Handbooks in Operations Research and Management Science: Financial Engineering

John R. Birge (Edited by), Vadim Linetsky (Edited by)

9780444517814, Elsevier Science

Hardback, published 18 October 2007

1026 pages
24 x 16.5 x 4.8 cm, 2 kg

The remarkable growth of financial markets over the past decades has been accompanied by an equally remarkable explosion in financial engineering, the interdisciplinary field focusing on applications of mathematical and statistical modeling and computational technology to problems in the financial services industry. The goals of financial engineering research are to develop empirically realistic stochastic models describing dynamics of financial risk variables, such as asset prices, foreign exchange rates, and interest rates, and to develop analytical, computational and statistical methods and tools to implement the models and employ them to design and evaluate financial products and processes to manage risk and to meet financial goals. This handbook describes the latest developments in this rapidly evolving field in the areas of modeling and pricing financial derivatives, building models of interest rates and credit risk, pricing and hedging in incomplete markets, risk management, and portfolio optimization. Leading researchers in each of these areas provide their perspective on the state of the art in terms of analysis, computation, and practical relevance. The authors describe essential results to date, fundamental methods and tools, as well as new views of the existing literature, opportunities, and challenges for future research.

I. Introduction
John Birge & Vadim Linetsky

Chapter 1. A Partial Introduction to Financial Asset Pricing Theory
Robert Jarrow & Philip Protter

II. Derivative Securities: Models and Methods

Chapter 2. Jump-Diffusion Models
Steven Kou

Chapter 3. Modeling Financial Security Returns Using Levy Processes
Liuren Wu

Chapter 4. Pricing with Wishart Risk Factors
Christian Gourieroux & Razvan Sufana

Chapter 5. Volatility Estimation
Federico Bandi and Jeff Russell

Chapter 6. Spectral Methods in Derivatives Pricing
Vadim Linetsky

Chapter 7. Variational Methods in Derivatives Pricing
Liming Feng, Pavlo Kovalov & Vadim Linetsky

Chapter 8. Discrete Path-Dependent Options
Steven Kou

III. Interest Rate and Credit Risk Models and Derivatives

Chapter 9. Topics in Interest Rate Theory
Tomas Bjork

Chapter 10. Calculating Portfolio Credit Risk
Paul Glasserman

Chapter 11. Valuation of Basket Credit Derivatives in the Credit Migrations Environment
Tomasz Bielecki, Stephane Crepey, Monique Jeanblanc & Marek Rutkowski

IV. Incomplete Markets

Chapter 12. Incomplete Markets
Jeremy Staum

Chapter 13. Option Pricing: Real and Risk-Neutral Distributions
George Constantinides, Jens Jackwerth & Stylianos Perrakis

Chapter 14. Total Risk Minimization Using Monte Carlo Simulations
Thomas Coleman, Yuying Li & Maria-Cristina Patron

Chapter 15. Queuing-Theoretic Approaches to Financial Price Fluctuations
Erhan Bayraktar, Ulrich Horst & Ronnie Sircar

V. Risk Management

Chapter 16. Economic Credit Capital Allocation and Risk Contributions
Helmut Mausser & Dan Rosen

Chapters 17. Liquidity Risk and Option Pricing Theory
Robert Jarrow & Phillip Protter

Chapter 18. Financial Engineering: Applications in Insurance
Phelim Boyle & Mary Hardy,

VI. Portfolio Optimization

Chapter 19. Dynamic Portfolio Choice and Risk Aversion
Costis Skiadas

Chapter 20. Optimization Methods in Portfolio Management
John Birge

Chapter 21. Simulation Methods for Optimal Portfolios
Jerome Detemple, Rene Garcia & Marcel Rindisbacher

Chapter 22. Duality Theory and Approximate Dynamic Programming for Pricing American Options and Portfolio Optimization
Martin Haugh & Leonid Kogan

Chapter 23. Asset Allocation with Multivariate Non-Gaussian Returns
Dilip Madan & Ju-Yi Yen

Chapter 24. Large Deviation Techniques and Financial Applications
Phelim Boyle, Shui Feng & Weidong Tian

Subject Areas: Maths for engineers [TBJ], Mathematical modelling [PBWH], Applied mathematics [PBW], Sport & leisure industries [KNSP], Operational research [KJT], Business mathematics & systems [KJQ], Budgeting & financial management [KJMV1], Finance [KFF], Econometrics [KCH], Political control & freedoms [JPV]