Carnegie Mellon University

Simulation Methods for Option Pricing

Professor: John P. Lehoczky

Department: Statistics

Course Number: 46932

Description: This course initially presents standard topics in simulation including random variable generation, statistical analysis of simulation output and variance reduction methods including antithetic variables, control variables, importance sampling, conditional Monte Carlo, stratification and martingale control variables. The course then addresses the use of Monte Carlo simulation in solving applied problems on derivative pricing discussed in the finance literature. Application areas include the estimation of the ``Greeks,’’ pricing of American options, pricing interest rate dependent claims, and credit risk. 

Prerequisites: 46923, 46973

Co-requisites: 46926, 46944