FE522 Part 1 Introduction

Introduction

In this course our aim is an introduction to implementation of various methods and techniques involving pricing and hedging derivative securities. The course will be conducted in three parts:

• Part 1: Statistical Analysis of Financial Data
• Part 2: Monte Carlo Simulation (basically estimating a price or a hedge by sample paths )
• Part 3: Binomial Method and Finite Difference Methods ( approximating numerical solution of Black-Sholes type equations )

As the computational tool of the course we will be using R.

1	Introduction
2	Basic Descriptive Statistics of Financial Data
3	Statistical Analysis of Financial Data
4	Monte Carlo Simulation : Basics
5	Monte Carlo Simulation: Random Generation
6	Monte Carlo Simulation: Variance Reduction Methods
7	Monte Carlo Simulation: Two Examples
8	Binomial and Trinomial Trees
9	Finite Difference Method

Instructor: Refik Güllü, [email protected] 

Course Web page: http://moodle.boun.edu.tr/ 

The weekly course plan:

• The lecture notes will be posted on the moodle page (moodle.boun.edu.tr).
• Some classes are to be held online (will be announced)