Tools for computational finance. (Q5895545)

This textbook gives a thorough introduction to computational finance, and includes the usual suspects such as Monte Carlo, finite difference methods, finite element methods etc. Its popularity is evident by the fact the book is in its fifth edition. This edition significantly expands upon previous editions' content. These additions include extra examples and exercises and a greater clarity of exposition. A major feature is the inclusion of a chapter on incomplete markets. In order to deal with this complication the author explores a form of a non-linear Black-Scholes equation. This family of equations is difficult to solve analytically and benefits from the application of numerical methods. A discretization technique is used on the partial differential equation, and a numerical solution is found by employing Newton's method. The usefulness of this approach is illustrated by applying it to Leland's transaction model. Other new features of the book include, inter alia, a more detailed section on the Greeks, penalty methods and a discussion on the efficiency of certain algorithms. This book would provide a valuable source in any financial mathematics library.