Principles of Financial Engineering

2nd Edition

Authors: Salih Neftci
Hardcover ISBN: 9780123735744
eBook ISBN: 9780080919973
Imprint: Academic Press
Published Date: 1st December 2008
Page Count: 696
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103.00 + applicable tax
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Table of Contents

  1. Introduction
  2. The Hedge Fund Industry
  3. Cash Flow Engineering and Forward Contracts
  4. Engineering Simple Interest Rate Derivatives
  5. Introduction to Swap Engineering
  6. Repo Market Strategies in Financial Engineering
  7. Dynamic Replication Methods and Synthetics
  8. Mechanics of Options
  9. Engineering Convexity Positions
  10. Options Engineering With Applications
  11. Pricing Tools in Financial Engineering
  12. Some Applications of the Fundamental Theorem
  13. Fixed-Income Engineering
  14. Tools for Volatility Engineering, Volatility Swaps, and Volatility Trading
  15. Volatility as an Asset Class and the Smile
  16. Credit Markets: CDS Engineering
  17. Essentials of Structured Product Engineering
  18. Credit Indices and their Tranches
  19. Default Correlation Pricing and Trading
  20. Principle Protection Techniques
  21. Caps/Floors and Swaptions with an Application to Mortgages
  22. Engineering of Equity Instruments: Pricing and Replication


Five new chapters, numerous additions to existing chapters, and an expanded collection of questions and exercises make this Second Edition an essential part of everyone's library. Between defining swaps on its first page and presenting a case study on its last, Salih Neftci's introduction to financial engineering shows readers how to create financial assets in static and dynamic environments. Poised among intuition, actual events, and financial mathematics, this book can be used to solve problems in risk management, taxation, regulation, and above all, pricing.

Key Features

  • 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


Primary: financial engineers, quantitative analysts in banks, investment houses, and other financial industry professionals; graduate students in financial engineering and financial mathematics programs.


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© Academic Press 2009
Academic Press
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"Its focus on financial engineering and the actual use of derivative instruments makes Neftci's book an extremely useful complement to the standard introductions to derivative pricing and financial mathematics. The value of the text has been enhanced further by the addition of five chapters on structured products and credit derivatives not present in the first edition." --Rüdiger Frey, University of Leipzig “Since its publication in 2004, Neftci's book has become the de facto reference text for financial engineering practitioners and academics. With renewed and extended emphasis on structured products engineering, Neftci keeps the material relevant and up to date for the current state of the financial markets.” --Dan Stefanica, Baruch College

About the Authors

Salih Neftci Author

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.

Affiliations and Expertise

Late of the Global Finance Master’s Program, New School for Social Research, New York, NY, USA