How can I learn more about mathematical finance?
December 17, 2019 11:13 AM   Subscribe

Ok so I'm a CS major that has recently developed an interest in finance. I wanted to learn more about mathematical finance. I started with this course: I also started reading Brealey, Myers and Allen's Principles of Corporate Finance.

I don't know if those resources are way too tough for a beginner. I've had trouble understanding the book's second chapter. I get the math but not the intent behind it. I'm also reviewing math, Calculus, Linear Algebra, Probability, Statistics, etc.

I'd really appreciate it if someone could help me out. I can't seem to find a good starting point for finance.

I'm learning because I want to learn to invest, specifically through the use of complex mathematics.
posted by Tarsonis10 to Education (11 answers total) 3 users marked this as a favorite
If you need to use complex mathematics I suspect you want to get into trading, not investing. I'd start with getting clear on that difference.
posted by Jobst at 11:31 AM on December 17, 2019 [1 favorite]

Response by poster: I know those things are different. I'm not sure that I agree that you can use math for one but not the other.

From what I've read of the book I mentioned they use mathematical concepts to valuate investments as well as different financial tools such as annuities and perpetuities.
posted by Tarsonis10 at 11:46 AM on December 17, 2019

This is the course referenced above.
posted by bricoleur at 11:50 AM on December 17, 2019

Response by poster: ^ Thanks, I did not realize I had forgotten to put that link.
posted by Tarsonis10 at 12:02 PM on December 17, 2019

Here's a great paper on programming financial instruments:
Composing contracts: an adventure in financial engineering Github repo in there a few hits down.

Do you know Black-Scholes? That was a milestone. Here's a NOVA documentary on the formula and a company that it spawned, Long-Term Capital Management L.P. (LTCM). Trillion Dollar Bet

Here's a talk about a finance company, Jane Street, and their choice of programming language, OCaML. Caml Trading talk at CMU
posted by at at 12:30 PM on December 17, 2019 [1 favorite]

As a test finance project, you can use the Black-Scholes model to value options using real-time options data, and you can (fakely!!!!!!!!!!!!!!!!!!!) make options purchases and see if the model-based trading works out and makes or loses money, and you can take the data you have gained to see if can improve your trading model (again, investing and trading are not the same) so that you regularly make money. You can use these models to highlight in interviews that you have some idea of corporate financial modeling that will help you get a job. Math + stats + probability will help you value stocks in real time, and you can use that data to make purchasing decisions.
posted by The_Vegetables at 1:34 PM on December 17, 2019

(I hope you are doing this with an eye to employment and not to day trading. The textbooks will not explain to you how to construct your back office such that it's possible to make money, and you can't afford it anyway.)
posted by praemunire at 1:44 PM on December 17, 2019 [1 favorite]

Response by poster: No I'm not trading, that's a fool's game unless you have hedge fund level money.

I'm not doing for a job either. I like math, especially applied math. Finance is just my field of preference, secondary interest.
posted by Tarsonis10 at 3:29 PM on December 17, 2019

Depending on how much math you know, I'd also recommend Wharton's Michael Steele's work (he's fabulous professor), such as Stochastic Calculus and Financial Applications
posted by shaademaan at 3:54 PM on December 17, 2019

The best single short book on this topic that requires undergrad level math is An Introduction To Quantitative Finance by Blyth.

The Columbia Coursera Financial Engineering and Risk Management seems to be popular. The Yale course Financial Markets is also popular, but less technical.
posted by caek at 10:16 PM on December 17, 2019 [1 favorite]

If you are more interested in investing than trading math, you can research 'portfolio theory' and learn to calculate your 'personal efficient frontier', which basically takes all the funds you are invested in, finds the correlation between them, and adjusts your allocation to be efficient (via investing more in one than another over the course of the year). Efficient portfolio allocation is generally considered to be the #1 goal of investing if you have the data to compare your various funds.
posted by The_Vegetables at 8:28 AM on December 18, 2019 [1 favorite]

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