Intended Audience

As the title of this book suggests, a modern book on financial engineering has to cover investment theory, financial mathematics, and computer science evenly. This interdisciplinary emphasis is tuned more to the capital markets wherever quantitative analysis is being practiced. After all, even economics has moved away from a time when “the bulk of [Alfred Marshall's] potential readers were both unable and unwilling to read economics in mathematical form” according to Viner (1892–1970) [860] toward the new standard of which Markowitz wrote in 1987, “more than half my students cannot write down the formal definition of [the limit of a sequence]” [642].

This text is written mainly for students of engineering and the natural sciences who want to study quantitative finance for academic or professional reasons. No background in finance is assumed. Years of teaching students of business administration convince me that technically oriented MBA students will benefit from the book's emphasis on computation.With a sizable bibliography, the book can serve as a reference for researchers.

This text is also written for practitioners. System analysts will find many compact and useful algorithms. Portfolio managers and traders can obtain the quantitative underpinnings for their daily activities. This work also serves financial engineers in their design of financial instruments by expounding the underlying principles and the computational means to pricing them.