Computation in Financial Mathematics

Article sponsor: Malena (see more of her work at http://financeresearch.com.au) Mathematical finance is applied mathematics concerned with financial markets. The subject has a close relationship with the discipline of financial economics, which is concerned with much of the underlying theory. Generally, mathematical finance will derive, and extend, the mathematical or numerical models suggested by financial economics. Thus, for example, while a financial economist might study the structural reasons why a company may have a certain share price, a financial mathematician may take the share price as a given, and attempt to use stochastic calculus to obtain the fair value of derivatives of the stock (see: Valuation of options).

Article sponsor: Jeff (see more of his work at http://pfmanagement.com.au)The history of mathematical finance starts with The Theory of Speculation (published 1900) by Louis Bachelier, which discussed the use of Brownian motion to evaluate stock options. However, it hardly caught any attention outside academia.

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