Dr. Umut Cetin COL 6.08

This course is compulsory for MSc Risk and Stochastics and is also available for students on MSc Statistics (Financial Statistics) and MSc Statistics (Financial Statistics) (Research), MSc Financial Mathematics, MSc Accounting and Finance, MSc Finance, and MSc Management of Risk and Regulation.

MA400 September Introductory Course (Financial Mathematics)

The purpose of this course is to (a) develop the students' computational skills, (b) introduce a range of numerical techniques of importance in actuarial and financial engineering, and (c) develop the ability of the students to apply the theory from the taught courses to practical problems, work out solutions including numerical work, and to present the results in a written report.

Binomial and trinomial trees. Random number generation, the fundamentals of Monte Carlo simulation and a number of related issues. Finite difference schemes for the solution of ordinary and partial differential equations arising in insurance and finance. Numerical solutions to stochastic differential equations and their implementation. The course ends with an introduction to guidelines for writing a scholarly report/thesis.

10 support lectures (MA417) in MT and 20 lectures (MA417) in LT, and 10 lectures in (ST443.A) in LT.

Weekly exercises and practicals are set and form the basis of the classes.

N E Steenrod, P Halmos, M M Schiffer & J A Dieudonne, How to write mathematics (1973); D.J. Duffy, Finite Difference Methods in Financial Engineering: A Partial Differential Equation Approach, Wiley; P. Glasserman, MonteCarlo Methods in Financial Engineering, Springer; P.E. Kloden and E. Platen, Numerical Solution of Stochastic Differential Equations, Springer. Further material will be specified during the course.

50% for a two-hour exam in the Summer Term and 50% for a project based on independent study to be submitted by a given date in June. The project is a written report, normally between 15 and 20 pages long, 11pt, single-spaced.