Product Description

Monte Carlo simulation has become an essential tool in the pricing of derivative securities and in risk management. These applications have, in turn, stimulated research into new Monte Carlo methods and renewed interest in some older techniques.

This book develops the use of Monte Carlo methods in finance and it also uses simulation as a vehicle for presenting models and ideas from financial engineering. It divides roughly into three parts. The first part develops the fundamentals of Monte Carlo methods, the foundations of derivatives pricing, and the implementation of several of the most important models used in financial engineering. The next part describes techniques for improving simulation accuracy and efficiency. The final third of the book addresses special topics: estimating price sensitivities, valuing American options, and measuring market risk and credit risk in financial portfolios.

The most important prerequisite is familiarity with the mathematical tools used to specify and analyze continuous-time models in finance, in particular the key ideas of stochastic calculus. Prior exposure to the basic principles of option pricing is useful but not essential.

The book is aimed at graduate students in financial engineering, researchers in Monte Carlo simulation, and practitioners implementing models in industry.

Mathematical Reviews, 2004: "... this book is very comprehensive, up-to-date and useful tool for those who are interested in implementing Monte Carlo methods in a financial context."

Product Details

• Amazon Sales Rank: #69367 in Books
• Published on: 2003-08-07
• Original language: English
• Number of items: 1
• Binding: Hardcover
• 602 pages

Review

"Paul Glasserman has written an astonishingly good book that bridges financial engineering and the Monte Carlo method. The book will appeal to graduate students, researchers, and most of all, practicing financial engineers … You will want to have prior knowledge of both the Monte Carlo method and financial engineering. If you do, you will find the book to be a goldmine … So often, financial engineering texts are very theoretical. This book is not. The Monte Carlo method serves as a unifying theme that motivates practical discussions of how to implement real models on real trading floors. You will learn plenty of financial engineering amidst these pages. The writing is a pleasure to read. Topics are timely and relevant. Glasserman's is a must-have book for financial engineers." -Glyn Holton, Contingency AnalysisMathematical Reviews, 2004: "... this book is very comprehensive, up-to-date and useful tool for those who are interested in implementing Monte Carlo methods in a financial context."

From the reviews:

"This recent book is a valuable addition to the references devoted to Monte Carlo methods. … the author succeeded in choosing the most actual topics in financial engineering and in presenting them in an appropriate way by keeping a suitable balance between mathematical rigour and an audience friendly language. … To help the reader, three appendices provide basic results on convergence concepts … . A large bibliography of 358 entries accompanies this text. In short, the reader will find this book extremely lucid and useful." (Radu Theodorescu, Zentralblatt MATH, Vol. 1038 (13), 2004)

"To keep it short, let me summarize the recension in one phrase: Paul Glausserman’s book is a ‘strong buy’ for everybody in the financial community. … one gets 596 pages full of valuable information on all aspects of Monte Carlo simulation. … Altogether, I can encourage everyone interested in Monte Carlo methods in finance to read the book. It is very well written … comes with a carefully selected bibliography (358 references) and a helpful index, thus making it really worth the buy." (Ralf Werner, OR – Spectrum Operations Research Spectrum, Issue 27, 2005)

"Glasserman’s new book is a remarkable presentation of the current state of the art of Monte Carlo Methods in Financial Engineering. … lot of material which is sometimes hard to access has been composed into one volume. … a high quality monograph which is both suitable as a reference for practitioners and researchers as well as a textbook … . The list of references is by itself a valuable aspect. The refreshing writing style of the author is tailor-made for the thirsty reader … ." (Uwe Wystup, www.mathfinance.de, November, 2003)

"Paul Glasserman has written an astonishingly good book that bridges financial engineering and the Monte Carlo method. The book will appeal to graduate students, researchers, and most of all, practicing financial engineers. It is an advanced book. … The presentation is masterful. … You will learn plenty of financial engineering amidst the pages. The writing is a pleasure to read. Topics are timely and relevant. Glasserman’s is a must-have book for financial engineers." (www.riskbook.com, Dezember, 2003)

"This book is divided into three parts. … the aim of the author is … to give a precise description of the different techniques in order to facilitate their implementation. In my opinion, this book is a very comprehensive, up-to-date and useful tool for those who are interested in implementing Monte Carlo methods in a financial context." (Benjamin Jourdain, Mathematical Reviews, 2004g)

"The publication of this book is an important event in computational finance. For many years, Monte Carlo methods have been successfully applied to solve diverse problems in financial mathematics. By publishing this book the author deserves much credit for a very good attempt to lift such applications to a new level. … the book may well become a major reference in the field of applications of Monte Carlo methods in financial engineering. This is because the book is well structured and well written … ." (A Zhigljavsky, Journal of the Operational Research Society, Vol. 57, 2006)

Customer Reviews

Very well written
I must admit it is magnificently written book. Not just the main thematical issues but also appendix, where, compared to other similar publications, Girsanov theorem is thoroughly explained. All in all it's
a very useful book for everyone who has some basic information about stochastic processes and wants to learn something more about it or deepen their's knowledges. Well done.

Advanced analysis
Let me start by saying that I'm not a "quant." I am interested in the calculations that quants do, and in Monte Carlo techniques in general. As a result, I'm reviewing only about half of this book, the half on generally applicable Monte Carlo techniques, and skipping the finance-specific material that it alternates with.

As something of a novice to advanced Monte Carlo techniques, I find this book immensely useful. The chapter on "Generating Random Numbers" helps, even if the description of the basic uniform generators could be stronger. Given the uniform generator, its descriptions of generators for non-uniform distributions work well for me. The "Sample Path" material is where I came into this book, really, looking for more insight into generation Brownian bridges. The math certainly is not for the notation-shy, but suffices for the dedicated practitioner. The next few chapters on variance reduction, quasi-MC, discretization, and sensitivity analysis are all widely applicable - I don't have immediate use for the material, but now I know where to look when the need arises. The remaining two chapters cover specific financial applications, and I leave comment on them to other readers.

This book gave me what I wanted, and lots more besides. Much of what it offers really isn't for me, though - the financial instruments being analyzed border on abstract art. I also felt a little pain at having no background in stochastic calculus, but some determination and a willingness to skip over fine points got me through well enough. The successful reader has a working knowledge of basic calculus, linear algebra, and probability. That reader must have a real interest in MC techniques, and should care about the financial decision-making to which Glasserman applies those techniques - but, as I prove, even that isn't necessary for getting a lot of value from this text.

-- wiredweird

Review for Monte Carlo Methods... by P. Glasserman
The book is just right for a reader who is looking for state-of-the-art techniques in Monte-Carlo methods in general. The fact that the book is specific to financial systems does not limit the usability of the book in the manner it is written. There are a lots of useful references one can get out of this book.
The book is for advanced readers in the sense that it requires rigorous mathematical ability to understand all the concepts. It is by no means for a novice reader and requires background in computational mathematics.