|Not as portable as a Kindle, but much more satisfying|
These are some of my favourite books and websites. They do not constitute the complete set of financial books. They are not necessary or sufficient to get through an interview for a <insert name of job in finance> position (try this list if that is what you want). Other, possibly better, books are available (you can get a comprehensive guide to trading books here amongst other places). Some of them are only vaguely to do with finance.
With that in mind, enjoy.
- Python cookbook, Beazley and Jones
- Classic computer science problems in python, Kopec
- Effective python, Slatkin (some overlap with the cookbook, but a lot shorter and therefore cheaper)
- Clean code, Martin: Concise and brilliant
- The Art of Unix programming, Raymond: Useful even for non Unix people
- Code complete, McConnell: Large reference manual
- Refactoring: Dry, and I don't like the formulaic approach, but a useful reference manual
- The pragmatic programmer, Fowler: mostly covers the ground of clean code although not as well IMHO, also covers stuff about work practices most useful to software engineers !
- Dreaming in Code, Rosenberg: Entertaining story of when a computer project goes wrong; most useful for professional software engineers
- The mythical man month, Brooks: The law says it has to be on this list, but is'even older than I am and showing it's age.
Alongside this, there is some specific Python that it's super useful to know for finance. I don't actually own these, and I haven't read the third or fourth, but the author is highly rated.
- Python for finance, Hilpisch.
- Python for data analysis; by the creator of Pandas Wes McKinny
- Derivatives Analytics with Python, Hilpisch.
- Python for Algorithmic Trading, Hilpisch (note covers OANDA and FXCM but not IB)
Of course there are other languages than Python like R and Matlab or C (all of which I've used in the past) and Java (which I haven't used extensively, and therefore I naturally hate). This isn't the place for a language war (there is some discussion here of what might work best), but if you want references on material for other languages you might try here (for R), and here (for C++).
There are some coding blogs and websites that I've found particularly useful and interesting.
Automated trading (with interactive brokers)
A very specific coding need is to send orders to a broker. If you use interactive brokers like me (via IBinsyc and using the IB controller), then you'll need to become very familiar with the following web addresses:
- TWS API: Trader Workstation API
- ib insyc
- email@example.com | Topics
Econometrics, statistics and all that jazz
The problem with young people today, is they think they know everything because they have played around with some black box machine learning package. But they haven't got a firm grasp on the basics. Which means they are very likely to end up overfitting the hell out of everything.
- Fundamental methods of Mathematical Economics, Chiang. Good starting point if you've forgotten a lot of maths
- Econometric Analysis, Greene: Best introductory econometrics textbook mainly because of the absurdly long but endlessly entertaining chapter endnotes
- Dynamic Econometrics, Hendry. Blockbuster book if you're serious about time series analysis. Some people prefer Hamilton (the econometrics reference book, not the musical). I don't.
- Econometric modelling of financial time series, Mills. Shorter than Hendry (what isn't!) and finance specific
- Market models, Alexander. Alternative to Mills.
- The Elements of Statistical Learning, Hastie. The classic ML book.
- Advances in Financial Machine Learning, Lopez de Prado. You're only allowed to read this once you've got the basics under your belt. Read my review.
Derivatives pricing and trading
Clearly what you read here depends on whether you are going to be a pricing quant in which case you need to able to throw around Itos lemma in your sleep, or just punt around a few futures.
- Quantitative finance for dummies, Bell. Good for dummies.
- Paul Wilmott introduces quantitative finance, by .... well guess. Good for beginners.
- Options, futures and other derivatives, Hull. The absolute classic, but overkill for many people. But by law it has to be on thist list.
- Derivative securities, Jarrow & Turnbull. Similar level to Hull, and actually (whispers) I prefer it.
- Dynamic Hedging, Taleb. A bit of a marmite book (like Taleb himself really) but I found it very helpful when I was working as an options trader.
- Against the Gods, Bernstein. Non technical history of risk measurement and management
- Red-Blooded Risk: The Secret History of Wall Street, Aaron Brown. Non technical history of quant risk management over recent years from a dude that was there.
- Quantitative risk management, McNeil, Frey, Embrechts. Technical manual for risk managers.
- Beyond greed and fear, Shefrin. Quite an old book now but a very good accessible introduction to the world of behavioural finance and relatively brief. I suggest you read Thinking Fast and Slow after this if you are in a hurry; otherwise reverse the order.
- Thinking Fast and Slow, Kahneman. Not just a great finance book. This book will literally change the way you think about thinking (see what I did there). Arguably it isn't necessary to read this to follow the behavioural finance literature. However if you care about whether behavioural finance has some kind of underpinning then its an absolute must.
- How we decide, Lehrer. More modern take on the subject.
- How to predict the unpredictable, Poundstone.
- The signal and the noise, Silver. Yes it's the 538 guy
- Thinking in Bets: Making Smarter Decisions When You Don't Have All the Facts/ Annie Duke
- Forecast: What Physics, Meteorology, and the Natural Sciences Can Teach Us About Economics. Mark Buchanan
- Radical Uncertainty: Decision-making for an unknowable future. Mervyn King, John Kay
- Fortunes Formula. Superb non technical book about the Kelly criteria. This book manages to be an entertaining but also incredibly instructive book about the history of links between gambling and the financial markets.
- A random walk down Wall Street. This book has been around longer than me; and its like marmite you either agree with its efficient markets hypothesis creed or you don't. Certainly the later editions have drifted far from being a useful survey of the various factor inefficiencies to being yet another 'how to' on personal investment. If you find an earlier edition of this book in a second hand bookshop its worth buying, otherwise Expected Returns is a better use of your money.
- Expected returns- Anti Ilmanen. Absolute classic on return factors
- Irrational exuberance. Excellent book by Robert Shiller on speculative bubbles.
- Capital ideas and Capital Ideas Evolving. Interesting history of the whole efficient market hypothesis approach.
- Adaptive markets, Lo.
- Active Portfolio Management, Grinold and Kahn: A quantative approach for producing superior returns and selecting superior money managers.
- Narrative Economics: How Stories Go Viral and Drive Major Economic Events. Robert J. Shiller
High frequency trading
- Dark pools, Patterson.
- Flash boys, Lewis.
- The Handbook of Fixed Income Securities, Fabozzi.
- STIR futures, Aiken
General interest quant books
- The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It, Patterson.
- Nerds on wall street, Leinweber. Entertaining book written by someone who was there as the whole quant thing developed.
- The Predictors : How a Band of Maverick Physicists Used Chaos Theory to Trade Their Way to a Fortune on Wall Street, Bass: Not as cheesy as the subtitle suggests. This is the book that got me into the systematic investment game. Doyne Farmer now at Oxford, is one of the more interesting people in the finance world and a great speaker if you get the chance to listen to him. Also worth reading (though a little less relevant to finance) the prequel: The Eudaemonic Pie, which is about betting on roulette.
- The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution: Gregory Zuckerman. "Rentech. Probably the most hedge fund in the world". Also launched Donald Trumpt thanks to Bob Mercer's money, but nobodys perfect.
Books by traders
- The education of a speculator. Victor Niederhoffer. Is incredibly random and there is no attempt to impose a coherent worldview or grand theory of everything. Imposing such an overview would be a ridiculous thing to do anyway, but Taleb and Soros would have tried to do so...
- Reminiscences of a Stock Operator (Livermore). See also 'Boy plunger' in the history section.
- Trading Thalesians: What the Ancient World Can Teach Us About Trading Today. Saeed Amen.
- Market wizards series, Schwager. You must have heard of this guy. Surely.
- Why Aren't They Shouting?: A Banker’s Tale of Change, Computers and Perpetual Crisis. Kevin Rodgers. Great history of the markets
- All those books that Nassim Taleb guy has written. 'Fooled by Randomness' is my favourite. They get a little more mad and harder to follow as time goes on.
- Following the trend: Diversified Managed Futures Trading - Andreas Clenow. Nice book on trading futures CTA style.
- Stocks on the move, Clenow. Trading equities with momentum.
- A Complete Guide To The Futures Markets, Jack Schwager. Buy this rather than the other futures books Jack has written. Unless you really like Jack, and would like him to have as much of your money as his humanly possible.
- Trading systems and methods- Perry Kaufman. A massive book with a four figure page count. Nevertheless it really is the bible of trading signals and that is why everyone should buy it. Perry - is my cheque in the post?
- Efficiently inefficient, Pedersen. Excellent book on trading some popular hedge fund strategies, interspersed with interviews.
- The rise of carry, Lee & Coldiron. My review.
- Ernie Chen's various books.
- Systematic Trading - Robert Carver
- Leveraged Trading - Robert Carver
- Extraordinary popular delusions and the madness of crowds. This is the Das Kapital or Art of War of finance books. Nobody has actually read all of it but everyone has it on their shelf. A couple of people might have read a couple of chapters, once. The first three chapters are the finance stuff (John Law, South Sea Bubble, Tulipmania) in any case.
- Jesse Livermore - Boy Plunger: The Man Who Sold America Short in 1929.
- The Great Crash 1929 (Galbraith). This which is very brief (Galbraith being the least wordy economist of the twentieth century) and extremely entertaining.
- Barbarians at the Gate. The 1980's LBO frenzy.
- Almost any book my Michael Lewis, or more specifically: Liars poker, Boomerang, The Big Short, Panic! He also wrote a book about baseball. But this is not a baseball blog!
- F.I.A.S.C.O / Traders, Guns and Money: I always get these books mixed up. They cover much of the same ground (an insiders perspective on the 1990's derivatives scandals). If you must read a book on this subject, read either of them. But unless you have too much time on your hands, don't bother reading both. I would recommend one or the other, but I honestly can't remember which is which.
- When Genius Failed: the rise and fall of Long Term Capital Management. Obviously after reading this nobody would ever blow up from being over leveraged would they? Nobody would ever blindly use the results of a model that relied on extrapolating correlations from relatively short periods of historical data? Only some kind of idiot would do that... I can only conclude that hardly anyone working in the CDO business in the early 2000's read this book.
- The Smartest Guys in the Room. This is a book about Enron. No doubt that too is ancient history to most people in finance now. But its a great story. Why is it a great story? Great stories always have really cool bad guys. There are good guys too, but its the bad guys that make the thing work. Andrew Fastow and James Skilling make great arch enemies (Ken Lay was just a bumbling idiot as far as I can make out).
- boo hoo: The funniest book written about the dot com crash. Written by the weird bloke in the glasses who stood next to the ex model when boo.com was launched. Because Ernst (that's the guys name) is Swedish its really hard to know whether he is taking the mick or he genuinely believes / believed that this stupendously stupid and insanely overambitious web based fashion business would get off the ground. Either way its a hilarious read.
- Dumb money: Adventures of a day trader. Written in 1990's tech boom, but mostly still relevant today ('today' being the era of reddit/wsb).
Hedge Hogs: The Cowboy Traders Behind Wall Street's Largest Hedge Fund Disaster. Or how not to do calendar spread trading in Natural Gas.
- The Greatest Trade Ever. This is the Greatest Book On Paulson et als multi billion dollar short CDO trade. To be honest it is not that good but then books rushed out to cash in on a notorious news event even rarely are. So this is the best of a bad bunch.
- Too big to fail. Too big to fail comes closest to being the Credit Crisis' Smartest Guys; a readable narrative of what happened.
- The Gods that Failed: How Blind Faith in Markets has Cost us Our Future.. The Elliot / Atkinson book wears its left wing polemic badge with pride. Its much more amusing to read a good polemic than a balanced view, and whilst there are an awful lot of polemics on the crisis this is one of the best. Its also UK-centric which makes a change from the gazillions of American books.
- Fools Gold. This is probably the best book if you don't want a polemic, but want to actually understand what happened (weirdo) specifically to get an understanding of the CDS market.
- Ship of Fools: How stupidity and corruption sank the celtic tiger. Meltdown Iceland. Ireland and Iceland: where people really, really, really screwed up. If like me you are a big fan of schadenfreude, you will love these. Boomerang by Lewis is also worth reading on the sovereign crisis.
- The Ascent of Money and other Niall Ferguson works. Arguably a history book not an investment book. May not tell you anything new but such an elegantly coherent view of the world.
More Money than God. Not specifically about the 2000's but a very good about the history of the hedge fund industry and one of the best books to get a handle on this murky world.
- The Man who stole $65 billion (Madoff). But he didn't steal $65 billion did he? Most of that was just a fabricated mark to market value. Investors lost about $18 billion in actual money. And actually he didn't 'steal' most of that, he mostly took from newer investors and gave to older investors. Should be 'the man who stole maybe a billion give or take a few million'.
- The Spider Network: The Wild Story of a Maths Genius and One of the Greatest Scams in Financial History. LIBOR fixing, the story of Tom Hayes, who got sent down for something that nobody at the time knew was illegal whilst his bosses got off scot free.
- Black Edge: Inside Information, Dirty Money, and the Quest to Bring Down the Most Wanted Man on Wall Street. Sheelah Kolhatkar. Steve Cohen was a very naughty boy.
- Flash Crash: A Trading Savant, a Global Manhunt and the Most Mysterious Market Crash in History Liam Vaughan. Another scapegoat, Nav Sarao who managed to avoid going to prison.
I've just noticed that most of these books are about people who did or should have gone to prison. Not sure what that says about finance, or about me...
- The bonfire of the vanities. Classic book about 80's finance which subsequently became one of Tom Hanks' rare bad films.
- The fear index. A novel. About a systematic hedge fund. No, really.
Useful blogs and websites
- quantocracy.com/ My daily go-to place to find out what is going on in the wider world of quant
- https://fivethirtyeight.com/ Not really quant, but the best statistics site on the internet.
- http://www.cuemacro.com/ Website of fellow quant and pythonista Saeed Amen
- https://www.quantstart.com/ There might be more credible "Learn to be a quant" websites out there, but I haven't found one
- https://systematicindividualinvestor.com Nice website by someone with a very similar approach to me
- elitetrader.com The largest message board for traders on the internet. Inevitably a lot of nonsense, but also some fine posters and interesting threads.
- https://fundseeder.com/Keep track of your trading performance.
- https://www.bloomberg.com/view/contributors/ARbTQlRLRjE/matthew-s-levine Matt Levine is my favourite BB correspondent (well apart from Michael Lewis, but he's kind of part time)
- http://bettersystemtrader.com/ Adrian Reids podcast which I've been on a couple of times
- http://www.toptradersunplugged.com/ Neils Kaastrup-Larsens podcast which I've also appeared on, and am now a regular co-host for.
- http://podcast.ft.com/s/ft-money-show/Good for UK financial stuff
- http://podcast.ft.com/s/ft-alphachat/ Podcast of the FT alphaville microsite.
- followingthetrend.com Andreas Clenow's website
- thalesians.com Website of the infamous group of very clever and very nice finance people
- https://kjtradingsystems.com/index.html Kevin is one of a very small number of trading 'gurus' who actually knows what he is talking about
- http://epchan.blogspot.com/ Ernie
By the wayNo there are no links above as I refuse to endorse Amazon.
Bonus section: Some films...
Margin callWithout question one of two films that comes closest to describing what it was like being in the middle of the 2008 financial crisis, or indeed working in finance. The following conversation for example speaks volumes (from http://www.imdb.com/title/tt1615147/quotes) - both from the content and the obsession with what other people get paid that seems to have been endemic.
Seth Bregman: Will, did you really make two and a half million last year?
Will Emerson: Yeah, sure.
Seth Bregman: How did you spend it all?
Will Emerson: It goes quite quickly. You know, you learn to spend what's in your pocket.
Peter Sullivan: Two and a half million goes quickly?
Will Emerson: All right, let's see. So the taxman takes half up front, so you're left with one and a quarter. My mortgage takes another 300 grand. I send 150 home for my parents, you know, keep 'em going. So what's that?
Peter Sullivan: 800?
Peter Sullivan: All right, 800. Spent 150 on a car. About 75 on restaurants. Probably 50 on clothes. I put 400 away for a rainy day.
Seth Bregman: That's smart.
Will Emerson: Yeah, as it turns out, 'cause it looks like the storm's coming.
Peter Sullivan: You still got 125.
Will Emerson: Yeah, well I did spend 76,520 dollars on hookers, booze and dancers. But mainly hookers.
Peter Sullivan: 76,5?
Will Emerson: I was a little shocked initially, but then I realized I could claim most of it back as entertainment. It's true!
FreefallThe other film that comes closest etc etc. Nice use of perspective to show how the film hurt ordinary people badly. Has the advantage of being British, being out relatively early (2009) and having Dominic Cooper / Rosamund Pike (delete depending on gender preference - or keep both - its a free world) in it.
Inside jobFirst of all I should say that I appreciate that having to watch a 105 minute long documentary about the financial crisis is probably most peoples idea of hell. In which case go and watch Freefall or Margin call instead. Having said that if you want to understand the mechanics of what happened rather than just have your prejudices reinforced then it is worth watching.
(The book is also very good)