Financial Engineering and Computation: Principles, Mathematics, Algorithms

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Cambridge University Press, 2002 - Business & Economics - 627 pages
2 Reviews
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 practiced 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 (www.csie.ntu.edu/~lyuu/Capitals/capitals.htm)
  

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Contents

Analysis of Algorithms
7
Bond Price Volatility
32
Term Structure of Interest Rates
45
Option Basics
75
Arbitrage in Option Pricing
84
Option Pricing Models
92
Sensitivity Analysis of Options
123
Extensions of Options Theory
131
Time Series Analysis
284
Interest Rate Derivative Securities
295
Term Structure Fitting
321
Introduction to Term Structure Modeling
328
Foundations of Term Structure Modeling
345
Equilibrium Term Structure Models
361
NoArbitrage Term Structure Models
375
FixedIncome Securities
399

Forwards Futures Futures Options Swaps
155
Stochastic Processes and Brownian Motion
177
ContinuousTime Financial Mathematics
190
ContinuousTime Derivatives Pricing
206
Hedging
224
Trees
234
Numerical Methods
249
Matrix Computation
268
Introduction to MortgageBacked Securities
415
Analysis of MortgageBacked Securities
427
Collateralized Mortgage Obligations
451
Modern Portfolio Theory
458
Software
480
Bibliography
553
Glossary of Useful Notations
585
Copyright

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