Financial Calculus

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1. pjacotgApr 2025
   There's a book on financial calculus by Rennie and Baxter [0] that gave me very good intuition on the ideas behind option pricing. It starts with the binomial model and moves on to using stochastic calculus. If you get into the topic you'll want to read more in depth books, but this may be a good place to start.

   [0] https://www.goodreads.com/book/show/307698.Financial_Calculu...

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2. dalerobertsNov 2012
   I think the author of the article hasn't really grasped the concept of option pricing. You are not calculating an 'expected value'.

   The whole point of the theory is there is a correspondence between a 'no-arbitrage argument' and calculating an expectation under the 'risk-free' measure. The mathematical operation of expectation E is only a tool. This link between no-arbitrage and martingale theory is called the 'Fundamental Theorem of Asset Pricing'.

   There is a nice (basic) explanation of this idea in the book by Baxter and Rennie "Financial Calculus" where they compare the 'expected value' approach of a bookmaker and the 'no-arbitrage' approach.

   For a more advanced explanation, you can have a look at the book by Delbaen and Schachermayer (2006).

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3. shogunmikeOct 2011
   If by 'quantitative finance' you mean option pricing then check out the books by Mark Joshi:

   - 'The Concepts and Practice of Mathematical Finance' - 'C++ Design Patterns and Derivatives Pricing'

   Also of note is Baxter & Rennie:

   - 'Financial Calculus: An Introduction to Derivative Pricing'

   Once you've studied those and have a good grasp of Measure Theory, you'll want to tackle Shreve, Vol II.

   And a brief plug of my (slightly out of date!) quant finance website, Quantstart.com.

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4. CreateNov 2009
   intraday NN is irrelevant because NN are prone to overlearning, so the stuff becomes even more horrible - actually in reality you don't care which way it moves, as long as it moves: this is why the "big fish". It is like owning the place in Vegas: you don't care about the bets (much less about their substance or "direction"), as long as there are bets.

   if you really want intraday, think about news.google.com and http://rs2007.limsi.fr/index.php/TLP:Page_12 to automatically tweak the few k base parameters (SVM, associative memory etc).

   http://www.bbc.co.uk/science/horizon/1999/midas.shtml

   Options, Futures and Other Derivatives, J. C. Hull, Prentice Hall Int’l

   Financial Calculus, M. Baxter and A. Rennie, Cambridge University Press

   but the ML part is almost irrelevant: it is not the lever in the leverage (think CDO trade).

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