Title Page -- Contents -- Preface -- Real Options and Variational Inequalities -- Introduction -- Complete Market and Risk-Neutral Pricing -- Evolution of the Resource Process -- The Classical Real Options Model - A Single Player (Monopolist) -- Economic Framework -- The Monopolist's Problem and Its Solution -- Real Options and Competition -- The Economic Framework -- Investment Payoff Formulation for Players -- The Stackelberg Leader-Follower Game -- The Preemption Game -- Stackelberg Leader's Lowest Threshold, y1, vs. Optimal Threshold for Leading Firm in Preemption Game, y -- Research and Development: Creator of New Options -- Conclusion -- Real Options: A Framework of Optimal Switching -- Introduction -- Finite-Horizon Optimal Switching -- Dynamic Programming and Hamilton-Jacobi-Bellman Equation -- Entry and Exit Under Ambiguity as an Infinite Horizon Two-Mode Switching Model -- Conclusion -- Optimal Consumption and Investment in the Presence of a Stopping Choice -- Introduction -- The Basic Market Environment -- A Benchmark Problem -- A Wealth-Dependent Investment Opportunity Set -- The Problem -- A Solution and Its Properties -- Disutility, Optimal Retirement and Portfolio Selection -- The Problem -- A Solution and Its Properties -- The Problem in the Presence of Liquidity Constraints -- Optimal Retirement Time, Consumption/Investment, and Leisure Choice Problem -- The Problem -- The Solution and Its Properties -- The Problem in the Presence of Liquidity Constraints -- Conclusion -- Stochastic Control Methods for the Joint Optimization of the Risk and Dividend Policies of a Firm -- Introduction -- Proportional Reinsurance -- The Mathematical Model -- Properties of the Value Function -- Properties of the Solution to the QVI -- The Optimal Policy -- Bankruptcy and Expected Time Between Dividend Payments -- Excess-of-Loss Reinsurance.

The Mathematical Model -- Open Problems -- Nonlinear Expectations and Limit Theorems -- Introduction -- Expectations and Risk Measures -- g-Expectation -- Choquet Expectation -- Risk Measures -- Nonlinear Expectations and Risk Measures -- Summary -- Nonlinear Expectations and Limit Theorems -- Notation and Lemmas -- Strong Law of Large Number for Capacities -- Law of Iterated Logarithm for Capacities -- Applications to Financial Engineering and Econometrics -- Conclusion -- Market Microstructure -- Introduction -- Microstructure Noise and High Frequency Data Analysis -- Microstructure Noise -- High Frequency Data Analysis -- Liquidity Risk and Transaction Cost -- Liquidity Cost Model -- Transaction Cost Model -- Limit Order Book Dynamics -- Queuing Type Approach -- Extra Spread Approach -- Information Effect -- Information Asymmetry, Informed Trader/Insider -- Bid-Ask Spread, Volume, Variance, Depth, etc. -- Financial Market Equilibrium -- Conclusion -- Financial Engineering and Agency Problems -- Introduction -- Financial Crises and Moral Hazard -- The S&L (Savings and Loan) Crisis -- The Subprime Mortgage Crisis -- Excessive Competition over Similar Investment Opportunities -- Effects of Agency Problems on Loan Contracts -- A Naive Analysis -- An Incentive-Compatible Loan Contract -- Credit Risk and Agency -- Delegated Portfolio Management -- Portfolio Selection and Agency -- Interest Rates and Market Prices of Risks in the Presence of Moral Hazard -- Conclusion -- A Survey on Banking and Financial Markets: Lessons for Financial Engineering -- Introduction -- Beyond the Neoclassical Foundation of Financial Engineering -- Banks and Financial Markets -- A Historical Survey -- History of Banking -- Financial Markets -- Financial Crises -- Economic Theories of Banking and Financial Markets -- Risk Sharing -- Liquidity Provision -- Payment Services.

Monitoring -- The Effects of the Derivatives Revolution on Banking and Financial Markets -- Risk Sharing -- Liquidity Provision -- Payment Services -- Monitoring -- Conclusion and Future Research -- Securitization -- Pricing and Hedging with Liquidity Risk -- A Central Counterparty for Over-the-Counter Derivatives -- Derivatives and Transparency -- Banking for Small and Medium-Sized Firms -- Author Index.