Registry

Module Specifications

Current Academic Year 2012 - 2013
Please note that this information is subject to change.

Module Title	Simulation for Finance
Module Code	MS450
School	School of Mathematics
Online Module Resources
Module Co-ordinator	Semester 1: Olaf Menkens Semester 2: Olaf Menkens Autumn: Olaf Menkens
NFQ level	8	Credit Rating	7.5
Pre-requisite	None
Co-requisite	None
Compatibles	None
Incompatibles	None

Description

The module includes a practical introduction to the high level programming environment MATLAB. It also presents the theory of Monte Carlo simulation, and gives financial applications in the area of option pricing. The module includes substantial projects involving computer simulations in MATLAB.The module is aimed at final year undergraduate students studying Mathematics or Quantitative Finance.Students are expected to attend lectures, tutorials and laboratories. They will also engage in group computer projects facilitated by a tutor, and individual projects. There is no formal end of module examination.

Learning Outcomes

1. Write clear, structured and well-organized programs in MATLAB and utilise the helpful resources which are available to users
2. Take into account accuracy and efficiency issues when designing and implementating MATLAB programs;
3. Demonstrate a knowledge of elementary theory of Monte Carlo simulation
4. Use MATLAB to value various kinds of financial options using Monte Carlo simulation

Workload	Full-time hours per semester
*Type*	*Hours*	*Description*
Lecture	34	Lectures and tutorials
Laboratory	24	Supervised computer laboratories
Independent learning	130	Projects
Total Workload: 188

All module information is indicative and subject to change. For further information,students are advised to refer to the University's Marks and Standards and Programme Specific Regulations at: http://www.dcu.ie/registry/examinations/index.shtml

Indicative Content and Learning Activities

Review of Programming.
Review elementary principles of programming.

Introduction to MATLAB.
Discussion of accuracy and efficiency issues in the implementation of numerical algorithms.

Review of Probability.
weak and strong laws of large numbers, confidence intervals and central limit theorem.

Simulating random variables.
Generating uniform random numbers, inverse method for discrete and continuous random variables, acceptance-rejection method and applications to normal and Gamma distribution; composition method and application to Gamma distribution.

Monte Carlo methods in finance.
Motivation for Monte Carlo methods in finance, Crude Monte Carlo method, Monte Carlo integration; Variance reduction by using antithetic variables.

Option pricing with MATLAB.
Models for continuous and discrete time asset price evolution, option prices as expectations, options and option pricing in Black-Scholes model, Black-Scholes PDE, pricing Asian options using Monte Carlo methods, and other exotic options, simulating the values of some options in MATLAB.

Implementing Monte Carlo simulation in MATLAB.
Implementing Monte Carlo simulation in MATLAB.

Assessment Breakdown
Continuous Assessment	100%	Examination Weight	0%

Course Work Breakdown
Type	Description	% of total	Assessment Date
Project	Individual Computer Project	15%	Week 4
Project	Individual Computer Project	15%	Week 6
In Class Test	Class Test	40%	Week 9
Project	Individual computer project	30%	Week 12

Reassessment Requirement
Resit arrangements are explained by the following categories; 1 = A resit is available for all components of the module 2 = No resit is available for 100% continuous assessment module 3 = No resit is available for the continuous assessment component
This module is category 2

Indicative Reading List

D. J. Higham and N. J. Higham: 2005, MATLAB Guide, 2nd, SIAM,
D. J. Higham: 2005, An Introduction to Financial Option Valuation, Cambridge University Press,
D. Williams: 2001, Weighing the odds - a course in probability and statistics, Cambridge University Press,

Other Resources

None

Array

Programme or List of Programmes

ACM

BSc Actuarial Mathematics

FIM

B.Sc. Financial Mathematics

BSc in Financial & Actuarial Mathematics

Timetable this semester: Timetable for MS450

Date of Last Revision

09-JAN-12