https://gdpark.blog/tags/financial-engineering/Recent content in Financial Engineering on gdpark.blogHugoenSun, 18 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/financial-engineering-01-call-options-put-options/Thu, 01 Sep 2016 00:00:00 +0000https://gdpark.blog/posts/financial-engineering-01-call-options-put-options/A casual dive into call and put options — what they actually mean, why Black–Scholes blew the market wide open, and yes, there’s a dropped-class backstory involved.https://gdpark.blog/posts/financial-engineering-05-binomial-model-two-period/Mon, 03 Oct 2016 00:00:00 +0000https://gdpark.blog/posts/financial-engineering-05-binomial-model-two-period/We crank through the two-period binomial model one step at a time, build up the call price formula, and peek at how it naturally generalizes to n periods — heh heh.https://gdpark.blog/posts/derivatives-15-binomial-option-pricing-model-basics/Wed, 14 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-15-binomial-option-pricing-model-basics/A copy-paste deep dive into the binomial option pricing model — covering one-period basics, risk-free portfolios, and how to pin down a call option’s theoretical price.https://gdpark.blog/posts/derivatives-16-deriving-the-black-scholes-formula-from-the-binomial-model/Thu, 15 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-16-deriving-the-black-scholes-formula-from-the-binomial-model/Turns out if you just crank n to infinity in the binomial model, the Black-Scholes formula pops right out — so let’s do exactly that instead of going the hard way.https://gdpark.blog/posts/financial-engineering-16-differentiation-fundamentals-for-finite-difference-methods/Mon, 12 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/financial-engineering-16-differentiation-fundamentals-for-finite-difference-methods/Before we can tackle FDM and crack open the Black-Scholes PDE numerically, we need to get our differentiation fundamentals straight — so let’s run through it.https://gdpark.blog/posts/derivatives-17-black-scholes-formula-practice-problems/Fri, 16 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/derivatives-17-black-scholes-formula-practice-problems/Working through Chapter 13 Black-Scholes practice problems — from log-normal returns and Geometric Brownian Motion to actually pricing European call options.https://gdpark.blog/posts/financial-engineering-22-cholesky-decomposition-correlated-random-variables/Sun, 18 Dec 2016 00:00:00 +0000https://gdpark.blog/posts/financial-engineering-22-cholesky-decomposition-correlated-random-variables/A casual walkthrough of Cholesky decomposition — from real and Hermitian matrices to positive definite covariance matrices — and why it all matters in financial engineering.