# Quantitative Finance: A Simulation-Based Introduction Using Excel

## Book Description

*Teach Your Students How to Become Successful Working Quants*

**Quantitative 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.

### Table of Contents

Chapter 1 - Introduction

Chapter 2 - Intuition about Uncertainty and Risk

Chapter 3 - The Classical Approach to Decision Making under Uncertainty

Chapter 4 - Valuing Investment Opportunities: The Discounted Cash Flow Method

Chapter 5 - Repaying Loans over Time

Chapter 6 - Bond Pricing with Default: Using Simulations

Chapter 7 - Bond Pricing with Default: Using Difference Equations

Chapter 8 - Difference Equations for Life Annuities

Chapter 9 - Tranching and Collateralized Debt Obligations

Chapter 10 - Bond CDOs: More than Two Bonds, Correlation, and Simulation

Chapter 11 - Fundamentals of Fixed Income Markets

Chapter 12 - Yield Curves and Bond Risk Measures

Chapter 13 - Forward Rates

Chapter 14 - Modeling Stock Prices

Chapter 15 - Mean Variance Portfolio Optimization

Chapter 16 - A Qualitative Introduction to Options

Chapter 17 - Value at Risk

Chapter 18 - Pricing Options Using Binomial Trees

Chapter 19 - Random Walks

Chapter 20 - Basic Stochastic Calculus

Chapter 21 - Simulating Geometric Brownian Motion

Chapter 22 - Black Scholes PDE for Pricing Options in Continuous Time

Chapter 23 - Solving the Black Scholes PDE

Chapter 24 - Pricing Put Options Using Put Call Parity

Chapter 25 - Some Approximate Values of the Black Scholes Call Formula

Chapter 26 - Simulating Delta Hedging

Chapter 27 - Black Scholes with Dividends

Chapter 28 - American Options

Chapter 29 - Pricing the Perpetual American Put and Call

Chapter 30 - Options on Multiple Underlying Assets

Chapter 31 - Interest Rate Models

Chapter 32 - Incomplete Markets

Appendix 1 - Probability Theory Basics

Appendix 2 - Proof of DeMoivre–Laplace Theorem

Appendix 3 - Naming Variables in Excel

Appendix 4 - Building VBA Macros from Excel

## Book Details

- Title: Quantitative Finance: A Simulation-Based Introduction Using Excel
- Author: Matt Davison
- Length: 532 pages
- Edition: 1
- Language: English
- Publisher: Chapman and Hall/CRC
- Publication Date: 2014-05-08
- ISBN-10: 143987168X
- ISBN-13: 9781439871683

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