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Featuring international contributors from both industry and academia, Numerical Methods for Finance explores new and relevant numerical methods for the solution of practical problems in finance. It is one of the few books entirely devoted to numerical methods as applied to the financial field. Presenting state-of-the-art methods in this area, the book first discusses the coherent risk measures theory and how it applies to practical risk management. It then proposes a new method for pricing high-dimensional American options, followed by a description of the negative inter-risk diversification effects between credit and market risk. After evaluating counterparty risk for interest rate payoffs, the text considers strategies and issues concerning defined contribution pension plans and participating life insurance contracts. It also develops a computationally efficient swaption pricing technology, extracts the underlying asset price distribution implied by option prices, and proposes a hybrid GARCH model as well as a new affine point process framework. In addition, the book examines performance-dependent options, variance reduction, Value at Risk (VaR), the differential evolution optimizer, and put-call-futures parity arbitrage opportunities. Sponsored by DEPFA Bank, IDA Ireland, and Pioneer Investments, this concise and well-illustrated book equips practitioners with the necessary information to make important financial decisions.
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P1: Naresh August 27, 2007
11:34
C925X
C925X˙C000
P1: Naresh August 27, 2007
11:34
C925X
C925X˙C000
P1: Naresh August 27, 2007
11:34
C925X
C925X˙C000
P1: Naresh August 27, 2007
11:34
C925X
C925X˙C000
Chapman & Hall/CRC Taylor & Francis Group 6000 Broken Sound Parkway NW, Suite 300 Boca Raton, FL 33487-2742 © 2008 by Taylor & Francis Group, LLC Chapman & Hall/CRC is an imprint of Taylor & Francis Group, an Informa business No claim to original U.S. Government works Printed in the United States of America on acid-free paper 10 9 8 7 6 5 4 3 2 1 International Standard Book Number-13: 978-1-58488-925-0 (Hardcover) This book contains information obtained from authentic and highly regarded sources. Reprinted material is quoted with permission, and sources are indicated. A wide variety of references are listed. Reasonable efforts have been made to publish reliable data and information, but the author and the publisher cannot assume responsibility for the validity of all materials or for the consequences of their use. No part of this book may be reprinted, reproduced, transmitted, or utilized in any form by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying, microfilming, and recording, or in any information storage or retrieval system, without written permission from the publishers. For permission to photocopy or use material electronically from this work, please access www. copyright.com (http://www.copyright.com/) or contact the Copyright Clearance Center, Inc. (CCC) 222 Rosewood Drive, Danvers, MA 01923, 978-750-8400. CCC is a not-for-profit organization that provides licenses and registration for a variety of users. For organizations that have been granted a photocopy license by the CCC, a separate system of payment has been arranged. Trademark Notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. Library of Congress Cataloging-in-Publication Data Miller, John (John James Henry), 1937Numerical methods for finance / John Miller and David Edelman. p. cm. -- (Financial mathematics series) Papers presented at a conference. Includes bibliographical references and index. ISBN-13: 978-1-58488-925-0 (alk. paper) ISB