From the Preface to the First Edition.
PART I. BACKGROUND.
2. Financial Theory.
PART II. NUMERICAL METHODS.
3. Basics of Numerical Analysis.
4. Numerical Integration: Deterministic and Monte Carlo Methods.
5. Finite Difference Methods for Partial Differential Equations.
6. Convex Optimization.
PART III. PRICING EQUITY OPTIONS.
7. Option Pricing by Binomial and Trinomial Lattices.
8. Option Pricing by Monte Carlo Methods.
9. Option Pricing by Finite Difference Methods.
PART IV. ADVANCED OPTMIZATION MODELS AND METHODS.
10. Dynamic Programming.
11. Linear Stochastic Programming Models with Recourse.
12. Non-Convex Optimization.
PART V. APPENDICES.
Appendix A. Introduction to MATLAB Programming.
Appendix B. Refresher on Probability theory and Statistics.
Appendix C. Introduction to AMPL.
- reorganization in order to make adoption in financial engineering courses easier.
- advanced optimization methods are illustrated in later chapter (10, 11, 12), together with applications.
- first chapter to provide motivation and chapter 2 on financial theory has been enlarged and improved to provide better background for engineers (not familiar with finance) and to appeal a little more to economists.
- chapter on numerical integration (which was part of the old chapter on numerical analysis) which also includes the old chapter on Monte Carlo.
- new chapter on binomial and trinomial lattices, which were dealt with superficially in the first edition.
- new appendix on AMPL (an algebraic language to describe optimization models) in order to better illustrate the optimization models in chapters 11 and 12.
"In summary, this book is a "must have" for professionals and researchers who employ numerical methods in economic and financial modeling. The amount and quality of the material that the author offers is so generous that readers are likely to benefit from it even if they are not interested in some of the specific applications presented." (Interfaces, June 2008)
"…a broad and enjoyable introduction to computational finance." (Journal of the American Statistical Association, December 2007)
"...written in such a lucid way that it provides great pleasure in reading...excellent for students...of great value to practitioners who are new to the field." (MAA Reviews, November 23, 2006)
- The text is primarily focused on MATLAB-based application, but it also includes descriptions of other readily available toolboxes to finance.
- Helpful appendices on the basics of MATLAB and probability and statistics theory (now greatly enhanced) round out the balanced coverage.
- In the new edition, techniques and applications have now been integrated throughout the book rather than presented in a layered fashion.
- There is now more discussion of economics, optimization, and MATLAB code.
- There are three new chapters on Asian options, pricing American options by Monte Carlo simulation, and (on an optional basis) numerical dynamic programming. There is added coverage of interest-rate derivatives.
- Extensive enhancements have been made in the new edition to topics such as partial differential equations, multi-asset options, and binomial and trinomial lattices.