(1) Options, Futures and Other Derivatives John C. Hull Prentice Hall College Div; 5th edition 0-130-09056-5 (2) Handbook of Fixed Income Securities Frank J. Fabozzi (editor) McGraw-Hill Trade; 6th edition 0-071-35805-6 (3) The Complete Guide to Option Pricing Formulas Espen Gaarder Haug McGraw-Hill Trade 0-786-31240-8 (4) A Non Random Walk Down Wall Street Andrew Lo, A. Craig MacKinlay Princeton University Press 0-691-05774-5 (5) RiskMetrics Documents: (i) Long Run (ii) Technical Document (iii) Risk Management (iv) Clear Horizon (v) CreditMetrics J.P. Morgan/RiskMetrics Group, Inc and The RiskMetrics Group, Inc. http://www.riskmetrics.com/techdoc.html to download Acrobat pdf files of these documents (6) The Econometrics of Financial Markets John Y. Campbell, Andrew W. Lo (Contributor), Archie Craig MacKinlay Princeton Univ Press(7) Value at Risk Philippe Jorion McGraw-Hill Trade 0-071-35502-2 (8) Introduction to Stochastic Calculus Applied to Finance Damien Lamberton, Nicolas Rabeau (Translator), Francois Mantion(Translator), B. Lapeyre (Contributor) CRC Press 0-412-71800-6 (9) Derivatives: The Theory and Practice of Financial Engineering Paul Wilmott John Wiley & Sons 0-471-98366-7
(10) Advanced Modeling in Finance Using Excel and VBA Mary Jackson and Mike Staunton John Wiley & Sons 0-471-49922-6
Of all survey questions, the question about top ten books for a financial engineer's library clearly generated the most passionate and thoughtful responses. As mentioned earlier, financial engineering publishers are a prolific lot – new titles are churned out constantly. But based on our survey, the “essentials” are the rock-solid classics.
Of all the books cited, “Options, Futures and Other Derivatives,” by John C. Hull stood head and shoulders above the rest. This classic, now in its fifth edition, was praised for its comprehensive coverage of a wide range of financial topics, and its usefulness for seasoned pros and beginners alike. Readers extolled it as “the” book on derivatives and quantitative finance – one devotee called it his “bible.” Another said “This is 'the' book. Every developer/risk manager/quant [that] I know has a copy. In my opinion, it is the most comprehensive and up-to-date reference on quantitative finance. Good for beginners and pros alike…” Still another paraphrased “…basic knowledge for anybody in derivatives. An absolute must.”
Frank Fabozzi’s book, “The Handbook of Fixed Income Securities” was another popular reader selection for the financial engineer’s library. One respondent explained that this book is particularly important because fixed income securities are important “building blocks” of financial engineering, and if you are serious about financial engineering, this is the book to have. Another reader appreciates Fabozzi’s “meticulous” explanations and examples. And it contains a number of the required readings for the CFA® (Charterd Financial Analyst) exam.
The other selections that round out the top five, “The Complete Guide to Option Pricing Formulas,” by Espen Gaardner Haug, “A Nonrandom Walk Down Wall Street,” by Andrew Lo and A. Craig MacKinlay, and the “RiskMetrics Documents,” which count as one selection – Long Run; Technical Document; Risk Management; Clear Horizon; and CreditMetrics, from J.P. Morgan’s RiskMetrics Group, Inc. also received favorable mention in a number of surveys.
No matter the selection, attributes like “comprehensive,” and “in-depth” seem to be what turn readers on. Industry newcomers and veterans alike told us that the books they consider “essential” are those that provide comprehensive, in-depth, and practical treatment of the fundamental financial engineering topics.