Module description
Syllabus
Direct solutions of partial differential equations arising in financial applications by finite difference methods. Binomial and trinomial tree methods. Monte Carlo simulation techniques in finance. Examples of historical estimation of financial models.
Prerequisites
Some knowledge of continuous time financial mathematics, i.e. one of: 7CCMFM02, 7CCMFM04 or 6CCM338a.
Assessment details
Assessment
2 hr written examination, essay, or alternative assessment
Educational aims & objectives
Aims
You will learn numerical and computational techniques for pricing and hedging derivatives, measuring risk, testing models and developing optimal investment strategies. The course provides an introduction to computer programming and does not assume prior programming experience.
The course will enable you to perform calculations and numerical experiments in financial mathematics. This will both enhance your understanding of financial mathematics and will enable you to include numerical work in your dissertation.
Teaching pattern
Two hours of lectures per week and computer clinics
Suggested reading list
Suggested reading/resources (link to My Reading Lists)