Financial Engineering Principles: A Unified Theory for Financial Product Analysis and Valuation

by Perry Beaumont

Stock, bonds, cash . . . the investment mind is often programmed. The reality is that most investors think in terms of single asset classes, and allocate money to them accordingly. The unique contribution of First An Investor's Guide to Building Bridges Across Financial Products is that, for the first time, a single unified valuation approach is available to use for all financial products. This book shows you how to focus on the dynamics of processes and interrelationships of different investment choices, providing the reader with a financial toolbox to equips any investor with the knowledge to de-construct and value any financial product, making it a must if you?re a portfolio manager or an individual investors interested in building the optimal portfolio.

320 pages, Hardcover

First published October 3, 2003

About the author

Perry Beaumont, Ph.D., works at AWS in the cloud computing division. He is also an occasional university lecturer, and has published books, articles, and blogs on a variety of finance topics.

Perry Beaumont’s latest publications include Digital Finance and Business Case Studies in Applied Data Science. With interests in both the academic and practitioner dimensions of financial services, he is also the recipient of a U.S. patent related to statistical applications of large datasets.

Reviews

[Shahar · Rating 1 out of 5]

Some interesting ideas about financial products and how they relate to each other. I finally gave up reading after 70 pages or so, because the mistakes were too blatant. If the author makes such gross errors about things that I know, I am not sure I can rely on his teaching for anything I don't know.
On page 66, the formula for standard deviation is presented as the average of the square root of the squares, rather than the square root of the average (it's the type of thing that strikes you the moment you see it: in essence, the square root of a square).
Next, in the misinformed discussion about historical vs implied volatility, we learn that "a standard deviation calculated as just described assumes that the underlying price series is normally distributed."
What finally sealed the deal for me was the "When Standard Deviation is Zero" treatment of the Black-Scholes model, in which the author confidently states, "Since anything divided by zero is zero... N(0) simply means that the role of the normal distribution function has no meaningful influence..."

I expected more than this from Wiley Finance.