Financial Engineering
The purpose of this research guide is to point students to electronic information sources that highlight how mathematical methods are used to find solutions of problems in finance.
Table of Contents
All Items by Source

Electronic Databases

ebrary Database Some full text available
ebrary database offers e-books from trusted publishers in all academic subject areas.
note: Electronic Database
EBSCO Discovery Service Some full text available
Provides full-text, abstracted and indexed journals from all branches of science, technology, medicine, social sciences and humanities.
note: Electronic Database
Emerald insight Some full text available
Emerald is a global publisher linking research and practice to the benefit of society. Its collection features over 80,000 articles from over 200 titles covering management, and library and information science journals.
note: Electronic Database
Oxford Journals Online Some full text available
Oxford Journals Online entails information on Biological Sciences, Medicine, Public Health& Epidemiology, Mathematics, Computers, Statistics, Humanities and Social Sciences.
note: Electronic Database

Journals/Magazines

Financial Management Some full text available
This journal publishes significant new scholarly research in finance that is of the highest quality. The principal criteria for publishability are originality, rigor, timeliness, practical relevance and clarity.
note: e-journal
Optimal Statistical Inference in Financial Engineering Some full text available
The purpose of this journal is to investiagate which stochastic models can describr the actual financial data adequately and how to estimate the proposed models optimally.  this journal also connects two areas, which are the statistical inference for time series and financial engineering.
note: e-journal
Computational Statistics Some full text available
This journal provides a forum for computer scientists, mathematicians, and statisticians working in a variety of areas in statistics, including biometrics, econometrics, data analysis, graphics, simulation and algorithms.
note: e-journal
Journal of Human Resource Costing & Accounting Some full text available
A high quality, interdisciplinary journal collection serving the academic and professional research communities in accounting, finance and economics.
note: e-journal
Principles of Financial Engineering Some full text available
This journal is genuinely about financial engineering in the best sense of the term, it is about how to craete financial devices that behave in desired ways in the real world. 
note: e-journal
The Financial Economic Risk in Financial Engineering Models Some full text available
This journal finds that financial engineering does not closely reflect the financial economics of intermediation that is fundamental to the creation of, and price making in, derivative products. By not reflecting the economics of intermediating market risk, financial engineering has difficulty in accurately predicting the value of market risk to an intermediary.
note: e-journal
The International Journal of Cybernetics, Systems and Management Sciences Some full text available
This journal is an important forum for the exchange of knowledge and information in cybernetics and systems thinking. The journal addresses major areas of concern and debate whilst highlighting future developments.
note: e-journal
The Journal of Risk and Insurance Some full text available
The Journal of Risk and Insurance  publishes rigorous, original research in insurance economics and risk management.
note: e-journal

Articles

A Financial Engineering Approach to Pricing Agricultural Insurances Some full text available
Purpose: The purpose of this paper is to introduce a continuous time version of the speculative storage model of Deaton and Laroque (1992) and to use for pricing derivatives, in particular insurances on agricultural prices.

Design/Methodology/Approach: The methodology of financial engineering is used in order to find the partial differential equations that the dynamics of derivative prices have to satisfy. Furthermore, by using the Monte-Carlo method (and Feynman-Kac theorem) the insurance prices is computed.

Findings: Results of this paper show that insurance prices (and derivative prices in general) are heavily influenced by market structure, in particular, the demand function specifications. Furthermore, through an empirical analysis, the performance of the continuous time speculative storage model is compared with the geometric Brownian motion model. It is shown that the speculative storage model outperforms the actual data.

Practical Implications: Since the agricultural insurances in many countries are subsidised by government, the results of this paper can be used by policy makers to measure changes in agricultural insurance premiums in scenarios that market experiences changes in demand. In the same manner, insurance companies and investors can use the results of this paper to better price agricultural derivatives.

Originality/Value: The issue of agricultural insurance pricing (in general derivative pricing) is of great concern to policy makers, investors and insurance companies. To the author’s knowledge, an approach which uses the methodology of financial engineering to compute the insurance prices (in general derivatives) is new within the literature.

note: Journal Article
Financial Engineering for the Farm Problem Some full text available
Purpose: This paper is to provide a general discussion of how techniques from financial engineering can be used to investigate the economic costs of farm programs and to aid in the design of new financial products to implement margin protection for dairy farmers. Specifically the paper investigates the Milk Income Loss Contract (MILC) and the Dairy Margin Protection (DMP) program. In addition the paper introduces the concept of the Milk to Corn Price ratio to protect margins.

Design/Methodology/Approach:
The paper introduces and reviews the tools of financial engineering. These include the stochastic calculus and Itô's Lemma. The empirical tool is Monte Carlo simulations. The approach is part pedagogy and part practice.

Findings: In this paper the authors illustrate how financial engineering can be used to price complex price stabilization formula in the USA and to illustrate its use in the design of new products.

Practical Implications: In this paper the authors illustrate how financial engineering can be used to price complex price stabilization formula in the USA and to illustrate its use in the design of new products.

Practical Implications: In this paper the authors illustrate how financial engineering can be used to price complex price stabilization formula in the USA and to illustrate its use in the design of new products.

Social Implications: Farm programs designed to protect dairy farmers margins are designed in a seemingly ad hoc fashion. Assessments of programs such as MILC or DMP are conducted on an ex-post basis using historical data. The financial engineering approach presented in this paper provides the means to add significant depth to the assessment of such programs which can be used in conjunction with Monte Carlo simulation to identify alternative model structures before they are written into law.

Originality/Value: This paper builds upon an existing literature. Its originality is in the application of financial engineering techniques to farm dairy policy.

note: Journal Article
Financial Engineering in Pricing Agricultural Derivatives Based on Demand and Volatility Some full text available
Purpose: The purpose of this paper is twofold. First, the author proposes a financial engineering framework to model commodity prices based on market demand processes and demand functions. This framework explains the relation between demand, volatility and the leverage effect of commodities. It is also shown how the proposed framework can be used to price derivatives on commodity prices. Second, the author estimates the model parameters for agricultural commodities and discuss the implications of the results on derivative prices. In particular, the author see how leverage effect (or inverse leverage effect) is related to market demand.

Design/Methodology/Approach: This paper uses a power demand function along with the Cox, Ingersoll and Ross mean-reverting process to find the price process of commodities. Then by using the Ito theorem the constant elastic volatility (CEV) model is derived for the market prices. The partial differential equation that the dynamics of derivative prices satisfy is found and, by the Feynman-Kac theorem, the market derivative prices are provided within a Monte-Carlo simulation framework. Finally, by using a maximum likelihood estimator, the parameters of the CEV model for the agricultural commodity prices are found.

Findings:
The results of this paper show that derivative prices on commodities are heavily affected by the elasticity of volatility and, consequently, by market demand elasticity. The empirical results show that different groups of agricultural commodities have different values of demand and volatility elasticity.

Practical Implications: The results of this paper can be used by practitioners to price derivatives on commodity prices and by insurance companies to better price insurance contracts. As in many countries agricultural insurances are subsidised by the government, the results of this paper are useful for setting more efficient policies.

Originality/Value: Approaches that use the methodology of financial engineering to model agricultural prices and compute the derivative prices are rather new within the literature and still need to be developed for further applications.

note: Journal Article
Financial Engineering, Consumer Credit, and the Stability of Effective Demand Some full text available
This paper examines the microeconomic implications of recent developments in financial engineering,. with particular emphasis on the post-1987 growth of markets for securitiesbacked by credit card, installment, student loan and home equity receivables. Three linkages of financial engineering to effective demand are identified: (1) funding effects, (2) liquidity preference or speculative effects, and balance sheet or Minsky effects in the United States. Evidence is shown that financial engineering has boosted borrowing power at all income levels. The liberal use of expanded borrowing opportunities has fueled the growth of consumption-especially since 1995. However a secularly rising share of U.S. households have entered the categories of ''speculative'' or ''Ponzi'' finance units- a factor that raises doubts about the sustainability of the current spending boom.
note: Journal Article
The Interaction between Accruals Management and Financial Engineering With Special Purpose Entities Some full text available
Purpose: In response to recent financial corporate scandals, this study aims to provide a helpful understanding for investors and accounting regulators on how firms manage their reported earnings. This leads to a better firm valuation by financial intermediaries and more useful accounting standards.

Design/Methodology/Approach: Estimating discretionary accruals and opportunistic special purpose entities and using a simultaneous equation approach, the aim is to check how managers trade off between such tools of earnings management. Based on real earnings manipulation and accruals management of earnings, the goal is to understand if such tools are used simultaneously or as substitute by firms.

Findings:
After controlling for each cost determinants of such earnings management tool, firms use discretionary accruals and financial engineering with special purpose entities as substitutes. Additional analyses show that managers use such tools in a sequential process. Indeed, they first use special purpose entities during the course of the year but they manipulate discretionary accruals especially at the end of the year.

Research Limitations/Implications: Despite sensitivity checks, measurement error in discretionary accruals proxy and opportunistic SPE estimation model remains an alternative explanation for the results. The sample size and the lack of accurate information about the size of special purpose entities may limit the extent of the findings.

Practical Implications: It is a very useful tool for regulators when they plan to disclose new accounting standards. For investors, this study can help them in assessing the firm's value more accurately for investing and financing purposes.

Originality/Value: Providing a new methodology and new models to detect pervasive earnings management strategies adopted by firms.

note: Journal Article

Books

Advances in Computer Science and Engineering: Texts : Machine Learning for Financial Engineering Some full text available
The main purpose of this volume is to investigate algorithmic method based on machine learning in order to design sequential investment strategies for financial markets.

Author: Gyorfi, Laszlo   Ottucsak, Gyorgy   Walk, Harro  
Publisher: Imperial College Press
Date Published: 03/2012
Subjects: Machine learning.   Financial engineering.
note: e-book
Proceedings of the International Workshop on Financial 2011 : Recent Advances in Financial Engineering 2011 : Proceedings of the International Workshop on Financial 2011 Some full text available
This book will be of value given it comprises most up-to-date information about the hot topics in financial engineering and brief surveys on such topics, from the basics to the new and innovative.

Author: Takahashi, Akihiko   Muromachi, Yukio   Nakaoka, Hidetaka  
Publisher: World Scientific Publishing Co.
Date Published: 05/2012
Subjects: Financial engineering -- Congresses.
note: e-book
Recent Advances in Financial Engineering 2009 : Proceedings of the KIER-TMU International Workshop on Financial Engineering Some full text available
This book is the Proceedings of the KIER- TMU International Workshop of Financial Engineering 2009 held in Summer 2009. The workshop is the successor of Daiwa International Workshop onm Financial Engineering that was held in Tokyo every year since 2004 in order to exchange new ideas in Financial Engineering among workshop participants.

Author: Kijima, Masaaki   Hara, Chiaki   Tanaka, Keiichi  
Publisher: World Scientific
Date Published: 06/2010
Subjects: Financial engineering -- Congresses.  
note: e-book
Recent Advances in Financial Engineering 2010 : Proceedings of the Kier - TMU International Workshop on Financial Engineering Some full text available
This book will be of value to the readers for the most up-to-date information about the hot topics in financial engineering and brief surveys on such topics as the basic to the forefront.
 
Author: Kijima, Masaaki   Hara, Chiaki   Muromachi, Yukio  
Publisher: World Scientific
Date Published: 06/2011
Subjects: Financial engineering -- Congresses.  
note: e-book
Recent Developments in Computational Finance : Foundations, Algorithms and Applications : Foundations, Algorithms and Applications Some full text available
Mathematical finance has revolutionalised the financial world in the past forty years. a major reason for this success has been parallel development of efficient computational methods as well as more sophisticated Mathematical models.

Author: Kloeden, Peter   Gerstner, Thomas   
Publisher: World Scientific Publishing Company
Date Published: 12/2012
Author: Kloeden, Peter   Gerstner, Thomas  
Subjects: Financial engineering.   Finance.
 
note: e-book
Studies in Probability, Optimization and Statistics : Real Options, Ambiguity, Risk and Insurance : World Class University Program in Financial Engineering, Ajou University, Volume Two Some full text available
This volume focuses on important topics in financial engineering such as ambiguity, real options, and credit risk and insurance, and has 12 chapters organized in three parts.

Author: Bensoussan, A.   Peng, S.   Sung, J.  
Publisher: IOS Press
Date Published: 05/2013
Subjects: Financial engineering.   Investments.  
note: e-book
The Wiley Finance Series : Practical Financial Optimization : A Library of GAMS Models (1) Some full text available
Author: Zenios, Stavros A.   Nielson, Soren S   Consiglio , Andrea  Publisher: Wiley-Blackwell
Date Published: 03/2011
Subjects: Financial engineering.   Finance -- Mathematical models.   Mathematical optimization.  
note: e-book
Theory of Financial Risks : From Statistical Physics to Risk Management Some full text available
This book has been substantially improved and augmented. For example, we discuss the theory of random matrices and the problem of the interest rate curve, which were absent from the first edition. Furthermore, several points have been corrected or clarified.

Author: Bouchaud, Jean-Philippe   Potters, Marc  
Publisher: Cambridge University Press
Date Published: 08/2000
Subjects: Finance.   Financial engineering.   Risk assessment.   Risk management.  
note: e-book
Wealth Management : Private Banking, Investment Decisions, and Structured Financial Products Some full text available
This book has been written for investors and not for speculators, another deliberate decision has been to focus on the more common structured instruments sold as packaged products.

Author: Chorafas, Dimitris N.   Chorafas, Professor Dimitris N  
Publisher: Butterworth-Heinemann
Date Published: 02/2011
Subjects: Structured notes (Securities)   Private banks.   Financial engineering.  
note: e-book
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