Teach Your Students How to Become Successful Working Quants Quantitative Finance: A Simulation-Based Introduction Using Excel provides an introduction to financial mathematics for students in applied mathematics, financial engineering, actuarial science, and business administration. The text not only enables students to practice with the basic techniques of financial mathematics, but it also helps them gain significant intuition about what the techniques mean, how they work, and what happens when they stop working. After introducing risk, return, decision making under uncertainty, and traditional discounted cash flow project analysis, the book covers mortgages, bonds, and annuities using a blend of Excel simulation and difference equation or algebraic formalism. It then looks at how interest rate markets work and how to model bond prices before addressing mean variance portfolio optimization, the capital asset pricing model, options, and value at risk (VaR). The author next focuses on binomial model tools for pricing options and the analysis of discrete random walks. He also introduces stochastic calculus in a nonrigorous way and explains how to simulate geometric Brownian motion. The text proceeds to thoroughly discuss options pricing, mostly in continuous time. It concludes with chapters on stochastic models of the yield curve and incomplete markets using simple discrete models. Accessible to students with a relatively modest level of mathematical background, this book will guide your students in becoming successful quants. It uses both hand calculations and Excel spreadsheets to analyze plenty of examples from simple bond portfolios. The spreadsheets are available on the book's CRC Press web page. "With this book, Matt Davison succeeds where many have failed: it provides a genuinely understandable introduction to quantitative finance that remains true to the excitement experienced by both practitioners and researchers in the field. The order to chapters is carefully selected to build up intuition from familiar financial products to more esoteric ones so that by the time stock prices are introduced in Chapter 14 they can be understood with confidence by the reader. Mathematical techniques also go hand-in-hand with the finance so concepts such as binomial trees and random walks don't look like out-of-place aberrations. Better still, simulations on easily constructed spreadsheets give students exposure to the 'real deal' of the subject. Definitely recommended-the chapters on American options alone are worth the cover price." -Matheus Grasselli, Deputy Director, The Fields Institute for Research in Mathematical Sciences "This financial mathematics textbook is exceptional in many ways. It is an ideal introduction to the essential mathematical models used in modern finance for those who are more interested in gaining intuitive understanding of such models and how to use them in practice than learning all the technical intricacies that underpin them. The author still explains in a rigorous way all the necessary mathematics, but he does this in a very accessible and often entertaining way. By combining financial theory and computational methods implemented in Excel, the book provides the reader with an integrated approach to important problems like portfolio selection, pricing and hedging of contingent claims in different asset classes, and risk management. Diverse, carefully selected, and meticulously explained examples form an integral part of the book. They not only illustrate well difficult abstract mathematical concepts but incrementally introduce new programming techniques and give hands-on experience. The author put a great deal of thought into the preparation of this textbook, but what is equally important is that his passion and enthusiasm for the subject matter is clearly visible throughout the book." -Adam Kolkiewicz, Associate Professor, Department of Statistics and Actuarial Science.