An essential reference dedicated to a wide array of financial models, issues in financial modeling, and mathematical and statistical tools for financial modeling. The need for serious coverage of financial modeling has never been greater, especially with the size, diversity, and efficiency of modern capital markets. With this in mind, the Encyclopedia of Financial Models has been created to help a broad spectrum of individuals - ranging from finance professionals to academics and students - understand financial modeling and make use of the various models currently available. Incorporating timely research and in-depth analysis, the Encyclopedia of Financial Models covers both established and cutting-edge models and discusses their real-world applications. Edited by Frank Fabozzi, it includes contributions from global financial experts as well as academics with extensive consulting experience in this field. Organized alphabetically by category, touching on everything from asset pricing and bond valuation models to trading cost models and volatility, it provides readers with a balanced understanding of today's dynamic world of financial modeling. Emphasizes both technical and implementation issues, providing researchers, educators, students, and practitioners with the necessary background to deal with issues related to financial modeling. Financial models have become increasingly commonplace, as well as complex. They are essential in a wide range of financial endeavors, and this resource will help put them in perspective.

Table of Contents

• Contributors
• Preface
• Guide to the Encyclopedia of Financial Models
• Asset Allocation
• Mean-Variance Model for Portfolio Selection
• Principles of Optimization for Portfolio Selection
• Asset Allocation and Portfolio Construction Techniques in Designing the Performance-Seeking Portfolio
• Asset Pricing Models
• General Principles of Asset Pricing
• Capital Asset Pricing Models
• Modeling Asset Price Dynamics
• Arbitrage Pricing: Finite-State Models
• Arbitrage Pricing: Continuous-State, Continuous-Time Models
• Bayesian Analysis and Financial Modeling Applications
• Basic Principles of Bayesian Analysis
• Introduction to Bayesian Inference
• Bayesian Linear Regression Model
• Bayesian Estimation of ARCH-Type Volatility Models
• Bayesian Techniques and the Black-Litterman Model
• Bond Valuation
• Basics of Bond Valuation
• Relative Value Analysis of Fixed-Income Products
• Yield Curves and Valuation Lattices
• Using the Lattice Model to Value Bonds with Embedded Options, Floaters, Options, and Caps/Floors
• Understanding the Building Blocks for OAS Models
• Quantitative Models to Value Convertible Bonds
• Quantitative Approaches to Inflation-Indexed Bonds
• Credit Risk Modeling
• An Introduction to Credit Risk Models
• Default Correlation in Intensity Models for Credit Risk Modeling
• Structural Models in Credit Risk Modeling
• Modeling Portfolio Credit Risk
• Simulating the Credit Loss Distribution
• Managing Credit Spread Risk Using Duration Times Spread (DTS)
• Credit Spread Decomposition
• Credit Derivatives and Hedging Credit Risk
• Derivatives Valuation
• No-Arbitrage Price Relations for Forwards, Futures, and Swaps
• No-Arbitrage Price Relations for Options
• Introduction to Contingent Claims Analysis
• Black-Scholes Option Pricing Model
• Pricing of Futures/Forwards and Options
• Pricing Options on Interest Rate Instruments
• Basics of Currency Option Pricing Models
• Credit Default Swap Valuation
• Valuation of Fixed Income Total Return Swaps
• Pricing of Variance, Volatility, Covariance, and Correlation Swaps
• Modeling, Pricing, and Risk Management of Assets and Derivatives in Energy and Shipping