Preface	7
	Contents	13
	List of Contributors	15
	Portfolio Management and Trading	18
	Portfolio Selection in the Presence of Multiple Criteria	19
	1 Introduction	19
	2 Initial Stochastic Programming Problem	22
	3 Equivalent Deterministic Formulations	23
	4 Portfolio Selection with Multiple-Argument Utility Functions	26
	5 Mean-Variance Nondominated Sets	30
	6 Solving a Multiple Criteria Portfolio Selection Problem	33
	7 Conclusions	36
	References	37
	Applications of Integer Programming to Financial Optimization	41
	1 Introduction	41
	2 Mean-Risk Portfolio Optimization Problems	42
	3 Maximal Predictability Portfolio Optimization Problems	49
	4 Choosing the Best Set of Financial Attributes in Failure Discriminant Analysis	55
	References	63
	Computing Mean/Downside Risk Frontiers: The Role of Ellipticity	65
	1 Introduction	65
	2 Main Proposition	66
	3 The Case of Two Assets	70
	4 Conic Results	75
	5 Simulation Methodology	77
	6 Conclusion	81
	References	82
	Exchange Traded Funds: History, Trading, and Research	83
	1 Introduction	83
	2 The History of ETFs	84
	3 ETF Trading	88
	4 ETFs’ Pricing Efficiency	98
	5 ETF Performance	100
	6 The Impact of the Introduction of ETFs on Trading and Efficiency of Related Securities	101
	7 More Studies Devoted to ETFs	107
	8 Conclusion and Perspectives	109
	References	110
	Genetic Programming and Financial Trading: How Much About "What We Know”	114
	1 Motivation and Literature Review	114
	2 Genetic Programming	116
	3 Fitness Function	119
	4 Data and Data Preprocessing	123
	5 Results	125
	6 Concluding Remarks	147
	Appendices	151
	References	168
	Risk Management	170
	Interest Rate Models: A Review	171
	1 Introduction	171
	2 Continuous-Time Models of Interest Rates	171
	3 Simple Short-Rate Models	172
	4 Estimating Interest Rate Models	177
	5 Multifactor Models of Interest Rates	180
	6 Estimating a Two-Factor Model for German Interest Rates	184
	7 Stochastic Term Structure Models	199
	8 Multifactor HJMModels	203
	9 Market Models: The LIBOR Approach	204
	10 Volatility and Correlation in Forward Rates	208
	11 Concluding Remarks	209
	References	212
	Engineering a Generalized Neural Network Mapping of Volatility Spillovers in European Government Bond Markets	215
	1 Introduction	215
	2 The Volatility Spillover Model	217
	3 The Data	221
	4 ANN Estimation of Volatility Spillover	224
	5 Summary and Conclusions	239
	References	241
	Estimating Parameters in a Pricing Model with State- Dependent Shocks	244
	1 Introduction	244
	2 The Pricing Model	245
	3 Parameter Estimation	248
	4 Fitting the Shocks: A Peaks Method	251
	5 Numerical Tests	252
	6 Conclusion	256
	References	256
	Controlling Currency Risk with Options or Forwards	258
	1 Introduction	258
	2 The International Portfolio Management Model	261
	3 Currency Hedging Strategies	271
	4 Empirical Results	275
	5 Conclusions	286
	Appendix: Pricing Currency Options	287
	References	289
	Operations Research Methods in Financial Engineering	292
	Asset Liability Management Techniques	293
	1 Introduction	293
	2 Bank ALM Techniques	296
	3 Conclusions	307
	Appendix	308
	References	310
	Advanced Operations Research Techniques in Capital Budgeting	313
	1 Scope of the Chapter	313
	2 The Traditional Discounted Cash Flow Approach	315
	3 Multicriteria Analysis	318
	4 Fuzzy Treatment of Uncertainties	324
	5 Treatment of Uncertainties Using Real Options	340
	6 Conclusions	353
	References	353
	Financial Networks	355
	1 Introduction	355
	2 Financial Optimization Problems	357
	3 General Financial Equilibrium Problems	360
	4 Dynamic Financial Networks with Intermediation	371
	5 Numerical Examples	385
	References	390
	Mergers, Acquisitions, and Credit Risk Ratings	395
	The Choice of the Payment Method in Mergers and Acquisitions	396
	1 Introduction	396
	2 The Origin of the Asymmetric Information Models and Myers and Maljuf’s Model ( 1984)	399
	3 The Informational Asymmetry Models Subsequent to Myers and Maljuf ( 1984)	404
	4 The Impact of Taxation on the Choice of the Payment Method	411
	5 The Theories Linked to Managerial Ownership and to Outside Monitoring	417
	6 The Past Performances, the Investment Opportunities, and the Business Cycles	424
	7 The Optimal Structure of Capital	427
	8 The Theories Linked to the Delays of Achievement of the Deal	429
	9 The Acquisition of Nonpublic Firms	430
	10 Conclusions	433
	References	434
	An Application of Support Vector Machines in the Prediction of Acquisition Targets: Evidence from the EU Banking Sector	441
	1 Introduction	441
	2 M&As Trends in the EU Banking Industry	442
	3 Literature Review	444
	4 Support Vector Machines	448
	5 Data and Variables	450
	6 Empirical Results	457
	7 Conclusions	460
	References	461
	Credit Rating Systems: Regulatory Framework and Comparative Evaluation of Existing Methods	467
	1 Introduction	467
	2 Credit Rating Systems	468
	3 Comparison of Classification Methods for the Development of Credit Rating Models	476
	4 Conclusions and Future Perspectives	494
	References	495
	Index	499