Number: 46950
Title: Numerical Methods
Concentration: Required
Prerequisites: 46944 - Stochastic Calculus for Finance I AND 46901 - Financial Computing I
Description: This course covers numerical methods relevant to solving the partial differential equations, which arise in finance. Both the theoretical background and practical issues are treated. Topics include: background material in partial differential equations, examples of exact solutions including Black Scholes and its relatives, finite difference methods including algorithms and question of stability and convergence, treatment of far boundary conditions, the connection with binomial models, interest rate models, early exercise, and the corresponding free boundary problems, techniques for calibration of Hull and White interest rate models, and a brief introduction to additional difficulties of the multi-factor models. Prerequisite: Stochastic Calculus I 46-944, Financial Computing I 46901.