This book is concerned with the application of finite difference schemes and methods (FDM) to the partial differential equations that model derivative products in the financial markets. FDM have been applied to compute solutions to problems in areas such as fluid mechanics, heat transfer etc. but it is also a valuable method that can be applied to financial engineering. This book will describe, in a step-by-step fashion, how robust and accurate numerical methods are motivated and applied to pricing financial derivative products. The focus will be on real-world derivative products such as vanilla and exotic options, credit and interest rate derivatives. The book will be accompanied by a CD containing C++ source code and executable programs. Paul Wilmott wrote: Definitely a very important book. Theres nothing as sophisticated as this in the financial world yet. Although plenty, and even more sophisticated, in the general numerical analysis literature. Will sell extremely well. It should be a must-have book. Peter Carr, Courant Institute, NY The author definitely knows what he is doing. Send me the book!
Book Details:
- Author: Daniel J. Duffy
- ISBN: 9780470300169
- Year Published: 2005
- Pages: 440
- BISAC: BUS027000, BUSINESS & ECONOMICS/Finance
About the Book and Topic:
This book is concerned with the application of finite difference schemes and methods (FDM) to the partial differential equations that model derivative products in the financial markets. FDM have been applied to compute solutions to problems in areas such as fluid mechanics, heat transfer etc. but it is also a valuable method that can be applied to financial engineering. This book will describe, in a step-by-step fashion, how robust and accurate numerical methods are motivated and applied to pricing financial derivative products. The focus will be on real-world derivative products such as vanilla and exotic options, credit and interest rate derivatives. The book will be accompanied by a CD containing C++ source code and executable programs. Paul Wilmott wrote: Definitely a very important book. Theres nothing as sophisticated as this in the financial world yet. Although plenty, and even more sophisticated, in the general numerical analysis literature. Will sell extremely well. It should be a must-have book. Peter Carr, Courant Institute, NY The author definitely knows what he is doing. Send me the book!
Mathematicians, physicists and engineers have used finite difference schemes to compute solutions to problems in pure mathematics, fluid mechanics, heat transfer and semiconductor modeling. However, they have not yet had widespread application in financial engineering literature. The main reasons (possibly) for this state of affairs may be due to the fact that there are few published results and that finite difference methods for partial differential equations (PDE) is a specialized field of research that takes years to master. It is not sufficient to apply formulas that appear in numerical recipes books because standard schemes do not always work due to the very nature of the schemes being applied to a specific PDE. The authors say that FDM is as much an art as a science! Not only must you do the mathematics but also be able to find robust and accurate numerical methods for solving problems in financial engineering.
Provides a practical guide to FDM (finite difference methods) as applied to derivative products very little published in book form Strong author team that combines both strong academic and practitioner experience of this subject. CD containing C++ source code and executable programs.
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.
