Essays in Portfolio Management: An Interactive E-book Powered by MapleTm
This book is composed of six essays in the area of Portfolio Management. Its goal is to introduce a novice reader, but with a reasonable quantitative background (calculus, linear algebra, probability and statistics, at the undergraduate level) to some of the main topics in the area of Portfolio Management. As such the book is silent on institutional details and empirical issues. Readers who are interested in these issues will be (after reading this book) very comfortable in consulting one of the many textbooks in this area. This is also the reason the book does not refer to papers in the academic literature as these can also be obtained in one of the above books. The book is aimed at capitalizing on the quantitative background of the reader and the reader's familiarity (and comfort) with computers in order to achieve its goal. This is being accomplished by using the MAPLE software, however no prior knowledge of MAPLE is needed to read the book. No prior knowledge of Economics of Finance is assumed, and for this reason we have decided to start in an unorthodox way. In fact, the material covered in part of Chapter 1 starts with a review of time value of money and continues with a classical topic usually covered in an introduction to Microeconomics. We have chosen to present this material at the start of the book for the following reasons. While being precise and mathematically oriented is a necessary condition for "Quantitative Finance", a solid understanding of the underlying Economics is essential for success in the innovation or engineering process. It helps in generating a deep understanding of the material and an intuition that leads us when we discover new grounds. Intuition should always be consulted when facing such a task, but a necessary condition to obey by this rule is that the intuition does exist. A deep understanding of the material and a strong intuition help us in developing new methods and dealing with new situations in the market. The e-book presents an interactive and dynamic friendly environment allowing readers to learn through hands-on experience. The book can only be read with the MAPLE software. We have chosen MAPLE because of its symbolic computation ability as well as its visualization capability and the structure of its files that allows embedding commands within the text. This e-book is a series of MAPLE worksheets connected by hyperlinks and a table of contents which has links to each worksheet. It presents an Interactive Dynamic Environment for Advanced Learning (IDEAL) which is supported by a collection of procedures - a MAPLE package. A reader who follows the book on-screen, will find the commands are already typed in the appropriate files. The reader should merely re-execute the printed commands while reading. The technology allows readers to learn through immediate application of theory and concepts. Readers can use the prepared MAPLE files, follow the text on-screen, and explore different numerical examples with no prior programming knowledge. In fact, readers can keep generating their own examples, verifying and investigating different situations not addressed in the book. Learning is enhanced by altering the parameters of the commands, varying them at will, in order to experiment with applications of the concepts and different (reader-generated) examples, in addition to the ones already in the prepared file. It is this interaction and experimentation, making use of MAPLE together with the ability to bring to life on the screen the theoretical material of the chapter, which provides a unique, powerful, and entertaining way to learn about Portfolio Management.
Keywords: E-book, MapleTm, Interactive Dynamic Environment, Portfolio Management, Quantitative Finance, learn through hands-on experience
Prof. Eliezer Prisman
Professor, Financial Engineering
RESEARCH INTEREST: Methodological and commercial use of symbolic computation for financial models; investment; Market imperfection, tax effects in the derivative and fixed income markets; arbitrage models; fixed income securities term structure estimation and immunization.