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Shreve's Stochastic Calc. for Finance II

forty two

Joined
5/7/08
Messages
19
Points
11
Hey guys,

I picked up Shreve Vol. 2 a couple weeks back. I was wondering, is it ok if I don't pick up on some of the concepts right away? Some of the concepts are quite straightforward, but sometimes when he goes in the little nuances and technicalites I tend to get a bit lost. Is this natural or is this somewhat of a premonition?

Also, would you recommend complementing Shreve Vol 2. with Baxter & Rennie's Financial Calculus? Any and all comments are welcome.
 
I wouldn't expect most people to pick up on 100% of what's in the book the first time through. I didn't pick up everything the first time I read and I can't say I still understand everything. It will come with time.

But perhaps someone like Andy, Alain, or Bigbadwolf can comment on this.
 
It's perfectly natural not to pick up everything in one go - actually, most don't. There is a reason why this topic took so long to develop. Depending on your background, I would say it VERY hard to study this THOROUGHLY on your own! Often, one doesn't really get something unless another person (ie the teacher) asks you questions you hadn't thought of yourself!
 
What concepts are unclear? Recommendations for supplementary reading will depend on what you find difficult. Generally speaking one should always have several books on a given subject: there's no one ideal book. Move back and forth between different treatments of a given topic.

I have Baxter and Rennie on my shelf, but I'm not sure it works best with Shreve. I suspect your problems with Shreve are more to do with axiomatic probability theory, either in its formulation or in its motivation (i.e., why bother with all this?). But I can't suggest anything until I know more.
 
I have self-studied first six chapters in Shreve II. IMO, if you get lost in the Math side, try to refresh your Probability and Calculus. On the other hand, when you don't understand how the option works (e.g. Risk Neutral Measure), find a quick note about Option/Forward trading may help ^^

* I spent more than 4 months with it but now I come back to Math subject (Numerical Analysis, Real Analysis, ...) ^^ Good luck
 
Minh Tran & Bigbadwolf,

Thank you for you replies - I went back and looked at the areas I hard trouble with and turns its the axiomatic treatment of probability. I'm fine with the calculus and finance aspects of it but its the probability thats giving me a bit of trouble.

Are there any books you can recommend that I can use to get up to pace with probability? I picked up "Measure, Integral, and Probability" by Capinski and Kopp. So far, the book seems to be a good supplement. Are there any others that I should perhaps consider?
 
Another good book to look at would be "Measure and Probability" by Patrick Billingsley. But since you've already picked up Capinski and Kopp, I'd recommend sticking with that book. I would suggest working studying Billingsley once you've finshed Capinski and Kopp.

Also, as ctassen pointed out, don't expect to pick up everything the first time around. Stochastica calculus isn't exactly a walk in the park. :D
 
forty two said:
Are there any books you can recommend that I can use to get up to pace with probability? I picked up "Measure, Integral, and Probability" by Capinski and Kopp. So far, the book seems to be a good supplement. Are there any others that I should perhaps consider?
Click to expand...

You're in good company with Capinski and Kopp. The problem some people have with rigorous probability is one of motivation: What's the raison d'etre for measure-theoretic probability? Why bother plowing through all those arid definitions and theorems? What's really going on? One good book that explains this is Shafer and Vovk's Probability and Finance. Since it's pricey, make sure you see the book before committing to buy it. Another one -- but not so relevant -- is von Plato's Creating Modern Probability. The same caveat about inspecting the book before committing to buy it applies here as well.
 
forty two said:
I picked up Shreve Vol. 2 a couple weeks back. I was wondering, is it ok if I don't pick up on some of the concepts right away?
Click to expand...

When I got it first and opened I thought I will have a heart attack :)

So, if you don't pick up "some" you are in a pretty good shape.
 
I just thought I would throw this in. If you go to BookFinder.com you can usually find international editions of many textbooks. They usually sell for around $30 and are the same as the US version but are softcover, generally black and white, and obviously lower page quality. The material, however, is still the same. If you are planning on buying several textbooks, looking for the international version isn't a bad idea IMO.

I found Creating Modern Probability for 38 new. Probability and Finance was still pricey.

Jeff
 
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