Tools for Computational Finance (Universitext)

By Rüdiger U. Seydel

Publisher: Springer
Number Of Pages: 304
Publication Date: 2006-05-11
Sales Rank: 421773
ISBN / ASIN: 3540279237
EAN: 9783540279235
Binding: Paperback
Manufacturer: Springer
Studio: Springer
Average Rating: 3.5

This book is very easy to read and one can gain a quick snapshot of computational issues arising in financial mathematics. Researchers or students of the mathematical sciences with an interest in finance will find this book a very helpful and gentle guide to the world of financial engineering. SIAM review (46, 2004).

The third edition is thoroughly revised and significantly extended. The largest addition is a new section on analytic methods with main focus on interpolation approach and quadratic approximation. New sections and subsections are among others devoted to risk-neutrality, early-exercise curves, multidimensional Black-Scholes models, the integral representation of options and the derivation of the Black-Scholes equation.

New figures, more exercises, more background material make this guide to the world of financial engineering a real must-to-have for everyone working in FE.

Review:

the shortcut for rocket scientists.

During my painful thesis writting, I read this book in order to get some relaxation together with Hull's book. If you are a rocket scientist, such as a struggeling ph.d candidata like me, you will find Hull's book is useful but simplified. This book is quite helpful to me because I used PDE. Statistic, SDE, numerical method here and there and in the book, Seydel shows how to put these skills together and how to solve problems.

Review:

Worth reading, but...

Seydel is at a level of sophistication comparable to Wilmott et al. (2000). Indeed, it makes a lot of sense to read both books side-by-side. While Wilmott focuses exclusively on "differential equation methods" of financial engineering, Seidel takes a more balanced approach. The two books complement each other well.

The main part of this book is focused on methods of how to value american vanilla options. He does this only in the diffusion transformed version of B&S. He starts with the equation in this form, without mentioning much of how to get there, and why. And thats typical for the rest of the book aswell, much of it is "cookery book form" (even if the book contains lots of usefull references in the endchapter). He discusses several ways of solving PDE:s, mainly implicit/explicit/Crank N and then there is a very introductory chapter on FEM. The discussion on stability issues is to brief (and not to understandable), I'd say (Tavella does this much more elegant). In the endchapter he discusses how to value exotic options (using asian as a case), and concludes that the methods ealier in the book isnt of much use, but as the author says this is an introductory book.