List of good books for IT/Quants

[Wallstyouth]

Here are a List of recommended books to read when hired into Equities IT @ Lehman Brothers.

Modern Portfolio Theory and Investment Analysis. E. Elton and M. Gruber. John Wiley & Sons. Great introduction to portfolio theory. Covers concepts such as risk/utility metrics, multi-factor return models, portfolio efficiency/selection, option pricing/risk, etc. Also presents evidence from the financial literature to support one technique over another.

Econometrics of Financial Markets. J. Campbell, A. Lo and A. MacKinlay. Princeton University Press. Similar to Elton and Gruber in the topics it covers, but more geared toward quantitative proprietary trading than portfolio management.

Dictionary of Financial and Investment Terms. J. Downes and J. Goodman. Barron's. Good, compact dictionary of financial terms and concepts.

Options, Futures and Other Derivatives. J. Hull. Prentice Hall. Best overall introduction to derivatives: Covers a wide range of securities including forwards, futures, vanilla and mildly exotic options, interest rate derivatives, etc. Gives basic examples of their use, then proceeds through theoretical valuation and implementation via numerical techniques.

Mathematics of Financial Derivatives: A Student Introduction. P. Wilmott, S. Howison and J. Dewynne. Cambridge University Press. Good coverage of PDE approach to options valuation, which may be a more natural approach for engineers. Not a good introduction to derivatives in general, however. Also, this is by far the most concise presentation of material that these same authors rehash to little additional benefit in larger and more expensive tomes.

Numerical Recipes in C: The Art of Scientific Computing. W. Press, B. Flannery, S. Teukolsky and W. Vetterling. Cambridge University Press. Cookbook approach to numerical methods, covering a whole gambit of techniques, with the notable exception of those for PDEs (e.g., finite difference methods). Short on theoretical soundness and some bugs and numerical stability problems in the code.

Introduction to Numerical Analysis. J. Stoer and R. Bulirsch. Springer-Verlag. Rigorous introduction to numerical methods, with emphasis on proper stability/error analysis and convergence testing--not as eclectic as Numerical Recipes, but much more sound theoretically.

Numerical Methods for Partial Differential Equations. W. Ames. Academic Press. All-around good book on finite difference methods, though mostly focused on physical problems (e.g., heat conduction).

An Introduction to Probability Theory and Its Applications, Vols. I and II. W. Feller. John Wiley & Sons. Very complete overview of probability theory, with financial applications among others.
Time Series Analysis. G. Box, G. Jenkens, and G. Reisel. Prentice Hall. Seminal work on the topic.

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[Muting]

There is one thing I am curious. It seems that Lehman requires so much finance knowledge for IT position. Is there any reason behind it?

 

[Wallstyouth]

Muting I use to wonder this myself until you start looking at the profiles for most of the top managers and division heads most we're engineers or worked on a particular trading system/product and got very competent in that area and eventually end up moving over to the business.

 

[weirluo]

Muting I use to wonder this myself until you start looking at the profiles for most of the top managers and division heads most we're engineers or worked on a particular trading system/product and got very competent in that area and eventually end up moving over to the business.

one example, you have to have a very good understand of many instrument types and their valuation models etc. to help on the IT side, such as automation of cash flow with PBs.