INSTITUTE OF APPLIED MATHEMATICS
Last Updated:
28/08/2017 - 21:10

IAM611 - Numerical Methods for Financial Models

Credit: 3(3-0); ECTS: 8.0
Instructor(s): Consent of IAM
Prerequisites: Consent of Instructor(s)

Course Catalogue Description

Numerical methods for discrete time models: Algorithms for option prices, algorithms for discrete time optimal control problems. Reminders on continuous models: Stochastic Calculus, option pricing and partial differential equations, dynamic portfolio optimization. Monte-Carlo methods for options: Convergence results, variance reduction, simulation of stochastic processes, computing the hedge, Monte-Carlo methods for pricing American options. Finite difference methods for option prices: numerical analysis of elliptic and parabolic Kolmogrov equations, computation of European and American option prices in the lognormal model. Finite difference methods for stochastic control problems: Markov Chain approximation method, elliptic Hamilton-Jacobi-Bellman equations, computational methods.

Course Objectives

Course Learning Outcomes

Tentative (Weekly) Outline

Numerical methods for discrete time models: Algorithms for option prices, algorithms for discrete time optimal control problems. Reminders on continuous models: Stochastic Calculus, option pricing and partial differential equations, dynamic portfolio optimization. Monte-Carlo methods for options: Convergence results, variance reduction, simulation of stochastic processes, computing the hedge, Monte-Carlo methods for pricing American options. Finite difference methods for option prices: numerical analysis of elliptic and parabolic Kolmogrov equations, computation of European and American option prices in the lognormal model. Finite difference methods for stochastic control problems: Markov Chain approximation method, elliptic Hamilton-Jacobi-Bellman equations, computational methods.

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