Quantitative Finance: A Simulation-Based Introduction Using Excel

“Teach Your Students How to Become Successful Working QuantsQuantitative Finance: A Simulation-Based Introduction Using Excel provides an introduction to financial mathematics for students in applied mathematics, financial engineering, actuarial science, and business administration.
The text not only enables students to practice with the basic techniques of financial mathematics, but it also helps them gain significant intuition about what the techniques mean, how they work, and what happens when they stop working.
After introducing risk, return, decision making under uncertainty, and traditional discounted cash flow project analysis, the book covers mortgages, bonds, and annuities using a blend of Excel simulation and difference equation or algebraic formalism.
It then looks at how interest rate markets work and how to model bond prices before addressing mean variance portfolio optimization, the capital asset pricing model, options, and value at risk (VaR).
The author next focuses on binomial model tools for pricing options and the analysis of discrete random walks.
He also introduces stochastic calculus in a nonrigorous way and explains how to simulate geometric Brownian motion.
The text proceeds to thoroughly discuss options pricing, mostly in continuous time.
It concludes with chapters on stochastic models of the yield curve and incomplete markets using simple discrete models.
Accessible to students with a relatively modest level of mathematical background, this book will guide your students in becoming successful quants.
It uses both hand calculations and Excel spreadsheets to analyze plenty of examples from simple bond portfolios.
The spreadsheets are available on the book’s CRC Press web page”–“Preface It is necessary to thank many people at the end of a big project like writing a book.
First, my thanks go to my patient editor Sunil Nair and his editorial assistants Rachel Holt and Sarah Gelson.
Two anonymous reviewers made very thorough and useful comments on an earlier manuscript.
Tao Luo and Sharon Wang typed and made figures for many versions of this book.
Tao’s valuable comments, mastery of visual basic, and untiring commitment were a particular help in both of the final pushes to completing this project.
I have benefitted from teaching this material to many students over many years, beginning with many insightful master’s and PhD students.
Classroom versions of this content has been taught to the actuarial science, financial modeling, and applied mathematics students of AM3613b, AM9578b, AS9022a, SS4521 g, SS9521b, and SS3520b at Western University, to the HBA students of Bus4486 and MBA students of Bus9443 at the Richard Ivey School of Business, and to students at a course on interest rate models given at the Bank of Canada.
Greg Sullivan and Kirk Cooper, then at Deutsche Bank Canada, were my first teachers in trading floor quant finance.
Chris Essex, Henning Rasmussen, and Mark Reesor at Western, Adam Metzler at Wilfrid Laurier, Matt Thompson at Queens, Lindsay Anderson at Cornell, and Alejandro Garcia at the Office of the Superintendent of Financial Institutions, have all helped shape my thinking.
Of course, any errors or omissions in this book are mine alone.
The final thanks go to my wife Christine and my sons Liam and Shawn, without whom none of this would be worth doing”– Read more.
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Abstract: “Teach Your Students How to Become Successful Working QuantsQuantitative Finance: A Simulation-Based Introduction Using Excel provides an introduction to financial mathematics for students in applied mathematics, financial engineering, actuarial science, and business administration.
The text not only enables students to practice with the basic techniques of financial mathematics, but it also helps them gain significant intuition about what the techniques mean, how they work, and what happens when they stop working.
After introducing risk, return, decision making under uncertainty, and traditional discounted cash flow project analysis, the book covers mortgages, bonds, and annuities using a blend of Excel simulation and difference equation or algebraic formalism.
It then looks at how interest rate markets work and how to model bond prices before addressing mean variance portfolio optimization, the capital asset pricing model, options, and value at risk (VaR).
The author next focuses on binomial model tools for pricing options and the analysis of discrete random walks.
He also introduces stochastic calculus in a nonrigorous way and explains how to simulate geometric Brownian motion.
The text proceeds to thoroughly discuss options pricing, mostly in continuous time.
It concludes with chapters on stochastic models of the yield curve and incomplete markets using simple discrete models.
Accessible to students with a relatively modest level of mathematical background, this book will guide your students in becoming successful quants.
It uses both hand calculations and Excel spreadsheets to analyze plenty of examples from simple bond portfolios.
The spreadsheets are available on the book’s CRC Press web page”–“Preface It is necessary to thank many people at the end of a big project like writing a book.
First, my thanks go to my patient editor Sunil Nair and his editorial assistants Rachel Holt and Sarah Gelson.
Two anonymous reviewers made very thorough and useful comments on an earlier manuscript.
Tao Luo and Sharon Wang typed and made figures for many versions of this book.
Tao’s valuable comments, mastery of visual basic, and untiring commitment were a particular help in both of the final pushes to completing this project.
I have benefitted from teaching this material to many students over many years, beginning with many insightful master’s and PhD students.
Classroom versions of this content has been taught to the actuarial science, financial modeling, and applied mathematics students of AM3613b, AM9578b, AS9022a, SS4521 g, SS9521b, and SS3520b at Western University, to the HBA students of Bus4486 and MBA students of Bus9443 at the Richard Ivey School of Business, and to students at a course on interest rate models given at the Bank of Canada.
Greg Sullivan and Kirk Cooper, then at Deutsche Bank Canada, were my first teachers in trading floor quant finance.
Chris Essex, Henning Rasmussen, and Mark Reesor at Western, Adam Metzler at Wilfrid Laurier, Matt Thompson at Queens, Lindsay Anderson at Cornell, and Alejandro Garcia at the Office of the Superintendent of Financial Institutions, have all helped shape my thinking.
Of course, any errors or omissions in this book are mine alone.
The final thanks go to my wife Christine and my sons Liam and Shawn, without whom none of this would be worth doing”.