Principles of Financial Engineering

Front Cover
Academic Press, Dec 9, 2008 - Mathematics - 696 pages
0 Reviews

Principles of Financial Engineering, Second Edition, is a highly acclaimed text on the fast-paced and complex subject of financial engineering. This updated edition describes the "engineering" elements of financial engineering instead of the mathematics underlying it. It shows you how to use financial tools to accomplish a goal rather than describing the tools themselves. It lays emphasis on the engineering aspects of derivatives (how to create them) rather than their pricing (how they act) in relation to other instruments, the financial markets, and financial market practices.

This volume explains ways to create financial tools and how the tools work together to achieve specific goals. Applications are illustrated using real-world examples. It presents three new chapters on financial engineering in topics ranging from commodity markets to financial engineering applications in hedge fund strategies, correlation swaps, structural models of default, capital structure arbitrage, contingent convertibles, and how to incorporate counterparty risk into derivatives pricing. Poised midway between intuition, actual events, and financial mathematics, this book can be used to solve problems in risk management, taxation, regulation, and above all, pricing.

This latest edition of Principles of Financial Engineering is ideal for financial engineers, quantitative analysts in banks and investment houses, and other financial industry professionals. It is also highly recommended to graduate students in financial engineering and financial mathematics programs.

* The Second Edition presents 5 new chapters on structured product engineering, credit markets and instruments, and principle protection techniques, among other topics
* Additions, clarifications, and illustrations throughout the volume show these instruments at work instead of explaining how they should act
* The Solutions Manual enhances the text by presenting additional cases and solutions to exercises

What people are saying - Write a review

We haven't found any reviews in the usual places.


CHAPTER 1 Introduction
CHAPTER 2 An Introduction to Some Concepts and Definitions
CHAPTER 3 Cash Flow Engineering and Forward Contracts
CHAPTER 4 Engineering Simple Interest Rate Derivatives
CHAPTER 5 Introduction to Swap Engineering
CHAPTER 6 Repo Market Strategies in Financial Engineering
CHAPTER 7 Dynamic Replication Methods and Synthetics
CHAPTER 8 Mechanics of Options
CHAPTER 14 Tools for Volatility Engineering Volatility Swaps and Volatility Trading
CHAPTER 15 Volatility as an Asset Class and the Smile
CDS Engineering
CHAPTER 17 Essentials of Structured Product Engineering
CHAPTER 18 Credit Indices and Their Tranches
CHAPTER 19 Default Correlation Pricing and Trading
CHAPTER 20 Principal Protection Techniques
CHAPTER 21 CapsFloors and Swaptions with an Application to Mortgages

CHAPTER 9 Engineering Convexity Positions
CHAPTER 10 Options Engineering with Applications
CHAPTER 11 Pricing Tools in Financial Engineering
CHAPTER 12 Some Applications of the Fundamental Theorem
CHAPTER 13 FixedIncome Engineering
Pricing and Replication

Other editions - View all

Common terms and phrases

About the author (2008)

Professor Neftci completed his Ph.D. at the University of Minnesota and was head of the FAME Certificate program in Switzerland. He taught at the Graduate School, City University of New York; ICMA Centre, University of Reading; and at the University of Lausanne. He was also a Visiting Professor in the Finance Department at Hong Kong University of Science and Technology. Known his books and articles, he was a regular columnist for CBN daily, the most influential financial newspaper in China.

Bibliographic information