Quantitative Finance Reading List - QuantStart

This is the big one!

I've tried to list as many great quantitative finance books as I can.

The lists cover general quant finance, careers guides, interview prep, quant trading, mathematics, numerical methods and programming in C++, Python, Excel, MatLab and R.

Canary Wharf Tube Station, London - Many investment banks reside here, via Harshil.Shah

If you have any suggestions for more books, please contact me at mike@quantstart.com and I'll get them added.

This list was last updated on 8th April 2013.

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One area that routinely catches out prospective quants at interview is their lack of basic financial markets knowledge. It's all well and good being the best mathematician and programmer on the globe, but if you can't tell your stock from your bond, or your bank from your fund, you'll find it a lot harder to pass those HR screenings.

These books also make much better bedtime reading than graduate texts on stochastic calculus...

On top of needing to be aware of capital markets and how they function, the mathematics of derivatives pricing and quantitative trading methods, being able to program in C++ and possibly Python, you also need to study how to ace that quant interview!

The following books are fantastic resources for getting you prepared. Make sure you study not only the content of the brainteasers, but also try deconstructing how they're put together and what you're really being asked.

Bank Of America, Canary Wharf, via Harshil.Shah

The career paths for quants have shifted recently towards direct quantitative trading and away from derivatives pricing.

Although Black-Scholes theory is still immensely important for hedging and exotic option pricing purposes, it is now necessary to be intimately familiar with systematic trading and the firms that employ it.

It is difficult to get hold of information from funds about their trading strategies (no surprise there!), but these books provide an in-depth overview into how the "black box" operates.

This would more accurately be described as financial engineering as the books listed below relate to derivatives pricing theory.

Although you don't need to read every book below, they are all good. Each provides a different perspective or emphasis on options pricing theory.

If you know you are definitely going to become a derivatives pricing quant then you should aim to study as many books from the following list as possible.

Gherkin and Lloyds Building, London, via Duncan Harris

• Interest Rate Models - Theory and Practice: With Smile, Inflation and Credit (Springer Finance) - Damiano Brigo, Fabio Mercurio
• Interest Rate Modeling. Volume 1: Foundations and Vanilla Models - Leif B.G. Andersen, Vladimir V. Piterbarg
• Interest Rate Modeling. Volume 2: Term Structure Models - Leif B.G. Andersen, Vladimir V. Piterbarg
• Interest Rate Modeling. Volume 3: Products and Risk Management - Leif B.G. Andersen, Vladimir V. Piterbarg
• The SABR/LIBOR Market Model: Pricing, Calibration and Hedging for Complex Interest-Rate Derivatives - Riccardo Rebonato, Kenneth McKay, Richard White
• Discounting, Libor, CVA and Funding: Interest Rate and Credit Pricing (Applied Quantitative Finance) - Chris Kenyon, Roland Stamm
• Interest Rate Swaps and Their Derivatives: A Practitioner's Guide (Wiley Finance) - Amir Sadr
• Term-Structure Models: A Graduate Course (Springer Finance / Springer Finance Textbooks) - Damir Filipovic

C++ is one of the hardest areas for beginning quants to get to grips with.

Since it is such a large programming language, and may in fact be a quant's first taste of programming, it can be extremely daunting.

The first five books on the list, if understood properly, would make you a competent C++ programmer. By reading the remainder, you will become an expert and probably the best in your peer group.

• Sams Teach Yourself C++ in One Hour a Day (7th Edition) - Jesse Liberty, Rogers Cadenhead
• C++: A Beginner's Guide, Second Edition - Herbert Schildt
• Accelerated C++: Practical Programming by Example - Andrew Koenig, Barbara Moo
• Introduction to C++ for Financial Engineers: An Object-Oriented Approach (The Wiley Finance Series) - Daniel Duffy
• Effective C++: 55 Specific Ways to Improve Your Programs and Designs (3rd Edition) - Scott Meyers
• More Effective C++: 35 New Ways to Improve Your Programs and Designs - Scott Meyers
• Exceptional C++: 47 Engineering Puzzles, Programming Problems, and Solutions - Herb Sutter
• More Exceptional C++: 40 New Engineering Puzzles, Programming Problems, and Solutions - Herb Sutter
• Exceptional C++ Style: 40 New Engineering Puzzles, Programming Problems, and Solutions - Herb Sutter
• C++ Coding Standards: 101 Rules, Guidelines, and Best Practices - Herb Sutter, Andrei Alexandrescu
• API Design for C++ - Martin Reddy
• Effective STL: 50 Specific Ways to Improve Your Use of the Standard Template Library - Scott Meyers
• The C++ Standard Library: A Tutorial and Reference (2nd Edition) - Nicolai Josuttis
• C++ Templates: The Complete Guide - David Vandevoorde, Nicolai Josuttis
• Modern C++ Design: Generic Programming and Design Patterns Applied - Andrei Alexandrescu
• C++ Template Metaprogramming: Concepts, Tools, and Techniques from Boost and Beyond - David Abrahams, Aleksey Gurtovoy
• The Boost C++ Libraries - Boris Schäling
• Beyond the C++ Standard Library: An Introduction to Boost - Björn Karlsson
• Introduction to the Boost C++ Libraries; Volume I - Foundations - Robert Demming, Daniel Duffy
• Introduction to the Boost C++ Libraries; Volume II - Advanced Libraries - Robert Demming, Daniel Duffy
• C++ Concurrency in Action: Practical Multithreading - Anthony Williams
• Programming with POSIX Threads - David Butenhof
• Advanced Linux Programming - Mark Mitchell, Alex Samuel, Jeffrey Oldham
• Advanced Programming in the UNIX Environment (2nd Edition) - W. Richard Stevens, Stephen Rago
• Advanced UNIX Programming (2nd Edition) - Marc Rochkind
• Design Patterns: Elements of Reusable Object-Oriented Software - Erich Gamma, Richard Helm, Ralph Johnson, John Vlissides
• Head First Design Patterns - Elisabeth Freeman, Eric Freeman, Bert Bates, Kathy Sierra, Elisabeth Robson
• The C++ Programming Language, 4th Edition - Bjarne Stroustrup
• C++: The Complete Reference, 4th Edition - Herbert Schildt
• C++ Pocket Reference - Kyle Loudon
• STL Pocket Reference (Pocket Reference (O'Reilly)) - Ray Lischner
• C++ Cookbook (Cookbooks (O'Reilly)) - D. Ryan Stephens, Christopher Diggins, Jonathan Turkanis, Jeff Cogswell

In recent years Python has rapidly become a staple in the quantitative finance world.

I personally know of many funds that employ it as the end-to-end computational infrastructure for carrying out systematic trading.

It is an easy language to learn, but it is harder to master, because it has many useful libraries. Regardless of which type of quant you wish to become, I would suggest learning Python, as it is only going to become more widely adopted as time goes on.

City of London, via Duncan Harris

Although Python is rapidly gaining ground in the hedge fund space, many exceptional individuals were trained up on MatLab in academia and took that expertise to the financial markets. You will still see a substantial usage of MatLab within funds.

If you have been applying for jobs with MatLab in the job description, the following books will help you impress your interviwer.

• Matlab, Second Edition: A Practical Introduction to Programming and Problem Solving - Stormy Attaway
• Numerical Methods in Finance and Economics: A MATLAB-Based Introduction - Paolo Brandimarte
• Stochastic Simulation and Applications in Finance with MATLAB Programs - Huu Tue Huynh, Van Son Lai, Issouf Soumare
• Simulation and Optimization in Finance + Website: Modeling with MATLAB, @Risk, or VBA - Dessislava Pachamanova, Frank J. Fabozzi
• Numerical Methods with MATLAB - Amos Gilat, Vish Subramaniam
• The Mathematics of Derivatives Securities with Applications in MATLAB - Mario Cerrato
• Financial Modelling: Theory, Implementation and Practice with MATLAB Source - Joerg Kienitz, Daniel Wetterau
• MATLAB: An Introduction with Applications - Amos Gilat
• Getting Started with MATLAB: A Quick Introduction for Scientists and Engineers - Rudra Pratap
• An Engineers Guide to MATLAB (3rd Edition) - Edward B. Magrab, Shapour Azarm, Balakumar Balachandran, James Duncan, Keith Herold, Gregory Walsh
• Modeling Derivatives Applications in Matlab, C++, and Excel - Justin London
• Financial Risk Forecasting: The Theory and Practice of Forecasting Market Risk with Implementation in R and Matlab - Jon Danielsson

As with MatLab, R is extensively used within systematic funds as it is a natural language with which to carry out advanced statistical analysis.

A great way to learn R is to pair the following books with an online course in statistics (which will often make use of R anyway). This will really help you get to grips with the methods of quantitative trading.

Although not possessing the computational horsepower of C++ or Python, Excel is probably the most widely used software in the financial world.

If you are working on an investment banking prop trading desk as a quant, you will almost certainly be asked to implement functions in Excel for the traders at some stage. Having a working knowledge of Excel prior to interview will give you yet another edge over your peers when applying for that exciting quant role.

Phew! That was quite an extensive list. Congratulations if you have made it this far...

Please send me any suggestions of great quant books you've read that have helped you on your way. I am always willing to add more to this list. You can contact me by sending an email to mike@quantstart.com.

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