Spring

IEORE4703 Monte Carlo Simulation



3 pts. Lect: 3. IEOR E4701: Stochastic Models for Financial Engineering, and IEOR E4706: Foundations of Financial Engineering, or instructor permission. This graduate course is only for MS Program in FE students. This course serves as an introduction to Monte Carlo stochastic simulation with its main focus on finance applications. Examples include simulating various random variables and then stochastic processes (random walks, point processes, geometric Brownian motion, other diffusions, binomial lattice model, etc.) for the purpose of numerically estimating quantities of interest (option prices, probabilities, other expected values and integrals, etc.) Methods to make the simulations more efficient (variance reduction methods), and statistical output analysis (confidence intervals) will be explored too. Although the main focus is on financial applications, other examples will sometimes be provided. Computer programming in MATLAB will be used. Students who have taken IEOR E4404 Simulation may not register for this course for credit.



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