Modern Computational Finance

Arguably the strongest addition to numerical finance of the past decade, Algorithmic Adjoint Differentiation (AAD) is the technology implemented in modern financial software to produce thousands of accurate risk sensitivities, within seconds, on light hardware. AAD recently became a centerpiece of modern financial systems and a key skill for all quantitative analysts, developers, risk professionals or anyone involved with derivatives. It is increasingly taught in Masters and PhD programs in finance. Danske Bank's wide scale implementation of AAD in its production and regulatory systems won the In-House System of the Year 2015 Risk award. The Modern Computational Finance books, written by three of the very people who designed Danske Bank's systems, offer a unique insight into the modern implementation of financial models. The volumes combine financial modelling, mathematics and programming to resolve real life financial problems and produce effective derivatives software. This volume is a complete, self-contained learning reference for AAD, and its application in finance. AAD is explained in deep detail throughout chapters that gently lead readers from the theoretical foundations to the most delicate areas of an efficient implementation, such as memory management, parallel implementation and acceleration with expression templates. The book comes with professional source code in C++, including an efficient, up to date implementation of AAD and a generic parallel simulation library. Modern C++, high performance parallel programming and interfacing C++ with Excel are also covered. The book builds the code step-by-step, while the code illustrates the concepts and notions developed in the book.

This book is a detailed and step-by-step introduction to the mathematical foundations of ordinary and partial differential equations, their approximation by the finite difference method and applications to computational finance. The book is structured so that it can be read by beginners, novices and expert users. Part A Mathematical Foundation for One-Factor Problems Chapters 1 to 7 introduce the mathematical and numerical analysis concepts that are needed to understand the finite difference method and its application to computational finance. Part B Mathematical Foundation for Two-Factor Problems Chapters 8 to 13 discuss a number of rigorous mathematical techniques relating to elliptic and parabolic partial differential equations in two space variables. In particular, we develop strategies to preprocess and modify a PDE before we approximate it by the finite difference method, thus avoiding ad-hoc and heuristic tricks. Part C The Foundations of the Finite Difference Method (FDM) Chapters 14 to 17 introduce the mathematical background to the finite difference method for initial boundary value problems for parabolic PDEs. It encapsulates all the background information to construct stable and accurate finite difference schemes. Part D Advanced Finite Difference Schemes for Two-Factor Problems Chapters 18 to 22 introduce a number of modern finite difference methods to approximate the solution of two factor partial differential equations. This is the only book we know of that discusses these methods in any detail. Part E Test Cases in Computational Finance Chapters 23 to 26 are concerned with applications based on previous chapters. We discuss finite difference schemes for a wide range of one-factor and two-factor problems. This book is suitable as an entry-level introduction as well as a detailed treatment of modern methods as used by industry quants and MSc/MFE students in finance. The topics have applications to numerical analysis, science and engineering. More on computational finance and the author’s online courses, see www.datasim.nl.

A comprehensive introduction to various numerical methods used in computational finance today Quantitative skills are a prerequisite for anyone working in finance or beginning a career in the field, as well as risk managers. A thorough grounding in numerical methods is necessary, as is the ability to assess their quality, advantages, and limitations. This book offers a thorough introduction to each method, revealing the numerical traps that practitioners frequently fall into. Each method is referenced with practical, real-world examples in the areas of valuation, risk analysis, and calibration of specific financial instruments and models. It features a strong emphasis on robust schemes for the numerical treatment of problems within computational finance. Methods covered include PDE/PIDE using finite differences or finite elements, fast and stable solvers for sparse grid systems, stabilization and regularization techniques for inverse problems resulting from the calibration of financial models to market data, Monte Carlo and Quasi Monte Carlo techniques for simulating high dimensional systems, and local and global optimization tools to solve the minimization problem.

The only book to provide a unified view of the interplay between computational number theory and cryptography Computational number theory and modern cryptography are two of the most important and fundamental research fields in information security. In this book, Song Y. Yang combines knowledge of these two critical fields, providing a unified view of the relationships between computational number theory and cryptography. The author takes an innovative approach, presenting mathematical ideas first, thereupon treating cryptography as an immediate application of the mathematical concepts. The book also presents topics from number theory, which are relevant for applications in public-key cryptography, as well as modern topics, such as coding and lattice based cryptography for post-quantum cryptography. The author further covers the current research and applications for common cryptographic algorithms, describing the mathematical problems behind these applications in a manner accessible to computer scientists and engineers. Makes mathematical problems accessible to computer scientists and engineers by showing their immediate application Presents topics from number theory relevant for public-key cryptography applications Covers modern topics such as coding and lattice based cryptography for post-quantum cryptography Starts with the basics, then goes into applications and areas of active research Geared at a global audience; classroom tested in North America, Europe, and Asia Incudes exercises in every chapter Instructor resources available on the book’s Companion Website Computational Number Theory and Modern Cryptography is ideal for graduate and advanced undergraduate students in computer science, communications engineering, cryptography and mathematics. Computer scientists, practicing cryptographers, and other professionals involved in various security schemes will also find this book to be a helpful reference.

This book presents a cogent description of the main methodologies used in derivatives pricing. Starting with a summary of the elements of Stochastic Calculus, Quantitative Methods in Derivatives Pricing develops the fundamental tools of financial engineering, such as scenario generation, simulation for European instruments, simulation for American instruments, and finite differences in an intuitive and practical manner, with an abundance of practical examples and case studies. Intended primarily as an introductory graduate textbook in computational finance, this book will also serve as a reference for practitioners seeking basic information on alternative pricing methodologies. Domingo Tavella is President of Octanti Associates, a consulting firm in risk management and financial systems design. He is the founder and chief editor of the Journal of Computational Finance and has pioneered the application of advanced numerical techniques in pricing and risk analysis in the financial and insurance industries. Tavella coauthored Pricing Financial Instruments: The Finite Difference Method. He holds a PhD in aeronautical engineering from Stanford University and an MBA in finance from the University of California at Berkeley.

The use of computation and simulation has become an essential part of the scientific process. Being able to transform a theory into an algorithm requires significant theoretical insight, detailed physical and mathematical understanding, and a working level of competency in programming. This upper-division text provides an unusually broad survey of the topics of modern computational physics from a multidisciplinary, computational science point of view. Its philosophy is rooted in learning by doing (assisted by many model programs), with new scientific materials as well as with the Python programming language. Python has become very popular, particularly for physics education and large scientific projects. It is probably the easiest programming language to learn for beginners, yet is also used for mainstream scientific computing, and has packages for excellent graphics and even symbolic manipulations. The text is designed for an upper-level undergraduate or beginning graduate course and provides the reader with the essential knowledge to understand computational tools and mathematical methods well enough to be successful. As part of the teaching of using computers to solve scientific problems, the reader is encouraged to work through a sample problem stated at the beginning of each chapter or unit, which involves studying the text, writing, debugging and running programs, visualizing the results, and the expressing in words what has been done and what can be concluded. Then there are exercises and problems at the end of each chapter for the reader to work on their own (with model programs given for that purpose).

Computational Intelligence: An Introduction, Second Edition offers an in-depth exploration into the adaptive mechanisms that enable intelligent behaviour in complex and changing environments. The main focus of this text is centred on the computational modelling of biological and natural intelligent systems, encompassing swarm intelligence, fuzzy systems, artificial neutral networks, artificial immune systems and evolutionary computation. Engelbrecht provides readers with a wide knowledge of Computational Intelligence (CI) paradigms and algorithms; inviting readers to implement and problem solve real-world, complex problems within the CI development framework. This implementation framework will enable readers to tackle new problems without any difficulty through a single Java class as part of the CI library. Key features of this second edition include: A tutorial, hands-on based presentation of the material. State-of-the-art coverage of the most recent developments in computational intelligence with more elaborate discussions on intelligence and artificial intelligence (AI). New discussion of Darwinian evolution versus Lamarckian evolution, also including swarm robotics, hybrid systems and artificial immune systems. A section on how to perform empirical studies; topics including statistical analysis of stochastic algorithms, and an open source library of CI algorithms. Tables, illustrations, graphs, examples, assignments, Java code implementing the algorithms, and a complete CI implementation and experimental framework. Computational Intelligence: An Introduction, Second Edition is essential reading for third and fourth year undergraduate and postgraduate students studying CI. The first edition has been prescribed by a number of overseas universities and is thus a valuable teaching tool. In addition, it will also be a useful resource for researchers in Computational Intelligence and Artificial Intelligence, as well as engineers, statisticians, operational researchers, and bioinformaticians with an interest in applying AI or CI to solve problems in their domains. Check out http://www.ci.cs.up.ac.za for examples, assignments and Java code implementing the algorithms.

A Unified Summary of the Models and Optimization Methods Used in Computational Lithography Optical lithography is one of the most challenging areas of current integrated circuit manufacturing technology. The semiconductor industry is relying more on resolution enhancement techniques (RETs), since their implementation does not require significant changes in fabrication infrastructure. Computational Lithography is the first book to address the computational optimization of RETs in optical lithography, providing an in-depth discussion of optimal optical proximity correction (OPC), phase shifting mask (PSM), and off-axis illumination (OAI) RET tools that use model-based mathematical optimization approaches. The book starts with an introduction to optical lithography systems, electric magnetic field principles, and the fundamentals of optimization from a mathematical point of view. It goes on to describe in detail different types of optimization algorithms to implement RETs. Most of the algorithms developed are based on the application of the OPC, PSM, and OAI approaches and their combinations. Algorithms for coherent illumination as well as partially coherent illumination systems are described, and numerous simulations are offered to illustrate the effectiveness of the algorithms. In addition, mathematical derivations of all optimization frameworks are presented. The accompanying MATLAB® software files for all the RET methods described in the book make it easy for readers to run and investigate the codes in order to understand and apply the optimization algorithms, as well as to design a set of optimal lithography masks. The codes may also be used by readers for their research and development activities in their academic or industrial organizations. An accompanying MATLAB® software guide is also included. An accompanying MATLAB® software guide is included, and readers can download the software to use with the guide at ftp://ftp.wiley.com/public/sci_tech_med/computational_lithography. Tailored for both entry-level and experienced readers, Computational Lithography is meant for faculty, graduate students, and researchers, as well as scientists and engineers in industrial organizations whose research or career field is semiconductor IC fabrication, optical lithography, and RETs. Computational lithography draws from the rich theory of inverse problems, optics, optimization, and computational imaging; as such, the book is also directed to researchers and practitioners in these fields.

COMPUTATIONAL GEOMECHANICS The new edition of the first book to cover the computational dynamic aspects of geomechanics, now including more practical applications and up-to-date coverage of current research in the field[/b] Advances in computational geomechanics have dramatically improved understanding of the behavior of soils and the ability of engineers to design increasingly sophisticated constructions in the ground. When Professor Olek Zienkiewicz began the application of numerical approaches to solid dynamics at Swansea University, it became evident that realistic prediction of the behavior of soil masses could only be achieved if the total stress approaches were abandoned. Computational Geomechanics introduces the theory and application of Zienkiewicz’s computational approaches that remain the basis for work in the area of saturated and unsaturated soil to this day. Written by past students and colleagues of Professor Zienkiewicz, this extended Second Edition provides formulations for a broader range of problems, including failure load under static loading, saturated and unsaturated consolidation, hydraulic fracturing, and liquefaction of soil under earthquake loading. The internationally-recognized team of authors incorporates current computer technologies and new developments in the field, particularly in the area of partial saturation, as they guide readers on how to properly apply the formulation in their work. This one-of-a-kind volume: Explains the Biot-Zienkiewicz formulation for saturated and unsaturated soil Covers multiple applications to static and dynamic problems for saturated and unsaturated soil in areas such as earthquake engineering and fracturing of soils and rocks Features a completely new chapter on fast catastrophic landslides using depth integrated equations and smoothed particle hydrodynamics with applications Presents the theory of porous media in the saturated and unsaturated states to establish the foundation of the problem of soil mechanics Provides a quantitative description of soil behavior including simple plasticity models, generalized plasticity, and critical state soil mechanics Includes numerous questions, problems, hands-on experiments, applications to other situations, and example code for GeHoMadrid Computational Geomechanics: Theory and Applications, Second Edition is an ideal textbook for specialist and general geotechnical postgraduate courses, and a must-have reference for researchers in geomechanics and geotechnical engineering, for software developers and users of geotechnical finite element software, and for geotechnical analysts and engineers making use of the numerical results obtained from the Biot-Zienkiewicz formulation.