IAM611 NUMERICAL METHODS FOR FINANCIAL MODELS
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.
