Encyclopedia of Quantitative Finance, IV Volume Set

Foreword

For nearly four decades, new financial product and market designs, improved computer and telecommunications technology, and advances in the science of finance have led to dramatic and rapid global changes in the structure of the financial system. Financial innovation has been a central force driving the global financial system toward greater efficiency with considerable economic benefit having accrued from those changes. The scientific breakthroughs in finance in this period both shaped and were shaped by the extraordinary innovations in finance practice that expanded global opportunities for risk sharing, lowering transaction costs and reducing information and agency costs. The cumulative impact has significantly affected all of us—as users, producers, or overseers of the financial system.

The subject matter of this Encyclopedia, quantitative finance, is concerned with the mathematical modeling of financial and related risks, associated with the design optimization, valuation, risk measurement, and risk management of financial instruments and trading strategies. Financial engineering is the process of using the tools of quantitative finance and financial innovation to solve financial problems or to improve on the performance of current best-practices for executing financial functions. Quantitative finance is indispensable to research and development in the financial innovation process as well as to the ongoing management of those innovations after their implementation. ...