References

[Hull] Options, Futures, and Other Derivatives, Fifth Edition

John C. Hull. 2002 Prentice Hall

This is an excellent reference on everything from interest rate markets, credit risk, hedging strategies, Black-Scholes theory, the greeks, volatility smiles, etc. Hull continues on into exotic options, interest rate derivatives, swaps, Value-at-Risk, using moving averages to compute volatilities, and more. Very little of Hull’s book could be edited out without losing something valuable and Hull’s section on spreads is much more useful than Wilmott’s.

[Wilmott] Paul Wilmott Introduces Quantitative Finance

Paul Wilmott. 2001 John Wiley & Sons, Ltd.

Wilmott has written various books in the computational finance arena, one being a two-volume set (a greatly expanded version of this text), but in this particular text Wilmott and Hull seem to be competing head-on. While Hull and Wilmott each spend a chapter on binomial models, Monte-Carlo methods, value at risk, and credit risk, Wilmott extends that treatment with chapters on portfolio management, RiskMetrics, and CrashMetrics, though these issues are probably beyond the call for the typical NillaHedge user. Wilmott has probably over-diagramed this book - on a content per page basis, I’d pick Hull’s book unless you need or want the chapters on portfolio theory, RiskMetrics, and CrashMetrics.