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Investment Science [Hardcover]

David G. Luenberger
4.8 out of 5 stars  See all reviews (8 customer reviews)

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Book Description

June 1 1997 0195108094 978-0195108095
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.

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"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

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Traditionally, investment is defined as the current commitment of resources in order to achieve later benefits. Read the first page
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Most helpful customer reviews
5.0 out of 5 stars A very good introductory book April 17 1998
This textbook introduces the basics of asset pricing theory and portfolio optimization at a level suitable to advanced undergraduates. The mathematics seems to be just right for practitioners: no martingales, no girsanov theorem, but a complete treatment of binomial lattices and a semi-quantitative introduction to diffusion processes and to stochastic calculus. Problems are very well chosen. The organization of the text is standard, except for the last two chapters, related to optimal growth portfolio and to real options. Final remark: the book is excellent for self-study. I learnt the subject from Prof. Luenberger himself, and he was repeating each single word from the book, saying (as a disclaimer) that "it's not me copying the book... it's the book that copies what I said. After all, I wrote it." Needless to say, the class was excellent.
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5.0 out of 5 stars One of the few books I have purchased twice. Sept. 9 2003
This is the best book by far on the theory of finance. The book covers all the important fundamental concepts and develops them into practical models without going overboard and introducing every possible variation on the model. the style is both conversational and mathematical. It is replete with discussions about the material, but it doesnt gloss over the math. I took professor Luenbergers course at Stanford, and it piqued my interest in finance enough to pursue it professionally. (At the time, I was a masters student in electrical engineering.) I purchased several other books in finance. I dont even know where they are now, every time I have a question or need to build a new model, I go straight to Luenberger. This book is so good, I bought a second copy just as a backup, in case I lose my copy and the book goes out of print.
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I attended his courses at Stanford and indeed he's an eminence in the subject, and all his wisdom has been printed in this excellent book. This book provides you with the required tools to fully understand the theory and practical methods for valuation. A plus is the introduction of Real Option valuation concept. It's adequate for advanced undergraduates or mainly for graduate studies in preparation for deeper courses.
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5.0 out of 5 stars A great next text June 28 1997
By A Customer
This is the best singlevolume 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 Universit
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