MA 473 Computational Finance

Prerequisites:         MA 373 or equivalent

 Policy of Attendance

Attendance in all lecture and tutorial classes is compulsory. 

Students, who do not meet 75% attendance requirement will not be allowed to write the end semester examination.

For attendance in the classes, attendance sheets will be circulated. 

Each student is expected to sign against his/her name only.

In case, any student is found marking proxy for some other student, an appropriate disciplinary action will be taken on both students involved in the proxy matter.

Random attendance will also be taken.

Syllabus

Review of financial models for option pricing and interest rate modeling, Black -Scholes PDE; Finite difference methods, Crank-Nicolson method, American option as free boundary problems, computation of American options, pricing of exotic options, upwind scheme and other methods, Lax-Wendroff method.

Monte-Carlo simulation, generating sample paths, discretization of SDE, Monte-Carlo for option valuation and Greeks, Monte-Carlo for American and exotic options; Term-structure modeling, short rate models, bond prices, multifactor models; Forward rate models, implementation of Heath-Jarrow-Morton model; LIBOR market model, Volatility structure and Calibration.

Texts: 

1. P. Glasserman, Monte Carlo Methods in Financial Engineering, Springer, 2004.
2. R. U. Seydel, Tools for Computational Finance, 4th Ed., Springer, 2009.

References:

1. D. Higham, Introduction to Financial Option Valuation: Mathematics, Stochastics and Computation, Cambridge University Press, 2004.
2. P. Wilmott, S. Howison and J. Dewynne, The Mathematics of Financial Derivatives, Cambridge University Press, 1997.
3. Y. Lyuu, Financial Engineering and Computation, Cambridge University Press, 2002.

  Lecture Timings :  Venue: Room No. 2101