IAM749 - Numerical Algorithms with Financial Applications
Instructor(s): Consent of IAM
Prerequisites: Consent of Instructor(s)
Course Catalogue DescriptionCourses not listed in catalogue. Contents vary from year to year according to interest of students and instructor in charge.
Course ObjectivesThe main objective of the course is to introduce some numerical algorithms that are commonly used in financial applications. Moreover, to introduce basic options and their valuations both theoretically and numerically.
Course Learning OutcomesStudents are expected to gain, beside the theoretical concepts, programming skills that are related to option pricing as well as optimization.
Tentative (Weekly) OutlineFixed-income securities, basic portfolio optimization, binomial method for options; Ito process and its applications in stock market, Black-Scholes equation and its solution; random numbers, transformation of random numbers and generating normal variates, Monte Carlo integration, pricing options by Monte Carlo simulation, variance reduction techniques, quasi-random numbers and quasi-Monte Carlo simulation; introduction to finite difference methods, explicit and implicit finite difference schemes, Crank-Nicolson method, free-boundary value problems for American options.
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