General Information
The course starts with Monte Carlo (MC) simulation (in particular, simulation of stochastic differential equations, SDEs) followed by finite difference (FD) methods for PDEs. Applications include fixed income models (Vasicek and CIR), stochastic volatility models (Heston, Stein and Stein, and Bates) and credit derivatives (credit default swaps (CDS) and basket derivatives). A large part of lectures will be devoted to create Matlab code.
Prerequisites
- 01:640:485 and either 01:198:107 or 01:198:111.
- Alternatively, 01:640:485 and 14:332:252.
- Alternatively, 01:640:477 with grade of B+ or A and any one of 01:198:107, 01:198:111, or 14:332:252
To register using alternative prerequisites, fill out this form.
Textbook
We will not follow a specific text so you are asked to take notes in class (if you miss class, ask fellow students for a copy).