Academic Catalog

IAM611 NUMERICAL METHODS FOR FINANCIAL MODELS

Course Code:	9700611
METU Credit (Theoretical-Laboratory hours/week):	3(3-0)
ECTS Credit:	8.0
Department:	Institute Of Applied Mathematics
Language of Instruction:	English
Level of Study:	Graduate
Course Coordinator:	Prof.Dr. AYÞE SEVTAP KESTEL
Offered Semester:	Fall or Spring Semesters.

Course Content

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 Hamiltion-Jacobi-Bellman equations. computational methods.