"Professional Financial Computing Using Excel and VBA is anadmirable exposition that bridges the theoretical underpinnings offinancial engineering and its application which usually appears asa "black-box" software application. The book opens the black-boxand reveals the architecture of risk-modeling and financialengineering based on industry-standard stochastic models byutilizing Excel and VBA functionality to create a robust andpractical modeling tool-kit. Financial engineering professionalswho purchase this book will have a jumpstart advantage for theircustomized financial engineering and modeling needs."Dr. Cameron WicentowichVice President, Treasury AnalyticsCanadian Imperial Bank of Commerce (CIBC)"Spreadsheet modeling for finance has become a standard coursein the curriculum of many Quantitative Finance programs since theExcel-based Visual Basic programming is now widely used inconstructing optimal portfolios, pricing structured products andmanaging risks. Professional Financial Computing Using Excel andVBA is written by a unique team of finance, physics andcomputer academics and practitioners. It is a good reference forthose who are studying for a Masters degree in FinancialEngineering and Risk Management. It can also be useful forfinancial engineers to jump-start a project on designing structuredproducts, modeling interest term structure or credit risks."Dr. Jin ZhangDirector of Master of Finance Program and Associate ProfessorThe University of Hong Kong"Excel has been one of the most powerful tools for financialplanning and computing over the last few years. Most users utilizea fraction of its capabilities. One of the reasons is the limitedavailability of books that cover the advanced features of Excel forFinance. Professional Financial Computing Using Excel andVBA goes the extra mile and deals with the Excel tools manyprofessionals call for. This book is a must for professionals orstudents dealing with financial engineering, financial riskmanagement, computational finance or mathematical finance. I lovedthe way the authors covered the material using real life, hands-onexamples."Dr. Isaac GottliebTemple UniversityAuthor, Next Generation Excel: Modeling in Excel for Analystsand MBAs

Preface ixChapter 1 Financial Engineering and Computing 11.1 Financial Engineering and Spreadsheet Modeling 11.2 Lehman Brothers' Products for Retail Investors 31.3 Risk Management and Basel II 41.4 About the Book 41.5. Chapter Highlights 61.6 Other Remarks 7Chapter 2 The GARCH(1,1) Model 92.1. The Model 92.2. Excel Implementation 102.3. Excel Plus VBA Implementation 15Chapter 3 Finite Difference Methods 213.1. Difference Equations 213.2. Excel Implementation 243.3. VBA Implementation 283.4. Crank-Nicholson Scheme 33Chapter 4 Portfolio Mean-Variance Optimization 374.1. Portfolio Selection 374.2. Excel Implementation 424.3. Excel Plus VBA Implementation 48Chapter 5 Newton-Raphson Method 595.1. Newton-Raphson Method for Systems of Equations 595.2. VBA Routine 61Chapter 6 Yield Curve Construction Using Cubic Spline 676.1. Cubic Spline Interpolation 676.2. Yield Curve Construction 756.3. Excel Plus VBA Implementation 77Chapter 7 Binomial Option Pricing Model 857.1. Risk-Neutral Option Pricing and the Binomial Tree 857.2. VBA Implementation 89Chapter 8 The Black-Derman-Toy Model 958.1. The Term Structure Model and the Black-Derman-Toy Tree 958.2. Excel Plus VBA Implementation 98Chapter 9 Monte Carlo Option Pricing 1099.1. The Monte Carlo Method 1099.2. Risk-Neutral Valuation 1129.3. VBA Implementation 1149.4. Exotic Options 1249.5. American Options 132Chapter 10 Portfolio Value-at-Risk 14310.1. Portfolio Risk Simulation 14310.2. Monte Carlo Simulation for Multiple-Asset Portfolios 15210.3. Historical Simulation for Multiple-Asset Portfolios 16010.4. VBA Implementation of Portfolio Risk Simulation 16410.5. Drill Down of Portfolio Risk 180Chapter 11 The Hull-White Model 18911.1. Hull-White Trinomial Tree 18911.2. Excel Plus VBA Implementation 19611.3. The General Hull-White Model 20311.4. Implementation of the General Hull-White Model 210Chapter 12 CreditMetrics Model 22112.1. The CreditMetrics Model 22112.2. Individual (Segregate) Asset Valuation Framework 22112.3 Monte Carlo Simulation in Detail 22512.4. Excel and VBA Implementation 227Chapter 13 KMV-Merton Model 24313.1. KMV-Merton Model of Credit Risk 24313.2. Excel and VBA Implementation 248Appendix A VBA Programming 255A.1 Introduction 255A.2 A Brief History of VBA 255A.3 Essential Excel Elements for VBA 256A.3.1 Excel Cell Reference 257A.3.2 Excel Defined Names 261A.3.3 Excel Worksheet Functions 264A.4 The VBA Development Environment (VBE) 266A.4.1 The Developer Tab in the Ribbon 266A.4.2 The Windows of VBE 268A.4.3 The Project Explorer 272A.4.4 The VBA Project Structure 273A.4.5 The Procedure to Create a VBA Subroutine 275A.4.6 The Procedure to Create a VBA Function 278A.5 Basic VBA Programming Concepts 280A.5.1 Variables and Data Types 285A.5.2 Declaration and Assignment Statements 287A.5.3 Flow Control Statements 293A.6 VBA Arrays 300A.7 Using Worksheet Matrix Functions in VBA 304A.8 Summary 311Appendix B The Excel Object Model 315Appendix C VBA Debugging Tools 321Appendix D Summary of VBA Operators 327Appendix E Summary of VBA Functions 331Appendix F Summary of VBA Statements 333Appendix G Excel Array Formula 341Index 349