Re:Understanding Jane Street
by keithalewis on Tuesday August 02, 2022 @08:07AM
(#32317546)
My writeup: https://keithalewis.github.io/math/um.html for modeling and https://keithalewis.github.io/math/uf.html on now to more accurately reflect the real world. I have taught Derivative Securities at NYU, Columbia, Cornell, and Rutgers over the past 14 years, but my day job is turning math into software that produces numbers people running a business will pay for. The textbooks are missing some important things.
Nicely organized and dense.
Thanks for the material!
Hull's Futures, Options and other derivatives was on the bookshelf of a friend who worked at JS - it was their bible.
I always throught market microstructure was more important, but they insisted a disciplined application of the maths (as per the bible of Hull) was where the magic really was.
If you come from a pure math theory first background I would advise starting out with Björks “Arbitrage theory in continuous time”, I personally found the lack of rigor and superfluous examples in Hull frustrating and found Björk much more approachable then you can look into Hull for real life practicalities like daycount conventions, etc. If you want to go into complex derivatives pricing I would advise looking at the Andersen and Piterbarg trilogy.
I would also suggest to forget about Hull and Wilmott and would suggest to start with the excellent book by Shreve: "Stochastic Calculus for Finance. Volume II: Continuous Time Models".
Then, you can quickly read Bjoerk, work through Brigo/Mercurio (if you like that style) or Andersen/Piterbarg. Alternatively, if you want to fully dive into into the subject after Shreve, Musiela/Rutkowski: "Martingale Methods in Financial Modelling" is wonderful.
I'd say that Shreve and Musiela lack rigour and are too focused on trivia, name-dropping and anecdotes. Jiao's "Infinite-dimensional methods in amassing vast bags of gold" is unsurpassed. For its coverage of Black-Scholes, I'd also recommend Schulz's "Good Grief, Charlie Brown". Sorry, everyone seemed to be doing this so I felt I should contribute too.
I honestly can't tell exactly when the thread meandered into satire.
That's more than enough on the instrument math side, most of what you'll see is pretty mundane stuff, unless you end up on an exotics structuring desk.
I'd also note that JS and other MMs mostly don't do anything requiring you to know the intimate details of these things, a lot of it is understanding how the market works rather than the deep instrument math. That might mean other kinds of math of course.