This concise textbook provides a unique framework to introduce Quantitative Finance to advanced undergraduate and beginning postgraduate students. Inspired by Newton's three laws of motion, three principles of Quantitative Finance are proposed to help practitioners also to understand the pricing of plain vanilla derivatives and fixed income securities.
The book provides a refreshing perspective on Box's thesis that "all models are wrong, but some are useful." Being practice- and market-oriented, the author focuses on financial derivatives that matter most to practitioners.
The three principles of Quantitative Finance serve as buoys for navigating the treacherous waters of hypotheses, models, and gaps between theory and practice. The author shows that a risk-based parsimonious model for modeling the shape of the yield curve, the arbitrage-free properties of options, the Black-Scholes and binomial pricing models, even the capital asset pricing model and the Modigliani-Miller propositions can be obtained systematically by applying the normative principles of Quantitative Finance.
Sample Chapter(s)
Foreword (41 KB)
Chapter 1: Introduction (152 KB)
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Contents:
- Introduction
- Brief Introduction to Four Major Asset Classes
- Principles of Quantitative Finance
- Interest Rates
- Derivatives with Linear Payoffs
- Derivatives with Nonlinear Payoffs
- Binomial Models
- The Black–Scholes Model
Readership: Advanced undergraduates and graduate students in quantitative trading; practitioners who are interested to find out how models are derived
ab initio.
"Christopher Ting belongs to the select group of finance academics who are able to wade into the messiness of the real world and distil truth from theory. The book reflects his ability to straddle both worlds and would be highly recommended for this reason alone. As a bonus, he is also an entertaining writer and able to make complex topics accessible to a wider audience."
Philip FERNANDEZ
Managing Director
DBS Bank
"I enjoy reading the book, which is written in an accessible manner suitable for self-study. Filled with historical anecdotes from science and economics, it will be helpful for both students and practitioners to form a good intuitive and mathematical foundation to quantitative finance."
Teng Hwee NEO, PhD, CFA
Chief Investment Officer
Head of Investment Products and Solutions
UOB Private Bank
"I read this book with interest. I like Ting's philosophical comments on the basic principles of finance. The proof of the similarity law in Brownian motion is interesting. Though this is quite well known in the physics literature, it is less well known in finance."
Yue Kuen KWOK
Professor of Mathematics
Hong Kong University of Science and Technology
"I read the book on the flight back to Japan. It takes mastery to turn a book on quants into an airport read and a compelling page-turner. This book is simply brilliant. It is concise and complex concepts are explained simply. They can be applied either by beginners or as a workbook for seasoned quants audience. I liked the Miller-Modigliani and the Derman-Taleb at the end, very instructive. A great strength of this book is the multi-disciplinary approach, not only across asset classes but instruments as well. This book should be on everyone's desk."
Laurent BERNUT
CEO Alpha Secure Capital
Dr Christopher Ting is an associate professor of Quantitative Finance Practice at the Lee Kong Chian School of Business, Singapore Management University. He serves as the area coordinator (department head) for Quantitative Finance, and he is also the founding director of SMU's Master of Science in Quantitative Finance (MQF) Program jointly offered by the Cass Business School.
He earned his bachelor degree in mechanical engineering and master degree in experimental physics (biophysics) from the University of Tokyo on two Japanese Government scholarships administered by the Public Service Commission (PSC) of Singapore. Upon returning from overseas study and having served the full-time National Service as an infantry officer, he was assigned by the PSC to work as a research scientist at the DSO National Laboratories. While working, and having published four research papers, he earned his PhD in theoretical physics from the National University of Singapore.
Dr Ting rose to the rank of laboratory head and he had managed over 40 high-caliber research scientists and engineers in DSO. In 1999, he was conferred the title of Distinguished Member of Technical Staff. Moreover, Dr Ting was awarded the Defence Technology Award (Team) twice and he holds a US patent in natural language processing.
In 2009, Dr Ting became a proprietary trader with a futures trading company, Promisedland (Simex Trader) Pte Ltd. He also applied quantitative finance methods to develop strategies for trading index futures subsequently.
As a result of his experience in conducting research and development in many fields as required by DSO and SMU, as well as his proprietary trading experience, he has published many papers in diverse disciplines of Physics, Computer Science, Finance, and Quantitative Finance. In addition, he has the experience of providing consultancy to the Singapore Exchange and May Bank (Singapore), among others.
Under his leadership, he revamped the Simulated Trading Room (STR) in SMU, equipped each terminal with trading software (CQG and Trading Technologies) used by professional traders, and brought trade and quote data streaming live from SGX, Eurex, and CME to STR through the exchanges' university outreach programs. He also spearheaded an initiative to elevate SMU's MSc in Quantitative Finance program to an academic partner of the Global Association of Risk Professionals (GARP).
Dr. Ting's current research interest includes quantitative trading & investment, and portfolio analytics & risk management.
