Simulation and Optimization in Finance + Website : Modeling with MATLAB, @Risk, or VBA

by Dessislava Pachamanova; Frank J. Fabozzi (School of Management, Yale Univ.)

• ISBN13: 9780470882115
• ISBN10: 0470882115
• Format: eBook
• Copyright: 2010-09-01
• Publisher: Wiley

Summary

An introduction to the theory and practice of financial simulation and optimizationIn recent years, there has been a notable increase in the use of simulation and optimization methods in the financial industry. Applications include portfolio allocation, risk management, pricing, and capital budgeting under uncertainty.This accessible guide provides an introduction to the simulation and optimization techniques most widely used in finance, while at the same time offering background on the financial concepts in these applications. In addition, it clarifies difficult concepts in traditional models of uncertainty in finance, and teaches you how to build models with software. It does this by reviewing current simulation and optimization methodology-along with available software-and proceeds with portfolio risk management, modeling of random processes, pricing of financial derivatives, and real options applications. Contains a unique combination of finance theory and rigorous mathematical modeling emphasizing a hands-on approach through implementation with software Highlights not only classical applications, but also more recent developments, such as pricing of mortgage-backed securities Includes models and code in both spreadsheet-based software (@RISK, Solver, Evolver, VBA) and mathematical modeling software (MATLAB)Filled with in-depth insights and practical advice, Simulation and Optimization Modeling in Finance offers essential guidance on some of the most important topics in financial management.

Table of Contents

Preface

Introduction

Fundamental Concepts

Important Finance Concepts

Random Variables, Probability Distributions, and Important Statistical Concepts

Simulation Modeling and Software

Optimization Modeling

Optimization under Uncertainty

Portfolio Optimization and Risk Measures

Asset Diversification and Efficient Frontiers

Advances in the Theory of Risk Measures

Equity Portfolio Management in Practice

Fixed Income Portfolio Management in Practice

Asset Pricing Models

Regression and Factor Models

Modeling Asset Price Dynamics

Derivative Pricing and Use

Introduction to Derivatives

Pricing Derivatives by Simulation

Structuring and Pricing Residential Mortgage-Backed Securities

Using Derivatives in Portfolio Management

Capital Budgeting Decisions

Capital budgeting under uncertainty

Real options

ReferenceS

Index

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