By 1991, when the second edition was released, the actuarial profession was undergoing a technological shift. Calculators with advanced financial functions were becoming standard, and personal computers were emerging. Kellison’s second edition brilliantly adapted to this change: it retained the rigorous proofs of the first edition but introduced updated notation, more practical examples, and problem sets that mirrored the evolving SOA and CAS (Casualty Actuarial Society) exams.
is a foundational textbook in actuarial science and financial mathematics. Published by Richard D. Irwin , this 448-page edition significantly expanded upon the 1970 original by integrating modern financial instruments and economic factors like inflation and risk into the core mathematical framework. Core Conceptual Framework
Kellison has a unique ability to explain the "why" behind the formulas. He doesn't just provide a shortcut; he derives the logic using fundamental calculus. theory of interest -second edition- 1991 by kellison s.g
What sets the Second Edition apart from introductory textbooks is its progression into advanced mathematical territories:
Kellison’s approach is systematic, moving from the simplest concepts to intricate financial instruments. The book is generally divided into several core areas: 1. The Measurement of Interest By 1991, when the second edition was released,
Situations where payments increase or decrease over time, often following arithmetic or geometric progressions. 3. Yield Rates and Amortization
A calculus-based approach to interest that treats growth as a continuous process rather than a discrete event. 2. Annuities-Certain is a foundational textbook in actuarial science and
No book is perfect. The 1991 edition has a few drawbacks for modern readers:
The 1991 edition remains one of the best resources for understanding bond valuation. It teaches readers how to price a bond between coupon dates, how to account for premiums and discounts, and how to calculate the yield to maturity. Why the 1991 Edition Still Matters Today
The book starts by defining the "time value of money." Kellison breaks down the distinction between:
The "story" behind the second edition (1991) of Stephen G. Kellison’s The Theory of Interest
