Monte Carlo and Other Numerical Pricing Methods

Derivatives Mathematics (recap)
  • Risk neutral probability
  • Stochastics and Wiener process
  • Ito’s lemma
Monte Carlo
  • Random generators
  • Sampling method
  • Brownian simulation
  • Discreet vs. continuous distribution
  • Delta, Gamma and Vega in Monte Carlo
  • Variance reduction procedures: antithetic variable and control variable
  • Brownian bridge
  • Illustration for various exotic options (digitals, barriers…), valuation and sensitivities
  • Practical workshop:
  • Build a pricing spreadsheet in EXCEL™ for Asian and other exotic options
Application to VaR (economic, IFRS) Alternative Methods
  • Moment matching method for Asian options
  • Replication (CMS, digitals on Euribor and CMS spread)
  • PDEs
  • Trees
  • Selecting the most relevant method according to the underlying and derivatives: guidance and examples
Calibrating Interest Rate Models
  • Principles and importance in the sensitivity calculation: example applied to the LGM1F model

  • Master the numerical methods according to the relevant underlying and derivatives
  • Study the strengths and limitations of each method
  • Put numerical methods into practice through practical examples
  • Thorough study of state-of-the-art numerical methods applied to derivatives valuation
  • Risk management
  • Financial directors
  • Traders and managers
  • Structurers
  • Derivatives sales
  • Middle office / Audit / Inspection
  • Market IT
  • Institutional investors
  • Company treasurers
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