Book description
A comprehensive introduction to various numerical methods used in computational finance today
Quantitative skills are a prerequisite for anyone working in finance or beginning a career in the field, as well as risk managers. A thorough grounding in numerical methods is necessary, as is the ability to assess their quality, advantages, and limitations. This book offers a thorough introduction to each method, revealing the numerical traps that practitioners frequently fall into. Each method is referenced with practical, real-world examples in the areas of valuation, risk analysis, and calibration of specific financial instruments and models. It features a strong emphasis on robust schemes for the numerical treatment of problems within computational finance. Methods covered include PDE/PIDE using finite differences or finite elements, fast and stable solvers for sparse grid systems, stabilization and regularization techniques for inverse problems resulting from the calibration of financial models to market data, Monte Carlo and Quasi Monte Carlo techniques for simulating high dimensional systems, and local and global optimization tools to solve the minimization problem.
Table of contents
- Cover Page
- Title Page
- Copyright
- Dedication
- Contents
- Acknowledgements
- About the Authors
- 1 Introduction and Reading Guide
- 2 Binomial Trees
- 3 Finite Differences and the Black-Scholes PDE
- 4 Mean Reversion and Trinomial Trees
- 5 Upwinding Techniques for Short Rate Models
- 6 Boundary, Terminal and Interface Conditions and their Influence
- 7 Finite Element Methods
- 8 Solving Systems of Linear Equations
- 9 Monte Carlo Simulation
- 10 Advanced Monte Carlo Techniques
- 11 Valuation of Financial Instruments with Embedded American/Bermudan Options within Monte Carlo Frameworks
- 12 Characteristic Function Methods for Option Pricing
- 13 Numerical Methods for the Solution of PIDEs
- 14 Copulas and the Pitfalls of Correlation
- 15 Parameter Calibration and Inverse Problems
- 16 Optimization Techniques
- 17 Risk Management
- 18 Quantitative Finance on Parallel Architectures
- 19 Building Large Software Systems for the Financial Industry
- Bibliography
- Index
Product information
- Title: A Workout in Computational Finance
- Author(s):
- Release date: September 2013
- Publisher(s): Wiley
- ISBN: 9781119971917
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