MFIM 650 Numerical Methods in Finance
This course introduces and applies various numerical and computational techniques useful to tackle problems in mathematical finance. Among them are different interpolation methods and their consequences during hedge and root solving techniques and their properties. The focus of this course is the pricing of derivative securities. The PDE (partial differential equation) approach is discussed and stability analyzed. Monte Carlo methods are introduced with various variance reduction techniques and theoretical aspects studied. The course will also include applications to credit derivatives and other fashionable topics if time permits. The course is designed to be both theoretical and practical, dealing with theoretical aspects of the numerical techniques (what works, what does not, and what is popular in the industry and why) using tools from pure and/or applied mathematics with spreadsheet experimentations. In this course, students are challenged in both areas: theoretical (theorems, calculations, proofs) and practical (making spreadsheets that are working, easy to use, and understand).
Prerequisite
MFIM 636 Quantitative Finance I,
MFIM 638 Financial Analysis & Firm Valuation,
MFIM 640 Investment Management