Number: 46932
Title: Simulation Methods for Option Pricing
Concentration: TBA
Prerequisites: 46921 - Introduction to Probability AND 46923 - Introduction to Statistical Inference AND 46926 - Linear Financial Models AND 46944 - Stochastic Calculus I
Description: This course initially presents standard topics in simulation including random variable generation, variance reduction methods and statistical analysis of simulation output. The course then reviews papers from the current finance literature to illustrate the application of these methods to derivative security pricing. The topics addressed include importance sampling, martingale control variables, stratification and the estimation of derivatives. Additional topics include the use of low discrepancy sequences (quasi-random numbers), pricing American options and scenario simulation for risk management.