Computational Finance and Its Applications

Many interesting applications in computational finance are closely related to the simulation work carried out by engineers and physical scientists. This makes computational finance a particularly attractive area for transdisciplinary research, a fact which its reflected by the range of topics included in this book. Originally presented at the Third International Conference on Computational Finance and its Applications, the papers in this volume cover the following subject areas: modern financial services technologies; derivatives pricing; forecasting, advanced computing and simulation; portfolio management and asset allocation; risk management; time series analysis and forecasting; intelligent trading agents; and advanced computing and simulation. This state-of-the-art book should be of interest to academics involved with financial modelling, markets, and computational finance, as well as members of the banking community and financial institutions.

Table of Contents:
Section 1: Forecasting, advanced dynamics and simulation Control systems identification in finance and economics; Multifractal analysis and multiagent simulation for market crash prediction; Fast and flexible libor model pricing: two-stage Monte Carlo and on-the-fly payoff processing; Novel pruning based hierarchical agglomerative clustering for mining outliers in financial time series; Feasible estimation of the long term interest rate dynamics by nonlinear techniques Section 2: Derivatives pricing Derivative pricing as a business grid application using NextGRID technology; Valuation of swing options with supplier flexibility - switching and recall features: a methodology note; A neural network approach to option pricing; A Green's function-based iterative approach to the pricing of American options Section 3: Portfolio management and asset allocation Hedge fund portfolio selection with modified expected shortfall; Portfolio rankings with skewness and kurtosis; Active portfolios: diversification across trading strategies; Discovery of multi-component portfolio strategies with continuous tuning to the changing market micro-regimes using input-dependent boosting Section 4: Market analysis, dynamics and simulation Day-of-the-week effect in some of the Gulf Cooperation Council (GCC) stock markets; Looking for short term signals in stock market data Section 5: Risk management Modeling spark spread option and power plant evaluation; Computation and asymptotic properties of estimated coherent risk measures; An empirical investigation of the short-term relationship between interest rate risk and credit risk; Value at risk, outliers and chaotic dynamics; Numerical modelling of operational risks for the banking industry; Conditional Value-at-Risk under ellipsoidal uncertainties