COMPUTATIONAL TOOLS FOR FINANCE

The purpose of the course is understanding the main computational techniques to solve financial problems. In particular: studying the programming language VBA linked to Excel, using numerical applications for option pricing, understanding the Monte-Carlo methods, understandinghow to simulate stochastic models.

Basic of programming languages, option pricing, binomial trees, Black-Scholes model

Knowledge and understanding: The program aims to consolidate mathematical-statistical tools and advanced knowledge in the financial markets and portfolio theory. Applying knowledge and understanding: The students will be able to: • understand financial problems and build algorithms; • price and hedge basic derivatives; • use computational techniques as Monte-Carlo simulation. Making judgements: We expect students to be able to understand advanced financial problems and to define optimal numerical solutions to solve them. Throughout the whole course, students will be invited to critically analyse the algorithms in order to optimally define them. Communications Skills: Students will be encouraged to share ideas and doubts with the goal of shared solution. For this purpose, team project will be helpful. Learning skills: Through active student involvement and sharing of advanced algorithms. These learning outcomes will be verified through intermediate evaluations.

VBA and excel, the CRR model and option pricing, Monte-Carlo methods, Value at risk, Finite difference method, stochastic processes

Lecture notes. J.C. Hull, Option futures and other derivatives. P. Glasserman, Monte Carlo methods in financial engineering

Traditional lectures, exercises, team work, group programming

Compliant status - Students who actively attend at least 70% of classes The exam is formed by continuous assessment tests during the course (1/3 of the final grade) and the written VBA project (2/3 of the final grade). The continuous assessment tests are • Open questions (1/3 of the continuous assessment grade) • Programming questions (1/3 of the continuous assessment grade) • Group presentation (1/3 of the continuous assessment grade) The written VBA project must be solved in two weeks by groups of 3 or 4 students and it consists of the solution of a financial problem applying the algorithms studied during the course. So, the final grade will be given by • 3.33 points – first continuous assessment grade • 3.33 points – second continuous assessment grade • 3.33 points – third continuous assessment grade • 20 points – Group project Non-compliant status: Students who do not meet the minimum 70% classroom attendance threshold become non-compliant and exempt from mandatory attendance students The exam is formed by the written VBA project plus (1/2 of the final grade) the oral exam (1/2 of the final grade). The written VBA project must be solved in two weeks by groups of 3 or 4 students and it consists of the solution of a financial problem applying the algorithms studied during the course. The oral exam is on the topics of the lecture notes provided.

To be agreed.