CHAPTER 2

An Introduction to Some Concepts and Definitions

1. Introduction

This chapter takes a step back and reviews in a nutshell the prerequisite for studying the methods of financial engineering. Readers with a good grasp of the conventions and mechanics of financial markets may skip it, although a quick reading would be preferable.

Financial engineering is a practice and can be used only when we define the related environment carefully. The organization of markets, and the way deals are concluded, confirmed, and carried out, are important factors in selecting the right solution for a particular financial engineering problem. This chapter examines the organization of financial markets and the way market practitioners interact. Issues related ...

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