Computational Finance

Fall 2006, PSTAT 262

T-R 9:30-10:50 - GIRV 2110

Stephane Villeneuve

Office Hours: Wednesdays 1-3 or by appointment

Office: South Hall 5520
Phone: 893-5634

villeneuve@pstat.ucsb.edu

  • Course Outline
  • Simulation of random variables (2) 
  • Variance reduction techniques (2)
  • Simulation of stochastic processes (3).
  • Monte-Carlo methods and Option Pricing (4).
  • Hedging by Monte Carlo (1).
  • Finite Difference methods (4).
  • American Option pricing (4)
  • Prerequisites:
  • PSTAT 213 A-B-C Introduction to Probability Theory and Stochastic Processes
  • TEXT: Kerry Back, A Course in derivative securities Springer, First Edition (2005).

    • AGENDA:

    LECTURE 1: Simulation and variance reduction techniques

    LECTURE 2: Simulation of stochastic processes

    LECTURE 3: Monte Carlo and Option pricing

    LECTURE 4: Monte Carlo and Hedging

    LECTURE 5: Finite Difference methods



    HOMEWORK

    Homework 1: Simulation
    Homework 2: Variance reduction