Finite Difference Methods in Financial Engineering: A Partial Differential Equation Approach (The Wiley Finance Series) Includes a CD Rom

Duffy, Daniel J.

ISBN 10: 0470858826 / ISBN 13: 9780470858820

Published by John Wiley and Sons Ltd, 2006

About this Item

No edition stated, 2006. Includes a CD-Rom placed rear of book. Publication of 423 pages. Heavy book may require extra postage unless posted within South Africa. The jacket is a little shelf rubbed. The boards are in good condition. Internally the pages are clean and complete. Tightly bound and presented in cellophane. The binding is excellent. GK. Our orders are shipped using tracked courier delivery services.

Seller Inventory # 6rkjt

Bibliographic Details

• Title: Finite Difference Methods in Financial Engineering: A Partial Differential Equation Approach (The Wiley Finance Series) Includes a CD Rom
• Publisher: John Wiley and Sons Ltd
• Publication Date: 2006
• Language: English
• ISBN 10: 0470858826
• ISBN 13: 9780470858820
• Binding: Hardcover
• Condition: Very Good
• Dust Jacket Condition: Very Good
• Weight: 32 ounces

About this title

Synopsis

The world of quantitative finance (QF) is one of the fastest growing areas of research and its practical applications to derivatives pricing problem. Since the discovery of the famous Black-Scholes equation in the 1970's we have seen a surge in the number of models for a wide range of products such as plain and exotic options, interest rate derivatives, real options and many others. Gone are the days when it was possible to price these derivatives analytically. For most problems we must resort to some kind of approximate method.

In this book we employ partial differential equations (PDE) to describe a range of one-factor and multi-factor derivatives products such as plain European and American options, multi-asset options, Asian options, interest rate options and real options. PDE techniques allow us to create a framework for modeling complex and interesting derivatives products. Having defined the PDE problem we then approximate it using the Finite Difference Method (FDM). This method has been used for many application areas such as fluid dynamics, heat transfer, semiconductor simulation and astrophysics, to name just a few. In this book we apply the same techniques to pricing real-life derivative products. We use both traditional (or well-known) methods as well as a number of advanced schemes that are making their way into the QF literature:

• Crank-Nicolson, exponentially fitted and higher-order schemes for one-factor and multi-factor options
• Early exercise features and approximation using front-fixing, penalty and variational methods
• Modelling stochastic volatility models using Splitting methods
• Critique of ADI and Crank-Nicolson schemes; when they work and when they don't work
• Modelling jumps using Partial Integro Differential Equations (PIDE)
• Free and moving boundary value problems in QF

Included with the book is a CD containing information on how to set up FDM algorithms, how to map these algorithms to C++ as well as several working programs for one-factor and two-factor models. We also provide source code so that you can customize the applications to suit your own needs.

About the Author

Daniel Duffy is a numerical analyst who has been working in the IT business since 1979. He has been involved in the analysis, design and implementation of systems using object-oriented, component and (more recently) intelligent agent technologies to large industrial and financial applications. As early as 1993 he was involved in C++ projects for risk management and options applications with a large Dutch bank. His main interest is in finding robust and scalable numerical schemes that approximate the partial differential equations that model financial derivatives products. He has an M.Sc. in the Finite Element Method first-order hyperbolic systems and a Ph.D. in robust finite difference methods for convection-diffusion partial differential equations. Both degrees are from Trinity College, Dublin, Ireland.
Daniel Duffy is founder of Datasim Education and Datasim Component Technology, two companies involved in training, consultancy and software development.