Financial Engineering and
Computation
Principles, Mathematics,
Algorithms
Yuh-Dauh Lyuu
January 2002 | Hardback | 648
pages |
In stock
Nowadays students and
professionals intending to work in any area of finance must master not only advanced
concepts and mathematical models but also learn how to implement these models
computationally. This comprehensive text combines the theory and mathematics behind
financial engineering with an emphasis on computation, in keeping with the way financial
engineering is practised in today's capital markets. Unlike most books on investments,
financial engineering, or derivative securities, the book starts from very basic ideas in
finance and gradually builds up the theory. It offers a thorough grounding in the subject
for MBAs in finance, students of engineering and sciences who are pursuing a career in
finance, researchers in computational finance, system analysts, and financial engineers.
Along with the theory, the author presents numerous algorithms for pricing, risk
management, and portfolio management. The emphasis is on pricing financial and derivative
securities: bonds, options, futures, forwards, interest rate derivatives, mortgage-backed
securities, bonds with embedded options, and more. Each instrument is treated in a short,
self-contained chapter for ready reference use. Many of these algorithms are coded in Java
as programs for the Web, available from the book's home page.
Contents
1. Introduction; 2. Analysis
of algorithms; 3. Basic financial mathematics; 4. Bond price volatility; 5. Term structure
of interest rates; 6. Fundamental statistical concepts; 7. Option basics; 8. Arbitrage in
option pricing; 9. Option pricing models; 10. Sensitivity analysis of options; 11.
Extensions of options theory; 12. Forwards, futures, futures options, swaps; 13.
Stochastic processes and Brownian motion; 14. Continuous-time financial mathematics; 15.
Continuous-time pricing; 16. Hedging; 17. Trees; 18. Numerical methods; 19. Matrix
computation; 20. Time series and estimation; 21. Interest rate derivative securities; 22.
Term structure fitting; 23. Introduction to term structure modeling; 24. Foundations of
term structure modeling; 25. Equilibrium term structure models; 26. No-arbitrage term
structure models; 27. Fixed-income securities; 28. Introduction to mortgage-backed
securities; 29. Analysis of mortgage-backed securities; 30. Collateralized mortgage
obligations; 31. Modern portfolio theory; 32. Software.