Finance and the finance industry Books

Book SynopsisMost cost management efforts concern understanding the past but this book focuses on future costs, their uncertainties, and risks. It presents a new approach toward life-cycle costing based on the principles of activity-based costing, uncertainty and risk management and Monte Carlo methods.Table of ContentsPreface. Acknowledgments. 1. Introduction. What Does It Cost? The Role of Life-Cycle Costing. Why Activity-Based Life-Cycle Costing? Notes. 2. Basics of Life-Cycle Costing. What Is a Life Cycle? What Is a Cost? Four Ways of LCC. Notes. 3. Uncertainty Analysis and Risk Management. What are Risk and Uncertainty? Uncertainty, Risk, and Utility. Common Ways of Analyzing Risk and Uncertainty. How Belief Sheds Light on Risk and Uncertainty. Reduce Risk by Introducing Uncertainty: How Monte Carlo Methods Work. Traditional Risk Management. Notes. 4. Activity-Based Costing. Motivating Example. Activity-Based Costing. ABC Example and Case Study. From the Trenches. Notes. 5. Activity-Based Life-Cycle Costing. Step 1: Define the Scope of the Model and the Corresponding Cost Objects. Step 2: Obtain and Clean Bill of Materials for All Cost Objects. Step 3: Identify and Quantify the Resources. Step 4: Create an Activity Hierarchy and Network. Step 5: Identify and Quantify Resource Drivers, Activity Drivers, and Their Intensities. Step 6: Identify the Relationships between Activity Drivers and Design Changes. Step 7: Model the Uncertainty. Step 8: Estimate the Bill of Activities. Step 9: Estimate the Cost of Cost Objects and Their Performance Measures. Step 10: Perform Monte Carlo Simulations and Relevant Analyses. Further Explanation Regarding Some Steps. Notes. 6. Case Study: Life-Cycle Costing and Tire Disposal. What the Decision Is About. Traditional LCC Implementation. Activity-Based LCC Implementation. Discussion. Closure. Epilogue. Notes. 7. Activity-Based Life-Cycle Costing for Platform Supply Vessels. Operating a Platform Supply Vessel. Problem Statement and System Boundaries. Information Sources. Activity-Based LCC Model Implementation and Results. Identifying the Major Operational Risks. Closure. Notes. 8. Activity-Based Life-Cycle Costing at WagonHo! WagonHo!’s New Strategy and Business Idea. Developing an Activity-Based LCC Model. Results and How to Use Them. Closure. Notes. 9. From Hindsight to Foresight. Activity-Based LCC Revisited. Ideas for the Future. Some Thoughts at the End. Notes. Appendix A Monte Carlo Simulation Example. Problem Definition. Hypotheses to Be Tested. Results and Discussion. Appendix B SFI Group System. Glossary. Acronyms. Index.

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Book SynopsisOn The Deal Maker: How William C. Durant Made General Motors: "A well-written biography. "-New York Times On Stanwyck: The Life and Times of Barbara Stanwyck: "Madsen's admirably researched, insightful portrait of her aloof nature... reveals she was always torn between her wish to give of herself and her need to be in control.Trade ReviewFur trader, slumlord, war profiteer, opium dealer, liquor salesman. That's the rap on the first of America's legendary business titans, John Jacob Astor. The biography, John Jacob Astor: America's First Multimillionaire by Axel Madsen, records how in 1784, he arrived in America after an unusually long crossing of the Atlantic: He was at sea for 4 months. He was 20 years old with $25 in his pocket. At the time of his death, a few months shy of his 85th birthday, he was worth upward of $20 million and was the richest man in the USA. According to Axel Madsen (who has written 15 biographies on famous figures, such as Joe Kennedy and Gloria Swanson), Astor embodied the American Dream His desire to reinvent himself propelled him to levels of financial success few could attain. By all historical accounts (the vast majority supplied by the New York Public Library archives), Astor was ruthless and stingy, but he had a flair for business. Sounds like a viable strategy. And he had an uncanny ability for high-tailing it out of a business before it went bust. A poor German immigrant, Astor made his way to New York and rapidly stamped his mark on an economy that was taking off. He seemingly glided from the fur trade, bolstered by selling liquor to the Indians, to shipping opium to China, to Manhattan real estate (his greatest coup). He is described as a slum lord. Fairly unsavory stuff, but worth a fortune. Money was his passion, and that's all that mattered to him. He understood the impermanence of success and understood the volatility of the markets and how to anticipate change. Worthy instincts, even today. The fascinating thing about Astor is that, regardless of how one feels about his business practices, he was one of the first businessmen to imagine the world as a global economy. He went for it with gusto. To get a snapshot of how rich he was in his heyday, the author gives us this fine example: In 1844, the average New Yorker earned $1 a week. That year, Astor gave his granddaughter Laura a wedding gift of $250,000, conservatively worth $50 million today. The author reveals that it was really his wife, Sarah Todd, who came with a $300 dowry and a free place to live with her family, who started him on his financial way. Her wealth allowed him to quit hawking bread on the streets of lower Manhattan, his first job in this country. His work schedule is admirable, given the hours many of today's workers put in. He would have breakfast at 9a.m., leave the office at 2 in the afternoon, have dinner at 3, then savor a glass of beer and three games of checkers each evening, according to Madsen. Astor offers a historical insight into a vibrant, growing American economy, as well as a glimpse of a man who made the most of his time here. The fault is the inability to tap into the real heart of what propelled this man to such great heights. We learn of his business practices but little about his inner motivation and soul. We know that after money was no object, he spent much time traipsing around Europe from court to court, trying to marry his favorite daughter off to royalty. But more of his business acumen would have been worth noting beyond the notion that he was merciless and aggressive. How so? The author assures us that part of that problem was that none of Astor's children or siblings ever published an anecdote that might throw light on his character. Too bad. --USA Today Expertly situating his subject's accomplishments in the context of late 18th- and early 19th-century commercial and geopolitical expansion, Madsen (Chanel; Gloria and Joe) weighs in with an absorbing biography of one of 19th-century America's most powerful men. Having immigrated to the U.S. from Germany in 1783, Astor was on friendly terms with such prominent figures as Thomas Jefferson, James Madison and Albert Gallatin by the time he came to dominate the North American fur trade in 1800. While Astor's relationships with Jefferson and others characterized the wheeling and dealing fledgling Washington, D.C., his mastery over the fur trade figured significantly in opening up the American West. The book's best moments come when Madsen describes Astor's efforts to establish a permanent outpost in the Oregon territory. Called Astor, it was designed not only to aid its founder's domination of the fur trade in the Northwest, but to help him facilitate trade with China - for while fur brought Astor his first fortune, foreign trade provided him with his second. While he had a talent for exploiting new business opportunities, Astor also had the foresight to extricate himself from both the fur and trading businesses before they waned. Astor's third fortune, the legacy he would pass on to his heirs, sprang from his real estate investments in Manhattan. He sank the profits from his first ventures into large swaths of land in rapidly expanding New York City, where he built mansions and tenements alike. Madsen provides a largely sympathetic portrait of Astor; while no revelations emerge, the book effectively projects his story against the backdrop of seminal events in early American history. --Publishers Weekly Like Caesar's Gaul, the continent of popular business biographies has lately been divided into three parts - let's call them Pittsburgh, Wall Street and Silicon Valley. The Pittsburgh precinct is crowded with tales of the famous empire builders of the Gilded Age, the perennially interesting Morgans, Mellons and Rockefellers. The Wall Street region has produced a vast crop of books about various stock market geniuses. And Silicon Valley has become a fertile field for stories about famous young nerds and their favorite gadgets. So it is refreshing to find a new business biography that returns to some long-neglected historical terrain: America's first generation of business titans. Long before there were Steel mills in Pittsburgh - indeed, before there was anything but Fort Duquesne in Pittsburgh - there were colorful American entrepreneurs who mobilized the capital, labor force and greed of the frontier to produce a new aristocracy of wealth to challenge the pedigrees of Europe. And the most successful of them all, for those who use money to keep score, was John Jacob Astor. At the time of his death in 1848, at the age of 84, he was by far the richest man in America - indeed, he personally owned nearly 7 percent of all the personal wealth in the young country, far more than the young upstart Cornelius Vanderbilt. As recently as the early 20th century, the Astor name was still a widely recognized synonym for limitless wealth. "John Jacob Astor: America's First Multimillionaire" by Axel Madsen (John Wiley Sons, $30) offers an overdue refresher course in the roots of what is still a formidable fortune. Born in what is now southern Germany in 1763, Astor was a bright, enterprising young man whose early schooling gave him a tantalizing glimpse of the world's possibilities. He reluctantly followed his father into the butcher's trade, but two older brothers struck out for London and New York. Soon, he followed - first, to England, and finally, in November 1783, to America. He made his first fortune in the fur trade, and the men of his American Fur Company left their mark - and inevitably, their bruises - on the face of a barely explored North American wilderness. To help his fur trade with the Indians, he built a shipping empire, competing with the Boston Brahmins for a lucrative slice of the infamous opium trade with China. Finally, he plowed his profits into real estate, buying and leasing out the bucolic farms and riverfront property that are now known as Midtown Manhattan. Astor left money for what became one of the founding collections of the New York City Public Library, but he was clearly no philanthropist-indeed, his offspring would be more famous for their conspicuous consumption than for their generosity. His only grand edifice was the Astor Hotel, the city's first luxury lodging, but his name was appropriated by a community in Queens - Astoria - that could be seen from his country estate on the Manhattan shore of the East River. This is Mr. Madsen's second purely business biography after more than a dozen works drawn from the stylish world of fashion and film. Unfortunately, Astor's life was singularly lacking in similar glamour. He was a primitive man whose written English was almost incomprehensible. His personal papers are sparse, and primary sources have been well-thumbed by earlier biographers - including Washington lrving, who knew and briefly lived with Astor in the old trader's later years. None of Astor's offspring penned so much as a short anecdote about the man who paid the bills. As a result, Astor's essential personality seems to elude his new biographer, leaving the reader with little more than the pelts and antlers, the deeds and mortgages of a life. Mr. Madsen moves these inanimate relics around with great energy but never truly makes them come alive. The same cannot be said for Mr. Madsen's first foray into business biography, which has just been released in paperback. "The Deal Maker: How William C. Durant Made General Motors" (John Wiley Sons, $16.95) is a lively and fascinating account of a seminal figure in the history of the automobile industry. Durant, born in 1861, did not invent the automobile, but he almost might be said to have invented the American idea of the automobile - that shimmering amalgamation of style, speed and sex appeal that remains the essence of car marketing. He was a master salesman and a daring dreamer who, one friend said, was never happy unless he was clinging to a windowsill by his fingertips. His grand visions made conservative bankers like J. P. Morgan nervous. Nevertheless, before the 20th century was a decade old, Durant was able to pull together dozens of idiosyncratic car companies over an 18-month period to form the corporation that would dominate the American auto industry for more than 50 years. And then, like some magnificent figure from Greek mythology, he lost it all. He caught the stock market fever that broke out after World War 1. His frenzied speculations left him at the mercy of his biggest blue-chip investors, and they drove him from the G.M. boardroom in 1920. He tried for a second act as a stock speculator, but was ruined in the 1929 crash. Again, he started over, finding some poignantly modest success late in life as manager of a bowling alley in Flint, Mich., where his fascinating journey had begun. Durant's story is told with a confidence and passion that fully compensates for the occasional awkward phrasing and confusing chronology. Besides bringing the forgotten Durant to life, Mr. Madsen transforms familiar brands into real people, providing human faces for the proper nouns that Detroit has hardwired into our brains: Olds, Dodge, Buick, Chevrolet, Chrysler and even, for us old-timers, Nash and Studebaker. "The Deal Maker" is a wonderful tale, well told. --by Diana B.Henriques, NY Times Table of ContentsAcknowledgments. Introduction. The Hard Years. Flutes and Miss Todd. Into the Woods. Politics. Rounding Out the Century. China Profits. Realpolitik. Punqua Wingchong. Family. The Good Ship Enterprise. A Perfect Triangle. Outbound. The Hunt Journey. No News. Mr. Madison's War. "So Long as I Have a Dollar". John Jacob Astor & Son. Paris. This Land Is My Land. Estimable Grand-Papa. The Bigger Picture. Writing about It. A Third Fortune. Richest Man in America. Heirs and Graces. Notes. Bibliography. Index.

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Book SynopsisThis book teaches an entrepreneur seeking to grow a business. * how to find venture capital, how to make the business attractive to venture capitalists, how to protect himself in negotiating an agreement, and how to deal with the venture capitalists once the agreement is signed. .Table of ContentsPreface: Venture Capital: Make No Mystique About It. What Is Venture Capital? Where Is the Industry Going? Your Search for Venture Capital. Presenting a Business Plan to Investors. What Do Venture Capitalists Think of the Business Plans TheyReceive? The Capital Crapshoot. Earthbound Angels. Venture Capital Decision Making. No, It's Not Location, Location, Location, But It IsManagement. Finding Investors Where They Work and Play. Getting to the Big Show: Venture Capital Conferences. Do Referrals Open Doors? Intermediaries and Other Wild Things. So Many Venture Capitalists, So Little Time. Confidentialty: Prudence or Paranoia? The First Date: Meeting with Venture Capitalists. Valuing Your Company: A Small Dose of Reality. Due Diligence: A Two-Way Street. Give a Little, Get a Lot: Negotiating. Closing the Deal and Living Happily Ever After. Putting It All Together. Final Thoughts: You Can Get There from Here. Words of Encouragement and Advice. Index.

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Book SynopsisGives a snapshot of the role of accounting firms in the twenty first century. This work explores the transformation of CPAs from independent voices on behalf of the shareholder to Corporate America's best friend. It also examines the implications of this shift for investors, the industry, and the economy.Table of ContentsMy Introduction to Accounting 1 CHAPTER 1 The First Accountants 21 CHAPTER 2 The Birth of an American Profession 41 CHAPTER 3 Accountants Earn a Public Trust 67 CHAPTER 4 The Quest for Growth 99 CHAPTER 5 Cracks in the Facade 123 CHAPTER 6 The End of the Audit 159 CHAPTER 7 The Fight of His Life 187 CHAPTER 8 Enron and the Fall of Andersen 225 CHAPTER 9 Accounting 101 255 CHAPTER 10 The Future of Accounting 281 Notes 299 Bibliography 315 Index 317

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Book SynopsisThrough a coherent framework for pursuing such far-ranging changes, this easy-to-understand book addresses new ways for individuals and organizations to invest grant funds, approach regulatory structures that guide giving, and define their goals, activities, outcomes, and achievements. The author applies basic principles of industrial theory and evolution to examine, with a trained scholar's eye, how individual organizations, associations, and the philanthropic infrastructure can work more effectively. Order your copy today!Table of ContentsList of Exhibits. Acknowledgments. Introduction. Designing the Future. Change Comes Slowly. The Trillion-Dollar Opportunity. What Does Better Look Like? Chapter 1. The Industry of Philanthropy. Defining the Industry. Mapping the Landscape of Philanthropic Capital. Evolutionary Adaptations and the Limits of the Industrial Framework. Evolutionary Aspects of Philanthropy. Systems Theory. The Exceptions Prove the Rule. The Age of Commercial Charity. Chapter 2. What the Future Could Look Like. Why Bother? Getting There. Assembly Required. Not Just Newer, But Better. Chapter 3. The Forces of Change. Change Drivers on Society as a Whole. Demographic Trends. New Structures for Working. Globalization and Its Backlash. Environmental and Community Sustainability. Change Drivers on the Industry. Pushing on the Pieces. Collectively Isolated. Drivers of Change at the Organizational Level. Community Foundations Innovate First. Private Foundations and Changes in the Industry. The Ties that Bind Foundations Together. Implications of These Changes. Imagine the Industry Anew. Can Philanthropy Change Itself? Chapter 4. Philanthropic Marketplaces. Philanthropy and Financial Services: Parallels and Divergences. Competition in the Philanthropic Marketplace. Products in the Market. Philanthropic Alliances. The Power of Joint Action. Tied Together at the Top. Emerging Connections. Divergent Tensions. Chapter 5. Public Support for Philanthropy. Regulated from the Start. Industry Growth and Public Oversight. Operating in the Public Eye: Growing Public Attention. The Potential for Industry Action. Pressure Points in the Regulatory Framework. What the Regulatory Framework Should Do. New Markets, New Approaches to Regulation. Meaningful Metrics. Chapter 6. Evolving the Industry. Aligning Products and Services to Aggregate Resources. Using Knowledge as an Industry Resource. Promoting Hybrid Organizations and Strategies. Redesigning the Industry Infrastructure. Potential Leverage Points. The Direction of Evolution. Chapter 7. New Nodes on the Network. Organizational Implications. Partnership Building. The Role of Money. Charting Philanthropic Cycles. Mixing Up the Menu. New Assessment Strategies. Buy or Rent? Results. The Sum of the Parts. Independent Foundations. Changing One to Change Many. Chapter 8. Building New Systems for Social Good. The Futures We Choose. New Revenue Systems. Industry Leadership. Deliberate Diversity. Looking Back from the Future. Copyright Information. Bibliography. Notes. Index.

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Book SynopsisA guide which uses a problem solving approach and shows how to implement Monte Carlo methods, starting from first principles to advanced techniques.Table of ContentsPreface xi Acknowledgements xiii Mathematical Notation xv 1 Introduction 1 2 The Mathematics Behind Monte Carlo Methods 5 2.1 A Few Basic Terms in Probability and Statistics 5 2.2 Monte Carlo Simulations 7 2.2.1 Monte Carlo Supremacy 8 2.2.2 Multi-dimensional Integration 8 2.3 Some Common Distributions 9 2.4 Kolmogorov’s Strong Law 18 2.5 The Central Limit Theorem 18 2.6 The Continuous Mapping Theorem 19 2.7 Error Estimation for Monte Carlo Methods 20 2.8 The Feynman–Kac Theorem 21 2.9 The Moore–Penrose Pseudo-inverse 21 3 Stochastic Dynamics 23 3.1 Brownian Motion 23 3.2 Itô’s Lemma 24 3.3 Normal Processes 25 3.4 Lognormal Processes 26 3.5 The Markovian Wiener Process Embedding Dimension 26 3.6 Bessel Processes 27 3.7 Constant Elasticity Of Variance Processes 28 3.8 Displaced Diffusion 29 4 Process-driven Sampling 31 4.1 Strong versus Weak Convergence 31 4.2 Numerical Solutions 32 4.2.1 The Euler Scheme 32 4.2.2 The Milstein Scheme 33 4.2.3 Transformations 33 4.2.4 Predictor–Corrector 35 4.3 Spurious Paths 36 4.4 Strong Convergence for Euler and Milstein 37 5 Correlation and Co-movement 41 5.1 Measures for Co-dependence 42 5.2 Copulæ 45 5.2.1 The Gaussian Copula 46 5.2.2 The t-Copula 49 5.2.3 Archimedean Copulae 51 6 Salvaging a Linear Correlation Matrix 59 6.1 Hypersphere Decomposition 60 6.2 Spectral Decomposition 61 6.3 Angular Decomposition of Lower Triangular Form 62 6.4 Examples 63 6.5 Angular Coordinates on a Hypersphere of Unit Radius 65 7 Pseudo-random Numbers 67 7.1 Chaos 68 7.2 The Mid-square Method 72 7.3 Congruential Generation 72 7.4 Ran0 To Ran3 74 7.5 The Mersenne Twister 74 7.6 Which One to Use? 75 8 Low-discrepancy Numbers 77 8.1 Discrepancy 78 8.2 Halton Numbers 79 8.3 Sobol’ Numbers 80 8.3.1 Primitive Polynomials Modulo Two 81 8.3.2 The Construction of Sobol’ Numbers 82 8.3.3 The Gray Code 83 8.3.4 The Initialisation of Sobol’ Numbers 85 8.4 Niederreiter (1988) Numbers 88 8.5 Pairwise Projections 88 8.6 Empirical Discrepancies 91 8.7 The Number of Iterations 96 8.8 Appendix 96 8.8.1 Explicit Formula for the L2-norm Discrepancy on the Unit Hypercube 96 8.8.2 Expected L2-norm Discrepancy of Truly Random Numbers 97 9 Non-uniform Variates 99 9.1 Inversion of the Cumulative Probability Function 99 9.2 Using a Sampler Density 101 9.2.1 Importance Sampling 103 9.2.2 Rejection Sampling 104 9.3 Normal Variates 105 9.3.1 The Box–Muller Method 105 9.3.2 The Neave Effect 106 9.4 Simulating Multivariate Copula Draws 109 10 Variance Reduction Techniques 111 10.1 Antithetic Sampling 111 10.2 Variate Recycling 112 10.3 Control Variates 113 10.4 Stratified Sampling 114 10.5 Importance Sampling 115 10.6 Moment Matching 116 10.7 Latin Hypercube Sampling 119 10.8 Path Construction 120 10.8.1 Incremental 120 10.8.2 Spectral 122 10.8.3 The Brownian Bridge 124 10.8.4 A Comparison of Path Construction Methods 128 10.8.5 Multivariate Path Construction 131 10.9 Appendix 134 10.9.1 Eigenvalues and Eigenvectors of a Discrete-time Covariance Matrix 134 10.9.2 The Conditional Distribution of the Brownian Bridge 137 11 Greeks 139 11.1 Importance Of Greeks 139 11.2 An Up-Out-Call Option 139 11.3 Finite Differencing with Path Recycling 140 11.4 Finite Differencing with Importance Sampling 143 11.5 Pathwise Differentiation 144 11.6 The Likelihood Ratio Method 145 11.7 Comparative Figures 147 11.8 Summary 153 11.9 Appendix 153 11.9.1 The Likelihood Ratio Formula for Vega 153 11.9.2 The Likelihood Ratio Formula for Rho 156 12 Monte Carlo in the BGM/J Framework 159 12.1 The Brace–Gatarek–Musiela/Jamshidian Market Model 159 12.2 Factorisation 161 12.3 Bermudan Swaptions 163 12.4 Calibration to European Swaptions 163 12.5 The Predictor–Corrector Scheme 169 12.6 Heuristics of the Exercise Boundary 171 12.7 Exercise Boundary Parametrisation 174 12.8 The Algorithm 176 12.9 Numerical Results 177 12.10 Summary 182 13 Non-recombining Trees 183 13.1 Introduction 183 13.2 Evolving the Forward Rates 184 13.3 Optimal Simplex Alignment 187 13.4 Implementation 190 13.5 Convergence Performance 191 13.6 Variance Matching 192 13.7 Exact Martingale Conditioning 195 13.8 Clustering 196 13.9 A Simple Example 199 13.10 Summary 200 14 Miscellanea 201 14.1 Interpolation of the Term Structure of Implied Volatility 201 14.2 Watch Your CPU Usage 202 14.3 Numerical Overflow and Underflow 205 14.4 A Single Number or a Convergence Diagram? 205 14.5 Embedded Path Creation 206 14.6 How Slow is Exp()? 207 14.7 Parallel Computing And Multi-threading 209 Bibliography 213 Index 219

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Book SynopsisBased around a conference on financial modeling held in Milan in December 1999, this book brings together the leading names in quantitative finance to discuss the modeling techniques in a variety of areas of financial engineering.Table of ContentsPreface The Quantitative Finance Timeline (Paul Wilmott) Part I. New Directions in Equity Modelling Introduction Asymptotic analysis of stochastic volatility models (Henrik Rasmussen and Paul Wilmott) Passport options, a review (Antony Penaud) Equity Dividend Models (David Bakstein and Paul Wilmott) Isoperimetry, log-concavity and elasticity of option prices (Christer Borell) Part II. New Directions in Interest Rate Modelling Introduction Dynamic, deterministic and static optimal portfolio strategies in a mean-variance framework under stochastic interest rates (Isabelle Bajeux-Besnainou and Roland Portrait) Pricing bond options in a worst-case scenario (David Epstein and Paul Wilmott) Part III. New Directions in Risk Management Introduction Implementing VaR by Historical Simulation (Aldo Nassigh, Andrea Piazzetta and Ferdinando Samaria) CrashMetrics (Philip Hua and Paul Wilmott) Herding in financial markets: a role for psychology in explaining investor behaviour? (Henriëtte Prast) Further Reading Author Biographies Index

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Book SynopsisIn The Whole Worlda s Watching the authors explain how money can be channeled into the technology that will preserve the lifestyles we currently enjoy and create a new era of economic growth. This is a book that proposes real, concrete solutions.Trade Review"A timely new book." ---- The Daily Telegraph, 28th November 2000Table of ContentsForeword. Jack Kemp: Biographical Information. Acknowledgments. The Whole World's Watching. America Strikes Out. The Rest of the World. Power to the People. The Afterburners. Renewable Energy. Nuclear Energy. Fuel Cells. Trading. Methane and Other Greenhouse Gases. Kyoto Has No Soul. Glossary.

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Book SynopsisWhat has it meant for future of the financial industry? What about the lives and careers of financial operators who were once driven by utopian visions of economic, social, and personal transformation? And what does it mean for critics of capitalism who have long predicted the end of financial institutions? This book deals with these questions.Trade Review"I heartily recommend [this book] to readers who are seriously interested in finance, market economics, or capitalism... brimming with lucid analysis and profound insight." * Social Science Japan Journal *Table of ContentsAcknowledgments Introduction 1. Shakespearean Arbitrage 2. Between Arbitrage and Speculation 3. Trading on the Limits of Learning 4. Economy of Dreams 5. The Last Dream 6. From Arbitrage to the Gift Notes References Index

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Book SynopsisThe BlackâScholes option pricing model is the first and by far the best-known continuous-time mathematical model used in mathematical finance. Here, it provides a sufficiently complex, yet tractable, testbed for exploring the basic methodology of option pricing. The discussion of extended markets, the careful attention paid to the requirements for admissible trading strategies, the development of pricing formulae for many widely traded instruments and the additional complications offered by multi-stock models will appeal to a wide class of instructors. Students, practitioners and researchers alike will benefit from the book's rigorous, but unfussy, approach to technical issues. It highlights potential pitfalls, gives clear motivation for results and techniques and includes carefully chosen examples and exercises, all of which make it suitable for self-study.Table of ContentsPreface; 1. Introduction; 2. Strategies and risk-neutral probability; 3. Option pricing and hedging; 4. Various extensions and applications; 5. Path-dependent options; 6. General models; Index.

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Book SynopsisStudents and instructors alike will benefit from this rigorous, unfussy text, which keeps a clear focus on the basic probabilistic concepts required for an understanding of financial market models, including independence and conditioning. Assuming only some calculus and linear algebra, the text develops key results of measure and integration, which are applied to probability spaces and random variables, culminating in central limit theory. Consequently it provides essential prerequisites to graduate-level study of modern finance and, more generally, to the study of stochastic processes. Results are proved carefully and the key concepts are motivated by concrete examples drawn from financial market models. Students can test their understanding through the large number of exercises and worked examples that are integral to the text.Table of ContentsPreface; 1. Probability space; 2. Probability distributions and random variables; 3. Product measure and independence; 4. Conditional expectation; 5. Sequences of random variables; Index.

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Book SynopsisThis book focuses on solving and implementing the increasingly complex numerical problems that arise in finance. Readers will learn the numerical techniques and programming skills necessary for any aspiring quant developer. No programming background is required, making the book thoroughly suitable for beginners.Trade Review"This book leads the reader directly into the heart of C++ programming technique without too much fuss. And in so doing, the reader also learns some very important and fundamental methods in options pricing. I highly recommend this little gem of a book." Professor Michael K. Ong, IIT Stuart School of Business"I find the monograph to be an excellent integration of the object-oriented concepts of C++ and the classical numerical techniques used in quantitative finance. Throughout the book, there is an introduction to the numerical technique to be used, along with the need for such a method from the prospective of financial mathematics. After this discussion, the C++ source code that implements the technique is not only given but also annotated to highlight or to clarify reasons for the use of certain object-oriented constructs. As the authors comment, there are some source files which are not listed but are available from the publisher's web site. The monograph is an exceptional book for demonstrating the implementation of the various aspects of C++ in a very concrete fashion. There is substance given to C++ concepts that are introduced in basic programming courses but seldom framed in a realistic setting. The reader, however, should have some familiarity with C++ and mathematical finance, prior to reading the monograph. The book is not intended to be an introduction to either object-oriented C++ or mathematical finance. With such a background, the style and the content of the book make for an informative experience." Professor Sherman Wong, City University of New YorkTable of ContentsPreface; 1. Binomial pricer; 2. Binomial pricer revisited; 3. American options; 4. Nonlinear solvers; 5. Monte Carlo methods; 6. Finite difference methods; Index.

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Book SynopsisThis textbook on the basics of option pricing is accessible to readers with limited mathematical training. It is for both professional traders and undergraduates studying the basics of finance. This third edition includes three new chapters, along with expanded sets of exercises and references for all the chapters.Trade Review'… an excellent introduction to the subject … the book is ideally suited for self-study and provides a very accessible entry point to this fascinating field.' ISI Short Book Reviews'… this excellent text achieves its aim to provide a highly accessible and at the same time accurate presentation of the subject. I would recommend it.' The Statistician'… an excellent introduction to the mathematics of finance … very useful as a text for an introductory course.' Zentralblatt Math'… provides an accessible and relatively deep insight into basic and advanced topics of mathematical finance … The lucid style of the exposition will be appreciated by readers interested in the topic, and by researchers, students, and practitioners.' European Maths Society JournalTable of Contents1. Probability; 2. Normal random variables; 3. Geometric Brownian motion; 4. Interest rates and present value analysis; 5. Pricing contracts via arbitrage; 6. The Arbitrage Theorem; 7. The Black–Scholes formula; 8. Additional results on options; 9. Valuing by expected utility; 10. Stochastic order relations; 11. Optimization models; 12. Stochastic dynamic programming; 13. Exotic options; 14. Beyond geometric motion models; 15. Autoregressive models and mean reversion.

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Book SynopsisThis study examines the role of cowrie-shell money in West African trade, particularly the slave trade. Over a large part of West Africa they became the regular market currency, but then disappeared almost totally, except during the depression of the 1930s, and occasionally in the markets of remote frontier districts.Table of ContentsMaps; Tables and chart; Preface; Introduction; 1. The cowrie; 2. The Maldive Islands; 3. The Portuguese domination; 4. The Dutch and English enter the trade (seventeenth century); 5. Prosperity for the cowrie commerce (eighteenth century); 6. Boom and slump for the cowrie trade (nineteenth century); 7. Collection, transport and distribution; 8. Cowries in Africa; 9. The cowrie as money: transport costs, values and inflation; 10. The last of the cowrie; Notes; Bibliography; Index.

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Book SynopsisHere is a rigorous and accessible account of the mathematics behind the pricing, construction and hedging of derivative securities. An essential purchase for market practitioners, quantitative analysts, and derivatives traders, whether existing or trainees, in investment banks in the major financial centres throughout the world.Trade Review'… a very readable and useful introduction to the pricing of derivatives … A recommendable book.' Wil Schilders, ITW Nieuws'… the first rigorous and accessible account of the mathematics behind the pricing, construction and hedging of derivative securities.' L'Enseignement MathématiqueTable of ContentsThe parable of the bookmaker; 1. Introduction; 2. Discrete processes; 3. Continuous processes; 4. Pricing market securities; 5. Interest rates; 6. Bigger models; Appendix 1. Further reading; Appendix 2. Notation; Appendix 3. Answers to exercises; Appendix 4. Glossary of technical terms; Index.

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Book SynopsisThis textbook is an accessible introduction to stochastic processes and their applications, as well as methods for numerical simulation, for graduate students and researchers in physics. It includes coverage of the more exotic Levy processes, and a concise account of numerical methods for simulating stochastic systems driven by Gaussian noise.Trade Review'Jacobs is an enthusiastic, clear, and concise writer. He presents each theory by means of heuristic arguments and calculations.' Cosma Shalizi, Physics Today'I think this book is a very nice introduction to the subject of stochastic processes.' Zentralblatt MATHTable of Contents1. A review of probability theory; 2. Differential equations; 3. Stochastic equations with Gaussian noise; 4. Further properties of stochastic processes; 5. Some applications of Gaussian noise; 6. Numerical methods for Gaussian noise; 7. Fokker–Planck equations and reaction-diffusion systems; 8. Jump processes; 9. Levy processes; 10. Modern probability theory; Appendix; References; Index.

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Book SynopsisRisk control and derivative pricing have become of major concern to financial institutions, and there is a real need for adequate statistical tools to measure and anticipate the amplitude of the potential moves of the financial markets. Summarising theoretical developments in the field, this 2003 second edition has been substantially expanded. Additional chapters now cover stochastic processes, Monte-Carlo methods, Black-Scholes theory, the theory of the yield curve, and Minority Game. There are discussions on aspects of data analysis, financial products, non-linear correlations, and herding, feedback and agent based models. This book has become a classic reference for graduate students and researchers working in econophysics and mathematical finance, and for quantitative analysts working on risk management, derivative pricing and quantitative trading strategies.Trade ReviewFrom reviews of the first edition: '… provides a very useful stepping stone to understand the limitations of the Black-Scholes world to that of a more generalized theory of financial markets … Bouchard and Potters will then provide the reader with an insight and generalization that they may otherwise miss with direct application of more 'traditional' theory to the financial markets. To the experienced reader of financial theory, the book provides a useful reminder of the limitations of traditional theories and a number of useful tools that can be used in the more generalized world of financial risk.' David A. Scott C. Math. FIMA, Mathematics Today'This book does not try to be a comprehensive text on theoretical finance, but instead picks out classical problems in finance that are overlooked by the generalizations introduced by beautiful, ideal models such as the Black and Scholes model and discusses tools, concepts and paradigms of statistical finance that can contribute to the resolution of such problems … However, given the themes treated by the book and the expertise and knowledge of the authors, Theory of Financial Risks should certainly find a place on the bookshelves of professionals in risk management who are interested in new quantitative methods of risk minimization.' Rosario Mantegna, Institute of Physics'The book is well written and self-contained … It is recommended to anyone interested in a new and fresh approach to the dynamics of financial markets.' Journal of Statistical Physics'The authors dutifully thread the relations between different financial securities and statistical estimation, rewarding the reader with an understanding that could never be obtained from a purely statistical text … the feeling one is left with after putting the book down is one of time well spent.' Risk'Coming to the data with fewer preconceptions than those with professional training in finance, and applying sophisticated tools, the authors offer fresh and valuable insights into financial markets.' Mathematical Reviews'This is a terrific book. Some extremely exciting new ideas, questions, and techniques are coming from physics, and many were pioneered by the authors. This book will teach both academics and practitioners a new way of doing finance.' Xavier Gabaix, MIT'An outstanding and original presentation of quantitative finance from a physics perspective.' Nassin Nicholas Taleb, Empirica LLC, author of Fooled by Randomness'It is rare to read a quantitative finance book that has anything new to say. It is even rarer to find such a book written by those who know what they are talking about. Bouchaud and Potters are two of the most innovative, imaginative and experienced researches in finance. In this second edition of their ground-breaking work, they go even further into their field of econo-physics, a field that is changing the way we view the financial markets. Each page is packed with more ideas than most people put into an entire book. An inspirational book to be studied carefully and savoured.' Paul WilmottTable of ContentsForeword; Preface; 1. Probability theory: basic notions; 2. Maximum and addition of random variables; 3. Continuous time limit, Ito calculus and path integrals; 4. Analysis of empirical data; 5. Financial products and financial markets; 6. Statistics of real prices: basic results; 7. Non-linear correlations and volatility fluctuations; 8. Skewness and price-volatility correlations; 9. Cross-correlations; 10. Risk measures; 11. Extreme correlations and variety; 12. Optimal portfolios; 13. Futures and options: fundamental concepts; 14. Options: hedging and residual risk; 15. Options: the role of drift and correlations; 16. Options: the Black and Scholes model; 17. Options: some more specific problems; 18. Options: minimum variance Monte-Carlo; 19. The yield curve; 20. Simple mechanisms for anomalous price statistics; Index of most important symbols; Index.

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Book SynopsisFinance provides a dramatic example of the successful application of advanced mathematical techniques to the practical problem of pricing financial derivatives. This self-contained 2002 text is designed for first courses in financial calculus aimed at students with a good background in mathematics. Key concepts such as martingales and change of measure are introduced in the discrete time framework, allowing an accessible account of Brownian motion and stochastic calculus: proofs in the continuous-time world follow naturally. The Black-Scholes pricing formula is first derived in the simplest financial context. The second half of the book is then devoted to increasing the financial sophistication of the models and instruments. The final chapter introduces more advanced topics including stock price models with jumps, and stochastic volatility. A valuable feature is the large number of exercises and examples, designed to test technique and illustrate how the methods and concepts can be appTrade Review' … being relatively short and a paperback must make it appealing to students and those who need a quick introduction to the material. … nicely produced and elegantly laid out. I would consider adopting it as a text for a course in this topic. Publication of the International Statistical Institute'This is a well written textbook which should be suitable for final year undergraduate and first year graduate students having some background in probability theory.' Klaus Schrüger, Zentralblatt MATH' … this is a very well-organized text that makes it easy to learn.' Journal of the Royal Statistical Society'… it was necessary to supply the framework of the book with some theory of stochastic analysis and to provide a mathematical explanation of the notions used.' EMS NewsletterTable of ContentsPreface; 1. Single period models; 2. Binomial trees and discrete parameter martingales; 3. Brownian motion; 4. Stochastic calculus; 5. The Black-Scholes model; 6. Different payoffs; 7. Bigger models; Bibliography and further reading; Notation; Index.

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Book SynopsisThis is the first major study of bankruptcy in eighteenth-century England. Typically, business enterprise in this period has been seen as a success story. But this is a myth, for thousands of businesses failed, hounded by their creditors into bankruptcy and ignominy.Table of ContentsList of figures and tables; Preface; 1. Business enterprise in eighteenth-century England; 2. The bankrupt: friend or foe?; 3. Failure and the law; 4. The trend of eighteenth-century bankruptcy; 5. The structure of eighteenth-century bankruptcy; 6. Textiles, food and drink and merchants; 7. Fluctuations, the weather and cycles; 8. Bankruptcy, wars and financial crises; 9. Depths of failure and the role of creditors; 10. Contemporaries and failure; 11. Conclusion; Appendices; Bibliography; Index.

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Book SynopsisAs the global economy struggles to avoid meltdown, so the greatest Ponzi scheme in history approaches its final death rattle. Politicians have stood by and watched the financial industry create a massive overhang of debt, a mountain of low quality assets and ultimately, an economic disaster which has dwarfed all others.The Eurozone crisis and the LIBOR manipulaton scandal are just two symptoms of a much broader problem: one of vastly excessive debt, regulatory failure, a culture of deceit on Wall Street and the City of London, and governments that have promised their citizens far more than they can deliver. In Planet Ponzi, Mitch Feierstein tells you what's happened, what will happen next and how to protect yourself and your family.Trade ReviewMitch Feierstein is one of the most prescient and cogent observers of the economic crisis that has engulfed the world. He delivers his controversial views without fear or favour and tells the truths others are too terrified to voice or desperate to hide. Feierstein has an insider's knowledge of the markets and brilliant, iconoclastic intellect which he is not afraid to use. If you want to understand the financial mess we are in now, and what is likely to happen next, you can't afford not to read him. * Ruth Sunderland, Associate City Editor, Daily Mail *As a former member of the U.S. House of Representatives, prosecutor and veteran of one of the world's largest global banks, I'm thrilled that someone like Mitch is using this megaphone to sound the alarm. It takes someone with his background to take us behind the PR spin and superficial headlines to discover the truth. * Rick Lazio, Managing Director of Real-Estate & Infrastructure Group at JPMorgan *Here’s the book that’s flying off the shelves... it’s great! * Max Keiser *

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Book SynopsisFrom the Financial Times''s global finance correspondent, the incredible true story of the iconoclastic geeks who defied conventional wisdom and endured Wall Street''s scorn to launch the index fund revolution, democratizing investing and saving hundreds of billions of dollars in fees that would have otherwise lined fat cats'' pockets.Fifty years ago, the Manhattan Project of money management was quietly assembled in the financial industry''s backwaters, unified by the heretical idea that even many of the world''s finest investors couldn''t beat the market in the long run. The motley crew of nerds—including economist wunderkind Gene Fama, humiliated industry executive Jack Bogle, bull-headed and computer-obsessive John McQuown, and avuncular former WWII submariner Nate Most—succeeded beyond their wildest dreams. Passive investing now accounts for more than $20 trillion, equal to the entire gross domestic product of the US, and is today a force

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Book SynopsisAN INSTANT #1 NEW YORK TIMES BESTSELLERA must-have guide to optimizing your life for wealth and success, from bestselling author, NYU professor, and cohost of the Pivot podcast Scott Galloway.Today’s workers have more opportunities and mobility than any generation before. They also face unprecedented challenges, including inflation, labor and housing shortages, and climate volatility. Even the notion of retirement is undergoing a profound rethink, as our lifespans extend and our relationship with work evolves. In this environment, the tried-and-true financial advice our parents followed is no longer enough. It’s time for a new playbook.In The Algebra of Wealth, Scott Galloway lays bare the rules of financial success in today’s economy. In his characteristic unvarnished, no-BS style, he explains what you need to know in order to better your chances for economic security no matter what. You’ll learn: How to find and follow your talent, not your passion, when making career decisions How to ride and optimize big economic waves (hard truth: market dynamics always trump individual achievement) What small steps you can take that pay big returns later, including diversification and tax planning How stoicism can help you minimize spending and develop better financial habits Brimming with wise, game-changing advice from one of the world’s most popular business school professors, The Algebra of Wealth offers a powerful framework for making the most of what opportunities come your way.

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Book Synopsisaeo A topical subject of concern to all European countries. aeo The subject is addressed by a collection of top ranking economists with emphasis on real world policy. aeo This book is part of the well established SJE series and so quality is guaranteed.Table of Contents1. Contagious Currency Crises: First Tests: Barry Eichengreen (University of California, USA) and Andrew Rose (University of California, USA) and Charles Wyplosz (Graduate Institute of International Studies, Geneva). 2. The Credibility of a Fixed Exchange Rate - How Reputation is gained or Lost: Steinar Holden (University of Oslo, Norway) and Birger Vikoren (Norges Bank, Norway). 3. Would a Tobin Tax have Saved the EMS?: Olivier Jeanne (CERAS, Paris). 4. Financial Market Integration and Macroeconomic Volatility: Alan Sutherland (University of York, UK). 5. Monetary Integration in Europe: Implications for Real Interest Rates and Stock Markets: Matthew B. Canzoneri (Georgetown University, Washington, USA) and Harris Dellas (Catholic University of Leuven, Belgium). 6. Exchange Rate versus Price Level Targets and Output Stability: Asbjorn Rodseth (University of Oslo, Norway). 7. Does Financial Deregulation Cause a Consumption Boom?: Jonas Agell (University of Uppsala, Sweden) and Lennart Berg (University of Uppsala, Sweden). 8. Inviting Excess Volatility? Opening Up a Small Stock Market to International Investors: Peter Sellin (Sveriges Riksbank, Sweden).

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Book SynopsisCapital Markets: A Global Perspective concentrates on principles that financial professionals - regardless of geography - need to know, rather than on local institutional details.Trade Review"Capital Markets: A Global Perspective is a comprehensive and pedagogical textbook that condenses a broad field of finance into an intuitive and readable book. It provides both a conceptual and in-depth understanding of the major fiancial products and the operating structure of various U.S. and foreign capital markets." Norman Moore, University of ConnecticutTable of ContentsList of Figures. List of Tables. Preface. Acknowledgments. 1. Financial markets and their Products. 2. Secondary Markets. 3. Transaction Costs. 4. Clearing and Settlement. 5. Regulation. 6. Equities. 7. Debt Securities. 8. Debt Securities. Theoretical Considerations. 9. International Parity Relationships. 10. Foreign Exchange. 11. Markowitz and the Capital Asset Pricing Model. 12. Futures. 13. Options. 14. Swaps. 15. Hedging. Index of Names. Index of Subjects.

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Book SynopsisThis short, concrete, and to--the--point book guides students through this vast field of conflicting opinions. The book begins from the premise that students benefit most from seeing a balanced treatment of all available views. For instance, this book provides coverage of both ad hoc and optimizing models.Trade Review"The author should be congratulated on producing a first-class graduate text. The book has a breathtaking scope, spanning traditional monetary approaches to general equilibrium models under both perfect and imperfect competition in a clear, rigorous and lucid style. It will be of enormous value to postgraduate students in international macroeconomics." Andrew Snell, University of EdinburghTable of ContentsPreface. 1. Some Institutional Background:. International Financial Markets. National Accounting Relations. The Central Bank's Balance Sheet. 2. Some Useful Time-Series Methods:. Unrestricted Vector Autoregressions. The Generalized Method of Moments. The Simulated Method of Moments. Unit Roots. Panel Unit-Root Tests. Cointegration. Filtering. 3. The Monetary Model:. Purchasing-Power Parity. The Monetary Model of the Balance of Payments. The Monetary Model under Flexible Exchange Rates. Fundamentals and Exchange Rate Volatility. Testing Monetary Model Predictions. Problems. 4. The Lucas Model:. The Barter Economy. The One-Money Monetary Economy. The Two-Money Monetary Economy. An Introduction to the Calibration Method. Calibrating the Lucas Model. Appendix: Markov Chains. Problems. 5. International Real Business Cycles:. Calibrating the One-Sector Growth Model. Calibrating a Two-Country Model. 6. Foreign Exchange Market Efficiency:. Deviations from UIP. Rational Risk Premia. Testing Euler Equations. Apparent Violations of Rationality. The "Peso Problem". Noise Traders. Problems. 7. The Real Exchange Rate:. Some Preliminary Issues. Deviations from the "Law-of-One-Price". Long-Run Determinants of the Real Exchange Rate. Long-Run Analyses of Real Exchange Rates. Problem. 8. The Mundell–Fleming Model:. A Static Mundell–Fleming Model. Dornbusch's Dynamic Mundell–Fleming Model. A Stochastic Mundell–Fleming Model. VAR Analysis of Mundell–Fleming. Appendix: Solving the Dornbusch Model. Problems. 9. The New International Macroeconomics:. The Redux Model. Pricing to market. Problems. 10. Target-Zone Models:. Fundamentals of Stochastic Calculus. The Continuous-Time Monetary Model. Infinitesimal Marginal Intervention. Discrete Intervention. Eventual Collapse. Imperfect Target-Zone Credibility. 11. Balance-of-Payments Crises:. A First-Generation Model. A Second-Generation Model. Bibliography. Author Index. Subject Index.

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Book SynopsisThe design and construction of building projects is a complex and demanding process. It involves a variety of disciplines, including architecture, quantity surveying, engineering and construction management.Trade Review'this is a most useful and informative book with many strong points, and will be a core reference for courses in this area...students and lecturers in cost management will find the book's website of great use (www.bdcm.co.uk). The value of this book to students lies in the contemporary relevance of its treatment of the key topics covered and its approachable style.' Construction Management and Economics (October 2003) 21, 787-790Table of ContentsThe context:Definitions, historical influences and the basic approach; Design cost management: The cost planning infrastructure; Design cost management and changing trends in construction procurement; Future directions in construction procurement; Design cost management:Models and data; Design cost management:The feasibility stage; Design cost management:Sketch plan stage: Design cost management:Working drawing stage; Estimating the cost bracket:Feasibility stage; Refining the cost advice:Sketch plan stage; Confirming the cost targets;Detailed design stage; Design cost management and the future; Appendices; References; Index

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Book SynopsisIntroduces an important method for estimating correlations for large systems of assets: Dynamic Conditional Correlation (DCC). This title demonstrates the role of correlations in financial decision making, and addresses the economic underpinnings and theoretical properties of correlations and their relation to other measures of dependence.Trade Review"No doubt much more literature will develop in this area. Professor Engle has done a service by laying out how his mind is moving and thinking at the current time."--Peter Tompkins, The ActuaryTable of ContentsIntroduction vii Chapter 1: Correlation Economics 1 1.1 Introduction 1 1.2 How Big Are Correlations? 3 1.3 The Economics of Correlations 6 1.4 An Economic Model of Correlations 9 1.5 Additional Influences on Correlations 13 Chapter 2: Correlations in Theory 15 2.1 Conditional Correlations 15 2.2 Copulas 17 2.3 Dependence Measures 21 2.4 On the Value of Accurate Correlations 25 Chapter 3: Models for Correlation 29 3.1 The Moving Average and the Exponential Smoother 30 3.2 Vector GARCH 32 3.3 Matrix Formulations and Results for Vector GARCH 33 3.4 Constant Conditional Correlation 37 3.5 Orthogonal GARCH 37 3.6 Dynamic Conditional Correlation 39 3.7 Alternative Approaches and Expanded Data Sets 41 Chapter 4: Dynamic Conditional Correlation 43 4.1 DE-GARCHING 43 4.2 Estimating the Quasi-Correlations 45 4.3 Rescaling in DCC 48 4.4 Estimation of the DCC Model 55 Chapter 5: DCC Performance 59 5.1 Monte Carlo Performance of DCC 59 5.2 Empirical Performance 61 Chapter 6: The MacGyver Method 74 Chapter 7: Generalized DCC Models 80 7.1 Theoretical Specification 80 7.2 Estimating Correlations for Global Stock and Bond Returns 83 Chapter 8: FACTOR DCC 88 8.1 Formulation of Factor Versions of DCC 88 8.2 Estimation of Factor Models 93 Chapter 9: Anticipating Correlations 103 9.1 Forecasting 103 9.2 Long-Run Forecasting 108 9.3 Hedging Performance In-Sample 111 9.4 Out-of-Sample Hedging 112 9.5 Forecasting Risk in the Summer of 2007 117 Chapter 10: Credit Risk and Correlations 122 Chapter 11: Econometric Analysis of the DCC Model 130 11.1 Variance Targeting 130 11.2 Correlation Targeting 131 11.3 Asymptotic Distribution of DCC 134 Chapter 12: Conclusions 137 References 141 Index 151

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Book SynopsisAddressing the topics of real analysis, this book discusses the elements of order theory, convex analysis, optimization, correspondences, linear and nonlinear functional analysis, fixed-point theory, dynamic programming, and calculus of variations. It includes fixed point theorems and applications to functional equations and optimization theory.Trade Review"The book is intended as a textbook on real analysis for graduate students in economics. It is largely graduate level mathematics, and the students should have a solid undergraduate real analysis background... The author's writing style is ... in general quite attractive. The book should be quite successful for its intended purpose."--Gerald A. Heuer, Zentralblatt MATH "Important and commendable, this indispensable resource should be highly prized by all concerned with courses on mathematics for economists and by graduate students working on economic theory. Rarely do books meet such high aspirations and carry out their aims, yet this one certainly does. Well written in an engaging style and impressively researched in the requirements of graduate students of economics and finance, Real Analysis with Economic Applications is sure to become the definitive work for its intended audience. Real Analysis with Economic Applications with its large number of economics applications and variety of exercises represents the single most important mathematical source for students of economics applications and it will be the book, for a long time to come, to which they will turn with confidence, as well as pleasure, in all questions of economic applications."--Current Engineering PracticeTable of ContentsPreface xvii Prerequisites xxvii Basic Conventions xxix Part I: SET THEORY 1 Chapter A: Preliminaries of Real Analysis 3 A.1 Elements of Set Theory 4 A.1.1 Sets 4 A.1.2 Relations 9 A.1.3 Equivalence Relations 11 A.1.4 Order Relations 14 A.1.5 Functions 20 A.1.6 Sequences, Vectors, and Matrices 27 A.1.7* A Glimpse of Advanced Set Theory: The Axiom of Choice 29 A.2 Real Numbers 33 A.2.1 Ordered Fields 33 A.2.2 Natural Numbers, Integers, and Rationals 37 A.2.3 Real Numbers 39 A.2.4 Intervals and R 44 A.3 Real Sequences 46 A.3.1 Convergent Sequences 46 A.3.2 Monotonic Sequences 50 A.3.3 Subsequential Limits 53 A.3.4 Infinite Series 56 A.3.5 Rearrangement of Infinite Series 59 A.3.6 Infinite Products 61 A.4 Real Functions 62 A.4.1 Basic Definitions 62 A.4.2 Limits, Continuity, and Differentiation 64 A.4.3 Riemann Integration 69 A.4.4 Exponential, Logarithmic, and Trigonometric Functions 74 A.4.5 Concave and Convex Functions 77 A.4.6 Quasiconcave and Quasiconvex Functions 80 Chapter B: Countability 82 B.1 Countable and Uncountable Sets 82 B.2 Losets and Q 90 B.3 Some More Advanced Set Theory 93 B.3.1 The Cardinality Ordering 93 B.3.2* The Well-Ordering Principle 98 B.4 Application: Ordinal Utility Theory 99 B.4.1 Preference Relations 100 B.4.2 Utility Representation of Complete Preference Relations 102 B.4.3* Utility Representation of Incomplete Preference Relations 107 Part II: ANALYSIS ON METRIC SPACES 115 Chapter C: Metric Spaces 117 C.1 Basic Notions 118 C.1.1 Metric Spaces: Definition and Examples 119 C.1.2 Open and Closed Sets 127 C.1.3 Convergent Sequences 132 C.1.4 Sequential Characterization of Closed Sets 134 C.1.5 Equivalence of Metrics 136 C.2 Connectedness and Separability 138 C.2.1 Connected Metric Spaces 138 C.2.2 Separable Metric Spaces 140 C.2.3 Applications to Utility Theory 145 C.3 Compactness 147 C.3.1 Basic Definitions and the Heine-Borel Theorem 148 C.3.2 Compactness as a Finite Structure 151 C.3.3 Closed and Bounded Sets 154 C.4 Sequential Compactness 157 C.5 Completeness 161 C.5.1 Cauchy Sequences 161 C.5.2 Complete Metric Spaces: Definition and Examples 163 C.5.3 Completeness versus Closedness 167 C.5.4 Completeness versus Compactness 171 C.6 Fixed Point Theory I 172 C.6.1 Contractions 172 C.6.2 The Banach Fixed Point Theorem 175 C.6.3* Generalizations of the Banach Fixed Point Theorem 179 C.7 Applications to Functional Equations 183 C.7.1 Solutions of Functional Equations 183 C.7.2 Picard's Existence Theorems 187 C.8 Products of Metric Spaces 192 C.8.1 Finite Products 192 C.8.2 Countably Infinite Products 193 Chapter D: Continuity I 200 D.1 Continuity of Functions 201 D.1.1 Definitions and Examples 201 D.1.2 Uniform Continuity 208 D.1.3 Other Continuity Concepts 210 D.1.4* Remarks on the Differentiability of Real Functions 212 D.1.5 A Fundamental Characterization of Continuity 213 D.1.6 Homeomorphisms 216 D.2 Continuity and Connectedness 218 D.3 Continuity and Compactness 222 D.3.1 Continuous Image of a Compact Set 222 D.3.2 The Local-to-Global Method 223 D.3.3 Weierstrass' Theorem 225 D.4 Semicontinuity 229 D.5 Applications 237 D.5.1* Caristi's Fixed Point Theorem 238 D.5.2 Continuous Representation of a Preference Relation 239 D.5.3* Cauchy's Functional Equations: Additivity on Rn 242 D.5.4* Representation of Additive Preferences 247 D.6 CB(T) and Uniform Convergence 249 D.6.1 The Basic Metric Structure of CB(T) 249 D.6.2 Uniform Convergence 250 D.6.3* The Stone-Weierstrass Theorem and Separability of C(T) 257 D.6.4* The Arzela-Ascoli Theorem 262 D.7* Extension of Continuous Functions 266 D.8 Fixed Point Theory II 272 D.8.1 The Fixed Point Property 273 D.8.2 Retracts 274 D.8.3 The Brouwer Fixed Point Theorem 277 D.8.4 Applications 280 Chapter E: Continuity II 283 E.1 Correspondences 284 E.2 Continuity of Correspondences 287 E.2.1 Upper Hemicontinuity 287 E.2.2 The Closed Graph Property 294 E.2.3 Lower Hemicontinuity 297 E.2.4 Continuous Correspondences 300 E.2.5* The Hausdorff Metric and Continuity 302 E.3 The Maximum Theorem 306 E.4 Application: Stationary Dynamic Programming 311 E.4.1 The Standard Dynamic Programming Problem 312 E.4.2 The Principle of Optimality 315 E.4.3 Existence and Uniqueness of an Optimal Solution 320 E.4.4 Application: The Optimal Growth Model 324 E.5 Fixed Point Theory III 330 E.5.1 Kakutani's Fixed Point Theorem 331 E.5.2* Michael's Selection Theorem 333 E.5.3* Proof of Kakutani's Fixed Point Theorem 339 E.5.4* Contractive Correspondences 341 E.6 Application: The Nash Equilibrium 343 E.6.1 Strategic Games 343 E.6.2 The Nash Equilibrium 346 E.6.3* Remarks on the Equilibria of Discontinuous Games 351 Part III: ANALYSIS ON LINEAR SPACES 355 Chapter F: Linear Spaces 357 F.1 Linear Spaces 358 F.1.1 Abelian Groups 358 F.1.2 Linear Spaces: Definition and Examples 360 F.1.3 Linear Subspaces, Affine Manifolds, and Hyperplanes 364 F.1.4 Span and Affine Hull of a Set 368 F.1.5 Linear and Affine Independence 370 F.1.6 Bases and Dimension 375 F.2 Linear Operators and Functionals 382 F.2.1 Definitions and Examples 382 F.2.2 Linear and Affine Functions 386 F.2.3 Linear Isomorphisms 389 F.2.4 Hyperplanes, Revisited 392 F.3 Application: Expected Utility Theory 395 F.3.1 The Expected Utility Theorem 395 F.3.2 Utility Theory under Uncertainty 403 F.4* Application: Capacities and the Shapley Value 409 F.4.1 Capacities and Coalitional Games 410 F.4.2 The Linear Space of Capacities 412 F.4.3 The Shapley Value 415 Chapter G: Convexity 422 G.1 Convex Sets 423 G.1.1 Basic Definitions and Examples 423 G.1.2 Convex Cones 428 G.1.3 Ordered Linear Spaces 432 G.1.4 Algebraic and Relative Interior of a Set 436 G.1.5 Algebraic Closure of a Set 447 G.1.6 Finitely Generated Cones 450 G.2 Separation and Extension in Linear Spaces 454 G.2.1 Extension of Linear Functionals 455 G.2.2 Extension of Positive Linear Functionals 460 G.2.3 Separation of Convex Sets by Hyperplanes 462 G.2.4 The External Characterization of Algebraically Closed and Convex Sets 471 G.2.5 Supporting Hyperplanes 473 G.2.6* Superlinear Maps 476 G.3 Reflections on Rn 480 G.3.1 Separation in Rn 480 G.3.2 Support in Rn 486 G.3.3 The Cauchy-Schwarz Inequality 488 G.3.4 Best Approximation from a Convex Set in Rn 489 G.3.5 Orthogonal Complements 492 G.3.6 Extension of Positive Linear Functionals, Revisited 496 Chapter H: Economic Applications 498 H.1 Applications to Expected Utility Theory 499 H.1.1 The Expected Multi-Utility Theorem 499 H.1.2* Knightian Uncertainty 505 H.1.3* The Gilboa-Schmeidler Multi-Prior Model 509 H.2 Applications to Welfare Economics 521 H.2.1 The Second Fundamental Theorem of Welfare Economics 521 H.2.2 Characterization of Pareto Optima 525 H.2.3* Harsanyi's Utilitarianism Theorem 526 H.3 An Application to Information Theory 528 H.4 Applications to Financial Economics 535 H.4.1 Viability and Arbitrage-Free Price Functionals 535 H.4.2 The No-Arbitrage Theorem 539 H.5 Applications to Cooperative Games 542 H.5.1 The Nash Bargaining Solution 542 H.5.2* Coalitional Games without Side Payments 546 Part IV: ANALYSIS ON METRIC/NORMED LINEAR SPACES 551 Chapter I: Metric Linear Spaces 553 I.1 Metric Linear Spaces 554 I.2 Continuous Linear Operators and Functionals 561 I.2.1 Examples of (Dis-)Continuous Linear Operators 561 I.2.2 Continuity of Positive Linear Functionals 567 I.2.3 Closed versus Dense Hyperplanes 569 I.2.4 Digression: On the Continuity of Concave Functions 573 I.3 Finite-Dimensional Metric Linear Spaces 577 I.4* Compact Sets in Metric Linear Spaces 582 I.5 Convex Analysis in Metric Linear Spaces 587 I.5.1 Closure and Interior of a Convex Set 587 I.5.2 Interior versus Algebraic Interior of a Convex Set 590 I.5.3 Extension of Positive Linear Functionals, Revisited 594 I.5.4 Separation by Closed Hyperplanes 594 I.5.5* Interior versus Algebraic Interior of a Closed and Convex Set 597 Chapter J: Normed Linear Spaces 601 J.1 Normed Linear Spaces 602 J.1.1 A Geometric Motivation 602 J.1.2 Normed Linear Spaces 605 J.1.3 Examples of Normed Linear Spaces 607 J.1.4 Metric versus Normed Linear Spaces 611 J.1.5 Digression: The Lipschitz Continuity of Concave Maps 614 J.2 Banach Spaces 616 J.2.1 Definition and Examples 616 J.2.2 Infinite Series in Banach Spaces 618 J.2.3* On the "Size" of Banach Spaces 620 J.3 Fixed Point Theory IV 623 J.3.1 The Glicksberg-Fan Fixed Point Theorem 623 J.3.2 Application: Existence of the Nash Equilibrium, Revisited 625 J.3.3* The Schauder Fixed Point Theorems 626 J.3.4* Some Consequences of Schauder's Theorems 630 J.3.5* Applications to Functional Equations 634 J.4 Bounded Linear Operators and Functionals 638 J.4.1 Definitions and Examples 638 J.4.2 Linear Homeomorphisms, Revisited 642 J.4.3 The Operator Norm 644 J.4.4 Dual Spaces 648 J.4.5* Discontinuous Linear Functionals, Revisited 649 J.5 Convex Analysis in Normed Linear Spaces 650 J.5.1 Separation by Closed Hyperplanes, Revisited 650 J.5.2* Best Approximation from a Convex Set 652 J.5.3 Extreme Points 654 J.6 Extension in Normed Linear Spaces 661 J.6.1 Extension of Continuous Linear Functionals 661 J.6.2* Infinite-Dimensional Normed Linear Spaces 663 J.7* The Uniform Boundedness Principle 665 Chapter K: Differential Calculus 670 K.1 Frechet Differentiation 671 K.1.1 Limits of Functions and Tangency 671 K.1.2 What Is a Derivative? 672 K.1.3 The Frechet Derivative 675 K.1.4 Examples 679 K.1.5 Rules of Differentiation 686 K.1.6 The Second Frechet Derivative of a Real Function 690 K.1.7 Differentiation on Relatively Open Sets 694 K.2 Generalizations of the Mean Value Theorem 698 K.2.1 The Generalized Mean Value Theorem 698 K.2.2* The Mean Value Inequality 701 K.3 Frechet Differentiation and Concave Maps 704 K.3.1 Remarks on the Differentiability of Concave Maps 704 K.3.2 Frechet Differentiable Concave Maps 706 K.4 Optimization 712 K.4.1 Local Extrema of Real Maps 712 K.4.2 Optimization of Concave Maps 716 K.5 Calculus of Variations 718 K.5.1 Finite-Horizon Variational Problems 718 K.5.2 The Euler-Lagrange Equation 721 K.5.3* More on the Sufficiency of the Euler-Lagrange Equation 733 K.5.4 Infinite-Horizon Variational Problems 736 K.5.5 Application: The Optimal Investment Problem 738 K.5.6 Application: The Optimal Growth Problem 740 K.5.7* Application: The Poincare-Wirtinger Inequality 743 Hints for Selected Exercises 747 References 777 Glossary of Selected Symbols 789 Index 793

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