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2007/08 Taught Postgraduate Module Catalogue

MATH5350M Computations in Finance

15 creditsClass Size: 100

Module manager: Klaus Reiner Schenk-Hoppé
Email: K.R.Schenk-Hoppe@leeds.ac.uk

Taught: Semester 2 (Jan to Jun) View Timetable

Year running 2007/08

This module is not approved as an Elective

Objectives

The aim of this module is to introduce the standard computational methods in financial mathematics and their application to securities pricing. There is a strong emphasis on practical implementation and numerical simulation. On completion of this module, students will be able to:

- explain the basic modelling tools for financial options;
- generate random numbers with specified distributions;
- numerically solve stochastic differential equations;
- carry out Monte Carlo simulations to price financial derivatives;
- demonstrate an understanding of numerical methods for PDEs;
- use finite difference methods to price American and exotic options;
- explain techniques for improving simulation accuracy and efficiency;
- estimate price sensitivities (the Greeks) and market risk.

Syllabus

Pricing financial instruments and valuing new securities requires advanced numerical methods. Financial analysts routinely apply computational techniques to assess risk, price exotic options or value interest rate derivatives. A good command of the essential computational tools used in the financial service industry is expected from quantitative analysts.

This module covers Monte Carlo simulations and finite difference methods for financial derivative pricing. These two methods (both are standard workhorses) are essential in analysing securities that are modelled by stochastic or partial differential equations. Practical skills are emphasised and students will learn how to implement (and improve accuracy and efficiency of) numerical methods for financial valuation.

On completion of this module the student will be familiar with numerical methods in financial mathematics and will be able to apply and implement these methods to price financial derivatives.

Teaching methods

Due to COVID-19, teaching and assessment activities are being kept under review - see module enrolment pages for information

Delivery typeNumberLength hoursStudent hours
Lecture102.0020.00
Practical101.0010.00
Private study hours120.00
Total Contact hours30.00
Total hours (100hr per 10 credits)150.00

Private study

5 hours per lecture: 50 hours;
5 hours per class: 50 hours;
Prepararion for assessment: 20 hours.

Opportunities for Formative Feedback

Exercises will be handed in for assessment on a bi-weekly basis.

Methods of assessment

Due to COVID-19, teaching and assessment activities are being kept under review - see module enrolment pages for information


Coursework
Assessment typeNotes% of formal assessment
In-course AssessmentAssessed exercises30.00
Total percentage (Assessment Coursework)30.00

Normally resits will be assessed by the same methodology as the first attempt, unless otherwise stated


Exams
Exam typeExam duration% of formal assessment
Standard exam (closed essays, MCQs etc)2 hr 70.00
Total percentage (Assessment Exams)70.00

Normally resits will be assessed by the same methodology as the first attempt, unless otherwise stated

Reading list

The reading list is available from the Library website

Last updated: 24/06/2009

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