New book - A Linear Algebra Primer for Financial Engineering - Dan Stefanica

[Giuseppe Trapani]

@themarketprofessor I believe you totally misunderstand the use of mathematical models in pricing financial instruments.

There are two types of instruments: those actively traded (i.e. "liquid assets") and those that are not.

We CALIBRATE models on liquid assets and use calibrated models to PRICE non liquid assets.

This is because if an asset is actively traded there are no arbitrages on that and hence that's the unique price. If an asset is non liquid, you need a "guide" for pricing it, in order to obtain a no-arbitrage price which is coherent with a given market situation.

If you think models (and hence, mathematics) are used to predict something, YOU ARE WRONG. If you think mathematics gives you prices YOU ARE WRONG AGAIN, because the market gives you the prices. We only use mathematics to bridge the gap between what the market tells us and what it doesn't (but in a coeherent manner)

 

[actualQuant]

So what?! In my opinion, still nothing is new! Nonsignificant contribution whatsoever. As simple as "...finding arbitrage opportunities,..." you are saying that with the tech provided in your book one can confidently predict the next market crash if he wishes to?!

This is a wildly straw-manning type of argument to make. It's so off the mark I'm not sure if you're even in quantitative finance to begin with/ have the capacity to judge the merits of the book. You seem to be unable to even glean the context in which it's written (hint, the word "Primer" is in the title). This book clearly seems to be on establishing foundational applications of linear algebra... simple, well known, review of lin-alg concepts, followed by simple well known applications to some financial models. To hold it to the bar of "predict the next market crash" is revealing of your ability to process the world around you. Even to hold it to a very different, but still delusionally high bar of "provide cutting edge quantitative insights" would be ridiculous.