Numerical Finance

The course "Numerical Finance" consists of two 2-hour lectures and one 2-hour exercise per week.

News

  • All information on this page is preliminary and may be changed before the beginning of the semester.
  • The first class is scheduled to take place in the first semester week on the 15th of October, 2019.
  • The first exercise sheet will be put online by Thursday, October 17th, 2019. The first exercise will take place in the second semester week on the 24th of October, 2019.

Content

Topics:

  • Generation of random numbers
  • Monte-Carlo and Quasi-Monte-Carlo methods
  • Numerical methods for the computation of European and American options: Binomial, Finite Difference and Finite Element methods
  • Numerical methods for the simulation of stochastic processes: numerical treatment of stochastic differential equations

The course focusses both on the theoretical foundations and the practical aspects of the numerical methods. The underlying financial models will not be discussed in detail, a slight background in finance is therefore advisable. The exercises contain both theoretical work as well as the implementation (in C++) of the numerical approaches.

Weekly Schedule

LectureTu, 8-10HeHo 18, 120

 

Fr, 8-10HeHo 18, 220
ExerciseTh, 16-18HeHo 18, 220

Exam Dates

TBA

Exercise Sheets

Exercises will take place Thursdays every week.

For the exercise organize yourselves into groups of 2-3 people. The theoretical part of the exercise will not be graded. The solution to the theoretical part will be presented at the beginning of the exercise.

You will be graded based on your solutions to the programming exercises. Each group will present the solution on their laptop during the exercise.

We estimate the total number of exercise points by the end of this semester will be around 376 (i.e., around 188 to pass).

Literature

See also the bibliography of the lecture notes.

  • R. Seydel, Tools for Computational Finance, Springer 2006
  • M. Günther, A. Jüngel, Finanzderivate mit Matlab, Vieweg 2003
  • L.C.G. Rogers, D. Talay, Numerical Methods in Finance, 1997
  • P.E. Kloeden, E. Platen, Numerical Solution of Stochastic Differential Equations, Springer 1999

 There is a huge amount of literature for C++ available. Good starting points are:

Lecture

Exercises

Exam and Requirements

You require 50% of the exercise points to be admitted to the exam. The exam form will be announced during the semester.