Welcome to the Computer Aided Finance Blog or in short: the CAF Blog. In the future, I will post more or less regularly about financial modeling and all the tool for economic models.
Working in and with the finance industry for quite some time now, I observed many topics and issues which we should address in order to improve the efficiency of structuring and risk management processes. The previous crises, namely the real-estate crisis, the financial crisis and now the euro crisis require a substantial change in the risk treatment and thus new modeling techniques.
The posts will include ideas for better financial models, better organization and structuring models as well as tips and tricks for implementing these models. My background in engineering and computer science as well as a decent knowledge in numerical computations and the new insights from numerous software projects will hopefully allow me to write in an understandable fashion and yet present you new facts you do not find anywhere else.
The programming languages used for the implementations are Matlab, ThetaML, Java, VBA and possibly others. This depends on the ideas presented. In the recent years, I learned a lot about choosing the optimal tool for each task – it seems obvious, but choosing the right tool is very important for keeping software maintainable and efficient. Always feel free to ask implementation questions, I will try to answer asap.
We will see implementations of Monte Carlo simulations, Tree models, PDE models and analytical solutions. We will benchmark them and you will see, how important is the model choice as well as the implementation. E.g. Monte Carlo models in Matlab can be implemented in a simple way, but if an early exercise strategy is required, ThetaML is the better choice. But, compared to a Java implementation, Matlab is better in many ways. We will see this in the next posts.
Thanks for your attention!