Advances in computational finance and its application in grid computing

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Current (Sept.-Oct., 2008) chaos in the finance market even after government intervention in USA and other countries has brought down the global economy to a great extent. Some of the root causes of the problems are: the greed and competition have made many money managers to float complex financial instruments (credit default swap, collateralized debt obligation etc) without sound understanding of the actions and reactions of these instruments in the dynamic market environment; sub-prime mortgage boom in USA; and financial institutions failing to constantly analyze the risk involved in their business. Increasing competition in the market drives the research for faster, and more accurate solutions for problems in finance that are complex and computationally intensive. Options are one of the common derivatives in the market. Pricing options is the backbone of major research problems in finance such as value at risk (VaR), portfolio optimization and complex derivatives. This drive has created a highly challenging area of research called computational finance.