shifts in yield curve and more. The book also has been reorganised to give a better streamlined movement as the user goes through the book. Some proofs and basics have been moved to the appendix for readers to have a look at and the main part of the book is now only filled with relevant practical and theoretical information. The book covers several important topics: Put-Call parity, interest rates, bonds, Black-Scholes formula, implied volatility, portfolio optimization and many more quant finance topics. As I have mentioned before it truly is a unique PRIMER in financial engineering. Adding the new topics has helped to give students a deeper understanding about the fields thereby giving them a head-start basically for the courses in their first semester. I had some criticism of the book last time which had been mentioned by other readers as well. Dan has mostly met everyone demands which is also truly amazing to see. You don’t usually see writers listen to their readers in such detail. The one thing I would still have liked is to have a Bootstrapping code, but I guess that is one of the things the readers will have to figure out for themselves. Many program curriculums that I have seen have parts of this book as a course. Some universities that offer Pre-MFE programs have also made this book a required text book. And I am not surprised as it should be.

The book is also great for interviews. All interview books do a general Q&A format. This book first explains all the concepts in great depth and then puts forwards the question that can be asked in interviews. And trust me, the majority of the questions are typical quant interview questions, from the first round general questions, to 2-3^rd round deeper analytical questions. The solutions manual provides mostly thoroughly explained answers to the questions giving the reader a better grasp of the material. Dr. Stefanica always says that the biggest compliment he has got for his book is the fact that during interview season he finds the book in the hands of all his students in the Quant Lounge at Baruch College. And this is very true. We all in the Baruch MFE program can be seen going through Dr. Stefanica’s book before any quant interview. I used it on many occasions whether it was for a trading interview (lots of questions about options/put call partiy/Greeks) or for a desk quant internship (finite difference, Newton’s methods, algebra, etc).

But why listen to just me?

Here are some more reviews from student and a recent graduate..

Dr. Dan Stefanicas's refresher is an excellent overview of the introduction to the math involved in pricing financial instruments. From basic bond arithmetic, and a thorough treatment of the Black Scholes Framework, this book makes for a great introduction into the mathematics of Finance to both future students studying in math, and those who would want to attain careers related to finance. This book is also very solid on the basic knowledge required to do well in junior level positions and I find myself browsing through it to review any concepts that might have slipped my mind since the last time I cracked it open. Well worth the money. - MFE student

It is a pleasure for me to write this review in favour of Dr. Dan Stefanica’s primer book. I had bought the first edition when I started my program and have recently ordered the second edition to the book. I recently went through the recruiting process for quant analyst positions at banks and this book aided me greatly. Many of the questions asked in the book were basically right off the interviewer’s questionnaire. The thing I like the most about the book are the pseudocodes. It helped me a lot during my first semester as some of our profs did not go into much detail. In the new book I like the addition of Dollar duration convexity and DV01. Every student in MFE or MSCF or MSFM program should know these concepts.Every financial engineering students should get this book! - Recent MSFM Graduate

 

[Caesar]

 yes its a really good book.  Its going to be quite challenging completing this book in 8 days in the premfe seminar.  

 

[dstefan]

 The Baruch MFE incoming students taking the two weeks refresher seminar are required to read about 3/4 of the book and do the exercises, and there is a test on that material the first day of class. The majority of the material taught in the seminar is actually new material not covered in the book.

 

[robin.lo]

Is there any plan to Translate this book to Chinese? or how can i buy a PDF?