Quant Intern: What should I read up on

[AlexanderMcFarlane]

I have an interview coming up next week in London for a quant role within a top German bank.

The role is within the market risk department doing pricing and model validation from what the job spec. Is indicating.

It seems that I'll be validating derivative pricing models as well as verifying and validating exotic trade bookings for equities and commodities.

I am a BSc. Physics grad. I did my dissertation on VaR but I don't really know much about derivative pricing or anything about the process of booking exotic trades. I am a damn quick learner though. I've taught myself most of my MF knowledge and find it interesting and easy to pick up.

I have two questions:
1. Can anyone explain to me the basics and challenges of exotic order booking or link me to a good source.

2. Can anyone point me in the direction of an introduction to derivative pricing or just give me the names of some currently used industry models that I can investigate?
As a guide to the level I'm at in pricing, I've written a binomial tree option pricing model in Fortran and proved it's convergence to BSM and I'm looking for something a bit more intense.

Thanks!

 

[Ken Abbott]

Figlewski provides an excellent introduction to derivative pricing. Hull provides the ultimate reference.

You should read OCC 2011-12 first, however, to get model review background.

 

[AlexanderMcFarlane]

Thanks the OCC was really informative, as for Hull do you mean Options, Futures and Derivatives? Also which book by Figlewski do you reckon is the one I should check out?

 

[Ken Abbott]

Thanks the OCC was really informative, as for Hull do you mean Options, Futures and Derivatives? Also which book by Figlewski do you reckon is the one I should check out?

Yes.

For Figlewski, the Financial Options book. The first 100 pages explain the notion of the replicating portfolio exceptionally well. When I read that (20-odd years ago), the light went on.

Also, Steve Allen has some stuff on model risk in his book, I think.