Financial Books

I have been compiling a quant finance reading list for my own use. My goal for the list is to have a research and scientific bent since the field is still ripe with interesting research questions.

One of the textbooks for the University of Chicago's economics Ph.D. program seems to be a pretty good introduction to time series analysis (the bread and butter theory behind mean reversion strategies): Prof. Ruey Tsay's Analysis of Financial Time Series.

The classic is of course Hull's Options, Futures & Other Derivatives with Derivagem CD Value Package (includes Student Solutions Manual for Options, Futuresd Other Derivatives) (7th Edition). The material seems to be more geared towards i-bank investments such as bond modeling than small time quantitative trading in equities. However, the markets are all related in the end so it is useful to gain a solid background.

I have only skimmed through the first few chapters in Ganapathy Vidyamurthy's Pairs Trading: Quantitative Methods and Analysis (Wiley Finance), but I like what I am seeing so far. For the fundamentals, it mentions Engle-Granger cointegration test, but I did not get far enough to see if it is covered at length. It covers Stat Arb and Risk Arb. I like how it gives significant background and references (though perhaps not the best references) on each subject.

On more of an entertainment bent, The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance is an excellent read. Some of the reviews on Amazon suggest that Chernow is too partial to the Morgans, but I felt that the robber baron perspective is well hashed out in other books and articles. Most such volumes only give a superficial treatment of the Morgans. This book is quite comprehensive. It reads like a historical novel. I highly recommend it.

At the moment, Principles of Quantitative Development is one of the few books (perhaps the only one) on the subject of implementation of a trading platform. It includes discussions about implementations of applicable design patterns, derivatives pricing tools, trade life cycle, data structures, and general trading platform architecture considerations. It even has a short section on functional programming. There are very few reviews of the book so far, mostly very negative.