Financial Mathematics

S

sydneymyke86

Newbie
Messages
2
Likes
0
Hi,

I know that working in an environment surrounded by numbers you have to understand them fairly well, but what level of understanding is most beneficial for getting results (making money)? Do you feel that undergraduate topics such as matrix algebra, linear programming, calculus and probability / statistics with the addition of pc and excel skills are sufficient?

I know that the level of knowledge needed will vary based upon the type of financial product that is traded, so what type and level of mathematics is required to trade and profit with equity securities? derivatives (options, futures, warrants)? forex? commodities?

Also, what type of mathematics do Warren Buffett and George Soros use in making their decisions?

Thanks

sydneymyke86
 
Buffett is a fundamentalist, and does not appear to be an advocate of technical analysis.

Having a good level of understanding of different areas of Mathematics is fine, but many clever Mathematicians have tried, and failed, to obtain a quantitative understanding of market behaviour.

The degree of insight a person has is more significant.

The recent book by renowned mathematician Benoit Mandelbrot would be excellent reading. He is known for his work on fractals, but has long had a fascination with the markets. It is called "The (mis)behaviour of financial markets" ISBN 1861977905
 
"Having a good level of understanding of different areas of Mathematics is fine, but many clever Mathematicians have tried, and failed, to obtain a quantitative understanding of market behaviour.

The degree of insight a person has is more significant."

Agree with Pippin. Another enjoyable book - "A mathematician plays the market" by Paulos ISBN
0-713-99685-4
 
Equities - very little maths needed to understand the basics but of course the skies the limit.
Derivs - calculus a definite.
Fixed Income - a level + maths would be a help.

Probability and stats are also very useful in all financial areas. I would also add as a useful skill in analysing finance stuff computer programming. Certainly not a requirement but helps a lot even if only vb in excel.
 
all you need to know is how to add, subtract and multiply so you can work out weather your in profit or loss, unless you want to create a system where it predicts the market for you (if that is possible!). The movie "The Bank," is an excellent movie (my favourite) where he uses mandelbrot fractals, Chaos Theory and Non Linear Dynamics to predict the market to every exact movement. That is my dream but i dont know how realistic it is.

P.s. Watch "The Bank."
 
The following are just some of the titles that are essential to trading, after mastering them and passing the exams one can trade profitably:

Options, Futures and Other Derivatives by John Hull, Prentice Hall

Value at Risk by Philippe Jorion, McGraw-Hill

Risk Budgeting: Porfolio Problem Solving with Value-at-Risk by Neil D. Pearson, Wiley

Statistical Techniques in Business and Economics by Douglas A. Lind, William G. Marchal and Robert D. Mason, McGraw-Hill

Financial Risk Management: A Practitioner's Guide to Managing Market and Credit Risk by Steve L. Allen, Wiley

Fixed Income Securities by Bruce Tuckman, Wiley

Managing Credit Risk by John B. Couette, Wiley

They are like, postgraduate level. :arrowu:

About 10 to 20 years ago something like Probability was taught at "O" or "A" levels.
 
Last edited:
Anonymous said:
The following are just some of the titles that are essential to trading, after mastering them and passing the exams one can trade profitably
Click to expand...
Hello Anonymous,

Where did you get this information from? Since when did Jesse Livermore have to pass exams to make money?

I asked this question because I was curious to the level of mathematics which I should learn, I am not planning on being a quantitative trader, rather a trader using a careful blend of technical (some quantitative) and fundamental analysis, with strict money management rules. I later want to make real money partnering and investing into corporate structures, like Warren Buffett.

sydneymyke86
 
Hello sydneymyke86,
I have been trading US shares intra day full time for my family's living since 1999 and in my opinion and experience only simple arithmetic is needed. Naturally opinions will vary on the subject.
Other factors and qualities are needed to be a successful trader.
The only caveat is that some grasp of mathematics is needed if you decide to trade options.
Richard
 
For Executive education, OPEN ENROLLMENT PROGRAM CATEGORIES include:

Financial Management
Driving Corporate Performance: Aligning Scorecards, Systems, and Strategy
Finance for Senior Executives
Private Equity and Venture Capital
Strategic Finance for Smaller Businesses
Strategic Financial Analysis for Business Evaluation


MBA Curriculum in Finance:

The Required Curriculum Courses include: Finance (2 term course)

The Elective Curriculum Courses include:

Acquisitions and Alliances
Capital Markets
Corporate Financial Engineering
Corporate Financial Flexibility
Corporate Financial Management
Corporate Financial Management
Creating Value Through Corporate Restructuring
Entrepreneurial Finance
HC: Value Investing Workshop
International Entrepreneurial Finance
Investment Management
Large-Scale Investment
Tax Factors in Business Decisions
Venture Capital and Private Equity

After that there is the Doctoral Program.

After a one has passed all the exams he can trade profitably. Because a country cannot have too many rich people. If too many people without good university degrees can make money and get a membership on the recognized exchanges no one will be working.
 
Anonymous said:
For Executive education, OPEN ENROLLMENT PROGRAM CATEGORIES include:

Financial Management
Driving Corporate Performance: Aligning Scorecards, Systems, and Strategy
Finance for Senior Executives
Private Equity and Venture Capital
Strategic Finance for Smaller Businesses
Strategic Financial Analysis for Business Evaluation


MBA Curriculum in Finance:

The Required Curriculum Courses include: Finance (2 term course)

The Elective Curriculum Courses include:

Acquisitions and Alliances
Capital Markets
Corporate Financial Engineering
Corporate Financial Flexibility
Corporate Financial Management
Corporate Financial Management
Creating Value Through Corporate Restructuring
Entrepreneurial Finance
HC: Value Investing Workshop
International Entrepreneurial Finance
Investment Management
Large-Scale Investment
Tax Factors in Business Decisions
Venture Capital and Private Equity

After that there is the Doctoral Program.

After a one has passed all the exams he can trade profitably. Because a country cannot have too many rich people. If too many people without good university degrees can make money and get a membership on the recognized exchanges no one will be working.
Click to expand...
Er, yes, quite so...and that is the end of the beginning.
 
You must log in or register to reply here.

Similar threads

C
Young need guidance
Replies
10
Views
2K
15 min tlb
1
B
Career/Studies Advice Please
Replies
0
Views
1K
berlinhammer
B
X
I am an Applied Mathematics... advice?
Replies
4
Views
2K
MajorDutch
MajorDutch
J
Just Graduated and need some career advice.
Replies
3
Views
2K
Adamus
Adamus
G
Does Warren Buffett Invest in Bonds?
Replies
0
Views
2K
genelawson8
G
Top