Financial Engineering with Finite Elements

Finite elements are an invaluable technique for solving financial engineering problems that are presented as partial differential equations. This is a highly specialized topic with a vast literature crossing multiple disciplines. What Topper has done is compile a detailed survey of methodologies that are useful in finance. This is not really a financial engineering book. The author is clearly knowledgeable about the literature and recent developments in the financial engineering. He draws plenty of examples from the financial engineering literature, but this is really a book on finite elements written for financial engineers. Numerous techniques are discussed, and those discussions often open by presenting just a partial differential equation without any financial context. This isn't a criticism. It is just a warning that this really is a book on finite element (and to some extent finite difference) methods. It is somewhat of a book of recipes with citations to the liteature for addiitional information.

There are plenty of examples with detailed numerical output that readers can try to reproduce. It is a very technical book. You want to have prior familiarity with financial engineering and partial differential equations. Some familiarity with finite difference and finite element methods would also be helpful, but it isn't necessary.

Contents

1. Introduction

2. Some prototype models

3. The conventional approach : finite differences

4. Static 1D problems

5. Dynamic 1D problems

6. Static 2D problems

7. Dynamic 2D problems

8. Static 3D problems

9. Dynamic 3D problems

10. Nonlinear problems

11. Future directions of research

App. A Some useful results from analysis

App. B Some useful results from stochastics

App. C Some useful results from linear algebra

App. D A quick introduction to PDE2D

This book will be excellent for financial engineers. Those who already use finite elements in their work will find it an invaluable reference with lots of techniques for solving problems that arise in financial engineering applications. Those who are new to finite elements will find plenty of excellent reading. [11/16/05]

 

For related books, see sections:

Financial Engineering - Numerical Methods

Financial Engineering - Programming

Financial Engineering - Intermediate Theory

Financial Engineering - Advanced Theory

Mathematics - Monte Carlo Method

 

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