Brief course description: The course provides students with an understanding of how to use simulation to value securities, assess risk management strategies, how to make investment decisions, and to measure investment performance. This course initially presents standard topics in simulation including random variable generation, variance reduction methods and statistical analysis of simulation output. A concurrent introduction to financial markets, financial instruments, and financial asset price models is presented. The course then addresses the use of Monte Carlo simulation in solving applied problems on derivative pricing, the estimation of the "Greeks", pricing American optons, interest rate dependent claims, and credit risk. The technical topics will include control variates, importance sampling, and stratified sampling. Prerequisite: MGMT-4320 or consent of instructor. Fall terms annually. 4 credit hours
Last modified: Wed Jun 13 21:20:02 EDT 2007