Book description
An introduction to the theory and practice of financial simulation
and optimization
In 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.
DESSISLAVA A. PACHAMANOVA, PhD, is an Associate
Professor of Operations Research at Babson College where she holds the
Zwerling Term Chair. She has published a number of articles in
operations research, finance, and engineering journals, and
co-authored the Wiley title Robust Portfolio Optimization and
Management. Pachamanova's academic research is supplemented by
consulting and previous work in the financial industry, including
projects with quantitative strategy groups at WestLB and Goldman
Sachs. She holds an AB in mathematics from Princeton University and a
PhD in operations research from the Sloan School of Management at MIT.
Frank J. Fabozzi, PhD, CFA, CPA, is Professor in the Practice
of Finance and Becton Fellow at theYale School of Management and
Editor of the Journal of Portfolio Management. He is an Affiliated
Professor at the University of Karlsruhe's Institute of Statistics,
Econometrics, and Mathematical Finance and is on the Advisory Council
for the Department of Operations Research and Financial Engineering at
Princeton University. He earned a doctorate in economics from the City
University of New York.
