Practical Applications of Approximate Equations in Finance and Economics

by Manuel Tarrazo

Overview

Conventional methods of financial modeling are often overly exact, to the point that their purpose—to aid in financial decision making—is easily lost. Tarrazo's approach, the use of approximation, gives professionals in finance, economics, and portfolio management a sound and sophisticated way to improve their decision making, particularly in such tasks as economic prediction, financial planning, and portfolio management. Tarrazo reviews how to build models, especially those with simultaneous equation systems, then provides a simple way to use approximate equation systems to solve them. Down to earth, readable, and meticulously explained throughout, the book is not only an important tool in practical problem solving situations, but it also provides valuable methods and guidance for upper level students and their instructors.

Among the book's important contributions is its chapter on portfolio optimization. Tarrazo helps clarify the theory and application of modern portfolio theory, especially in regard to its implementation with commonly available information management tools (such as EXCEL). He also provides innovative ways to optimize portfolios under realistic conditions and a method to obtain optimal weights in interval form that does not rely on probability; instead, it relies on the mathematical quality of the matrix in the optimization. Another chapter shows that approximate equations are a general-purpose optimization tool, one that subsumes all other known optimization tools such as classical and mathematical programming. Tarrazo closes with an unusually full bibliography, containing more than 200 references spanning several areas of analysis and various disciplines.

Product Details

ISBN-13:	9781567203936
Publisher:	Bloomsbury Academic
Publication date:	11/30/2000
Pages:	200
Product dimensions:	6.14(w) x 9.21(h) x 0.50(d)

About the Author

MANUEL TARRAZO is Professor of Finance at the University of San Francisco./e He is the author of several scholarly articles and coauthor of a previous book.

Table of Contents

Preface
Modeling
Approximate Equation Systems
Towards Practical—Approximate—Macroeconomic Models
A Practical—Approximate—Financial Planning Model
Practical—Approximate —Portfolio Selection Models
Extensions to Approximate Equations Modeling
Conclusion
Bibliography
Index

Editorial Reviews

Written for academic researchers and practitioners in economics and finance, this monograph describes the practical application of approximate equations systems to economics and finance. Its treatment of scientific modeling and methodology may also be of interest to researchers in applied mathematics, computer, or cognitive sciences. Specific chapters deal with modeling, approximate equations systems, practical-approximate- macroeconomics models, practical-approximate-financial planning models, and practical-approximate-portfolio selection models. Tarrazo teaches finance at the University of San Francisco. Annotation c. Book News, Inc., Portland, OR (booknews.com)

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