Handbooks in Operations Research and Management Science: Financial Engineering

Handbooks in Operations Research and Management Science: Financial Engineering

1st Edition - October 18, 2007

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  • Editors: John Birge, Vadim Linetsky
  • eBook ISBN: 9780080553252
  • Hardcover ISBN: 9780444517814

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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.


Graduate students of finance, international business, and economics

Table of Contents

  • 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

Product details

  • No. of pages: 1026
  • Language: English
  • Copyright: © Elsevier Science 2007
  • Published: October 18, 2007
  • Imprint: Elsevier Science
  • eBook ISBN: 9780080553252
  • Hardcover ISBN: 9780444517814

About the Editors

John Birge

Affiliations and Expertise

Robert R. McCormick School of Engineering, Northwestern University, Evanston, IL, U.S.A.

Vadim Linetsky

Affiliations and Expertise

Department of Industrial Engineering, Northwestern University, Evanston, IL, U.S.A.

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