Investment Science by David G. Luenberger, Luenberger

Fueled in part by some extraordinary theoretical developments in finance, an explosive growth of information and computing technology, and the global expansion of investment activity, investment theory currently commands a high level of intellectual attention. Recent developments in the field are being infused into university classrooms, financial service organizations, business ventures, and into the awareness of many individual investors. Modern investment theory using the language of mathematics is now an essential aspect of academic and practitioner training. Representing a breakthrough in the organization of finance topics, Investment Science will be an indispensable tool in teaching modern investment theory. It presents sound fundamentals and shows how real problems can be solved with modern, yet simple, methods. David Luenberger gives thorough yet highly accessible mathematical coverage of standard and recent topics of introductory investments: fixed-income securities, modern portfolio theory and capital asset pricing theory, derivatives (futures, options, and swaps), and innovations in optimal portfolio growth and valuation of multiperiod risky investments. Throughout the book, he uses mathematics to present essential ideas of investments and their applications in business practice. The creative use of binomial lattices to formulate and solve a wide variety of important finance problems is a special feature of the book. In moving from fixed-income securities to derivatives, Luenberger increases naturally the level of mathematical sophistication, but never goes beyond algebra, elementary statistics/probability, and calculus. He includes appendices on probability and calculus at the end of the book for student reference. Creative examples and end-of-chapter exercises are also included to provide additional applications of principles given in the text. Ideal for investment or investment management courses in finance, engineering economics, operations research, and management science departments, Investment Science has been successfully class-tested at Boston University, Stanford University, and the University of Strathclyde, Scotland, and used in several firms where knowledge of investment principles is essential. Executives, managers, financial analysts, and project engineers responsible for evaluation and structuring of investments will also find the book beneficial. The methods described are useful in almost every field, including high-technology, utilities, financial service organizations, and manufacturing companies. Editorial Reviews Review A great book. Professor Luenberger has created a masterpiece that can serve as both an excellent introduction for novices and as a rich source of examples and well explained fundamental principles for more advanced readers.?Milan Lukic, University of Wisconsin-Oshkosh Outstanding book. Very intuitive development of a reasonably mathematical subject. Log-optimal integrated into main budget theory. Excellent.?Edwin T. Burton, University of Virginia An excellent text. It is unique in being as precise as a mathematically oriented reader could wish re: financial jargon.?Viswanath Ramakrishna, University of Texas at Dallas Advance Praise Options and continuous-time finance are important enough to warrant a whole course in MBA programs. David Luenberger's book makes continuous time finance accessible to any student who has mastered elementary calculus and probability theory, and motivates the subject by using it to solve a broad range of option-type problems relating to stock, bond, and commodity markets. ? Jack Treynor, President, Treynor Capital Management, Inc. This textbook takes a refreshing approach to the science of investing. It is extremely well-written. Financial principles and ideas are laid out clearly and in an orderly fashion. The proofs to theorems are elegant yet intuitive. ? Joseph Cherian, Department of Finance, School of Management, Boston University Investment Science is a wonderful textbook treatment of investment theory for the quantitatively-minded undergraduate or masters student. This book is typical of David Luenberger's uncanny way of simplifying complex technical material without loss of rigor. He divides and conquers the subject, starting with the basics of simple fixed-income securities, and building up to the valuation and hedging of derivative securities in a dynamic setting under uncertainty. There is a lovely interplay of arbitrage calculations, portfolio selection for individual investors, and market equilibrium. The book will be especially valuable for those entering the subject from other quantitative fields.?Darrell Duffie, Stanford University Graduate School of Business The book is very clearly written and introduces advanced concepts (e.g. duration and convexity of bonds) in relatively simple and intuitive ways early in the book. There are lots of carefully thought out examples to illustrate important points and applications of particular methodologies. Overall, the book does a great job of taking a reader who knows essentially nothing about finance from very basic concepts up through rather advanced valuation topics. ? James E. Hodder, University of Wisconsin-Madison This text is a breakthrough in the organization of very important theory. ?Lloyd Nirenberg, Director, Business Development, National Semiconductor Corp. This book provides great insights and practical approaches for anyone interested in the relation between markets and decisions. It is written in a unique and creative manner. ?Nick V. Arvanitidis, CEO,IDEA GmbH., and Former CEO, Sequus Pharmaceuticals Luenberger's book is very informative and offers genuinely new insights into important investment problems.?Paul McEntire, Chairman, Skye Investment Advisors LLC Professor Luenberger's book, particularly Chapters 15 &16, lays the foundation for the analytic approach Enron takes when assessing and managing risk in its non-traded asset portfolio.?Andrea Vail, Vice President, Enron Capital Management Professor Luenberger's book provides a well written and readable introduction to several important areas in financial engineering. The sections on derivatives are very useful. This book will be great for quantitatively oriented MBAs. Another important audience is those students with advanced quantitative training, but little formal economics or prior finance.?Dr. Aram G. Sogomonian, Corporate Vice President, Risk Management, Edison Source This book is well written, clear, and cohesive. There is not a single investment textbook that I am aware of that gives such in-depth and organized treatment of the topics chosen by this book. A distinguishing feature is that it gives you every single detail and tool that you would ever need to solve problems.?Raymond Kan, University of Toronto This is a well-organized, fun text. The examples are plentiful and carefully positioned in the text to illustrate the theory.? Phillip Daves, University of Tennessee This book goes into detail on several interesting advanced topics. Its no nonsense writing style and appropriate use of math are also admirable.?Duane Seppi, Carnegie Mellon University The book's main strengths are its quality of exposition, careful derivations of technical aspects, and extensive exercises at the end of each chapter.? Costis Skiadas, Northwestern University This is the best single volume on investments ever written. It is one of the only books to cover both derivatives and portfolio optimization, and it does not get bogged down with unnecessary notation. It is a real page turner. For non finance types looking for a serious, rigorous introduction to the subject, look no further.?Wayne Winston, Professor of Decision Sciences, Indiana University About the Author David G. Luenberger, Professor in Engineering-Economics Systems & Operations Research, Stanford University. He has written several successful books with Addison-Wesley and John Wiley publishers.